August 2017. Speaking last week, the Governor of the Bank of England highlighted that uncertainty over Brexit means some businesses are not investing. Since the EU referendum last year, businesses he said “have invested much less aggressively than usual in response to an otherwise very favourable environment”. The Governor’s comments coincided with the Bank’s decision to keep interest rates at 0.25% and to lower this year’s growth forecast slightly, from 1.9% to 1.7%. The Governor was warning that the impact of Brexit is beginning to bite.
So what should we do as business leaders? We can take some comfort from the recent Purchasing Managers’ Index survey which showed stronger growth in the manufacturing sector in July. And it was only two months ago that the quarterly update on UK productivity from the Office for National Statistics showed that manufacturing bucked a downward trend with the sector reporting a modest increase of 0.2%.
And yet we know investment is needed to address the long term productivity issues we face in the UK. The ONS reported that UK productivity levels have dropped back to pre-financial crisis levels and lag behind some other countries.
If leaders cannot answer “yes” to the following questions, productivity will not improve and there’s a risk that business performance will slide.
Are we investing in the business to update and improve the equipment and technology we use? Are we constantly innovating our products and processes to improve what we do and how we do it? Are we investing sufficiently in our people to develop new knowledge, skills and provide new experiences?
Productivity is exactly what we wanted to address at the iconic Bournville factory in Birmingham.Bournville has been the home and heart of Cadbury chocolate in the UK for nearly 140 years. Bournville is one of the largest chocolate factories in the world making over 5 million Cadbury Dairy Milk bars a day and over 400 million chocolate Buttons. We were committed to building on that great legacy.
But it would not have been possible for the Cadbury brand to continue to thrive in the highly competitive UK confectionary market without substantial investment to improve the competitiveness of the Bournville factory.
It used to cost three times as much to produce a chocolate bar in the UK as it did at one of our other factories in southern Germany.
So we decided to invest in order to secure the next generation of manufacturing in Bournville. In the factory alone we invested £75 million, for instance installing four new state of the art lines to make Cadbury Dairy Milk bars and our Heroes and Roses brands. We also invested substantially in our people – to broaden colleagues’ skills and capabilities in manufacturing, and develop their careers further.
That investment is now beginning to pay off. As a result we are welcoming the hugely successful chocolate/biscuit combo, Cadbury Dairy Milk Oreo, to Bournville alongside the return of an old favourite, Cadbury Dairy Milk Tiffin, thanks to popular demand.
The £75 million we invested in manufacturing at Bournville was part of a larger £200 million inward investment in the UK. Beyond Bournville we also invested in many of our other manufacturing sites for instance with new equipment for our fresh milk processing plant where we process half a million litres of fresh milk every year, bought from local British farmers on long term contracts, with fair prices. Something I am particularly proud of as the son of a Yorkshire Dairy Farmer. We also invested £18 million in creating new knowledge, jobs and innovative manufacturing techniques across our Global Chocolate Centre of Excellence in Bournville and our Reading Science Centre on the Reading University Campus. In fact, since 2010 the number of chocolate inventors and researchers in Bournville alone has grown from 25 to over 250 and every single Cadbury product, wherever in the world it ends up being sold, starts its life in the innovation kitchen in Bournville.
But it’s not just businesses that will need to invest. The government is currently analysing feedback from businesses and other groups on its proposed industrial strategy. I am delighted that government is committed to developing infrastructure and supporting businesses in all parts of the UK. There are three further key areas where Government can help support modern British manufacturing:
- -It is vitally important that Government works closely with business to maintain a thriving economy.
- -As a global business, with global research and development for the world starting in Bournville, we need to retain and continue to attract the best talent in the world – diverse and highly skilled people. We want to give current and future colleagues the confidence that they can develop their careers with us.
- -The third area is the need for a solution that makes frictionless movement of goods as close to a reality as possible as part of the Brexit negotiations. Businesses and consumers have been benefitting as goods move across borders without incurring tariffs and excessive regulations. We will need to be agile in the future so that whatever happens in the Brexit discussions we are able to adapt to the external circumstances and thrive, but anything that adds cost and complexity to business risks reducing competitiveness and higher prices for consumers.
Our brands have thrived for 200 years by consistently making the tastiest treats in the world at affordable prices. This requires great people; innovation in the way we manage our business; new inventions to meet consumer demand; and regular investment in equipment, people and technology. As the UK prepares to leave the EU, investment is even more critical if we are to increase productivity and compete effectively with other markets.