How London can lead the way in matching Germany’s manufacturing

Its phenomenal and ongoing success means it’s a model which is the envy of many of the world’s economies, and one which many are taking steps to emulate. Britain is no different, and manufacturing is undoubtedly a key focus as we look to continue to drive the economic recovery throughout Britain, with London being one of the powerhouses behind this growth.

Whenever manufacturing is discussed, London rarely features in the conversation. The legacy of Manchester, Birmingham and Glasgow, the powerhouses of the industrial revolution, still casts a long shadow. Yet the capital’s manufacturing sector has been one of the quiet success stories of our economic recovery. 

During 2011-2014, the number of manufacturing jobs in London grew by 15 per cent, the highest rate in Britain. This compares favourably to Berlin, which has seen its manufacturing sector plunge into intractable decline. London’s “makers” are increasingly looking overseas, by upping productivity and exporting into more markets.

However, the ambition of London’s manufacturing sector is met with some key challenges which may temper its future progress. On the one hand, producing and selling goods to a domestic market can be a hard nut to crack, but doing it overseas presents another series of challenges. Getting the right funding, arranging supply chains and managing currency movements are persistent worries for mid-market firms. This just serves to highlight the need for support from government and banks for companies looking to explore the export trade, particularly for small businesses.

The increased importance of the manufacturing sector was reflected in 2015’s Budget. Having doubled export funding to £3bn last year, the chancellor showed his support to the sector through targeted investments to support research and exporters, including a doubling of funding for UKTI operations in China.

This will be music to the ears of London’s manufacturers, which are increasingly looking to tap into the world’s second largest economy. Yet it’s important that banks and professional services companies play a greater role in order to support “Brand Britain” and those ambitious mid-market manufacturers which are looking to export across the globe. This is why Lloyds Bank has entered into a partnership with UKTI. By helping more firms trade internationally and supporting infrastructure investment, we will be supporting UKTI as they aim to support exports reaching one trillion pounds by 2020 and get 100,000 more companies exporting in the next five years.

Yet manufacturers also need intermediaries to lend more support on the supply side. This is why Lloyds Bank has outlined a commitment to allocate £1billion of funding to SMEs within industry each year until 2017, which will have a knock-on effect in the mid-market sector by helping to ignite the supply chain. Last year, this target was reached by September, recognising the thriving nature of the sector, and the increased appetite to grow production.

For manufacturers, London offers a unique set of opportunities and challenges. As one of the world’s financial capitals, there is no shortage of funding options for mid-market firms. Yet navigating the sheer abundance of alternatives and identifying that ideal funding solution can be a tall order. Equally, high property prices across the capital not only makes regional expansion expensive, but it keeps many skilled manufacturers priced out of the city. This is why we, at Lloyds Bank have created a manufacturing, wholesale and retail division dedicated to offering mid-market firms in London specialist solutions specific to their sector, because businesses need partners who understand the manufacturing landscape in the capital.

One of the reasons that the Mittelstand has become almost synonymous with efficiency stems from its major impact on youth unemployment, with only 7.8 per cent of Germans aged 25 or under being unemployed, compared to 16.9 per cent in the UK.

Read more about the Mittelstand:

In London, youth unemployment stands at around 25 per cent. Therefore, as manufacturing grows across the capital, it’s important to ensure that skilled young people are ready to take advantage of vacancies that become available at expanding firms.

Delving deeper into our ambitions to emulate the Mittelstand, the truth is that it’s impossible to develop a like-for-like replica of the model. It’s long-established, ever evolving, and built around a host of factors which are unique to Germany.

However, through continued investment and support of manufacturing, it’s clear that that UK manufacturers at mid-market level will have no shortage of opportunities to realise growth ambitions.

Ultimately, this will help to increase overseas trade, and ensure that Britain enhances its own reputation for excellence and efficiency within this vital sector.

Mark Burton is regional managing director at Lloyds Bank Commercial Banking in London and the South.

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