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Manufacture of Basic Metals and Fabricated Metal Products

May 2007

Photograph of a man welding Source Denis Oates, Corporate Photgrapher

Introduction

This industry encompasses both the manufacture of basic metals and the production of metal goods (except machinery and equipment). The primary metals industry consists of firms engaged in the smelting and refining of ferrous and non-ferrous metals, in the rolling, drawing and alloying of metals, and in the manufacture of basic castings. The production of basic metals usually requires a relatively heavy industrial infrastructure and equipment and the sector is a relatively small element in Lancashire. Larger and more diverse, the production of fabricated metal products encompasses a wide range of activities supplying other industries and construction as well as consumer end-markets. Its product range extends from nuts and bolts and household cooking ware and utensils through to tools of all kinds, metal packaging and containers, central heating boilers, metal forgings and stampings, structural products and highly sophisticated components for aerospace, automotive, nuclear and other leading edge industries using advanced engineering and metal treatment and coating processes.

Employment

Graph showing the number of metals industry employee jobs in Lancashire's local authorities in 2005 - see text for details Source ONS - Annual Business Inquiry

The Metals & Metal Products industry is of some importance in Lancashire employing 11,700 people in about 780 separate establishments, representing 11.4% of the County's manufacturing employee workforce. This is rather less than the 13% share it occupies in Great Britain at large due mainly to the absence of major local activity in the heavy and integrated end of primary metals production.

Geographically the industry is well represented across the County but shows some concentration in the East Lancashire towns (44% of jobs are based in Pendle, Burnley and Blackburn districts) with lesser levels of activity in parts of Central Lancashire (Figure 1). In Burnley and Pendle the industry contributes about 5% of the districts' total employee jobs. It also retains a relatively high profile in many districts in which manufacturing overall has a well-below average representation (e.g. it accounts for 16% of manufacturing jobs in Lancaster and a fifth in Wyre). The sector remains very much a male dominated industry with men accounting for 84% of all employee jobs whilst 94% of the jobs are full-time (Table 1).

Map showing the approximate distribution of metals industry establishments across Lancashire in 2005 - see text for details Source ONS - Annual Business Inquiry, 2005

There are a handful of larger companies working in the local fabricated metal products industry but despite a clear tendency over recent years towards greater consolidation and concentration of supply, the sector remains highly fragmented, comprising mainly small and medium-sized firms. Statistically, the "average" company size is just over 15 employees. Nearly 98% of metal fabrication establishments employ fewer than 100 people and these account for nearly three-quarters of the total workforce (Table 2). Larger employers within the sector include Baxi Heating with plants in Bamber Bridge and Padiham – a European market leader in the manufacture of gas fired boilers and domestic heating appliances; Brookhouse Holdings, engaged in a wide range of precision and sub-contract engineering activities; Saco – manufacturers of deep-drawn components for the pharmaceuticals industry; Decorpart, also involved in the manufacture of deep drawn components for the pharmaceutical and cosmetics packaging industry; Gledhill Water Storage, manufacturers of hot water storage cylinders and thermal storage appliances; Presspart Manufacturing producing deep drawn metal pressings and George Wilkinson (Burnley) Ltd, manufacturers of bakeware, cookware and a range of homewares.

Employment Trends

The Metals & Fabricated Metal Products sector enjoyed an extended period of both employment and output growth over a large part of the post-war period (Figure 3). It made a significant contribution towards the County's economic diversification away from the traditional textile and allied staples. Since the 1970s however, the industry appears to have become much more cyclical in nature, often with employment trends within different sub-sectors of the industry pushing in different directions depending in part on the fortunes of its downstream customers. Over the 1980s, for example, it remained a major generator of new local employment opportunities benefiting in particular from its strong linkages with buoyant aerospace and automotive markets. Post 1989, recession, allied with cuts in defence equipment procurement and growing global competition imposed a degree of rationalisation and associated job cuts wiping out many earlier gains but of late appears to be recruiting again on a modest scale across a number of its sub-sectors.

Graph showing how the number of metals industry employee jobs in Lancashire has changed from 1950 to 2005 - see text for details Source Ministry of Labour/ONS - ERII Employment Records

Over the past decade or so job trends in the Metal & Metal Products industry have been much more benign than in manufacturing industry generally. The local sector has seen a net fall 1993-2005 of just over 700 jobs or -6%. Over the same period total manufacturing jobs in the sub-region suffered a drop of 21%. Within the sector there have been variations (Table 3). Employment in basic metal production has remained fairly stable though this was achieved by increased job opportunities in light metal casting offset by a reduction in non-ferrous metals production. Employee numbers have risen in the manufacture of metal structures and related parts, presumably related to the buoyancy of construction and in particular the growing use of metal products in commercial construction activities. Employment in a few other sectors as diverse as light metal packaging, fasteners and the treatment and coating of metals has also held up well. Some sectors such as the manufacture of radiators and boilers have fared less well in terms of overall job numbers though arguably many of the individual companies comprising these sectors have continued to prosper with a reduced workforce. The largest single sub-sector – "general mechanical engineering" which includes most precision and general engineering sub-contractors, still forms a significant cluster of engineering services capabilities in the County but has been subject to some rationalisation and consolidation as it has sought to enhance its role within wider supply chain networks. The miscellaneous "other fabricated metal products" sub-sector that encompasses many lower value added activities from steel drums and wire products to household and office metal articles has suffered from competition from lower cost overseas producers.

General Characteristics

The industry, which nationally has annual turnover in excess of £43bn per annum and generates £15bn in gross value added, manufactures intermediate metal products for a wide range of downstream industries (with the aerospace, automotive, power and construction industries being particularly important locally) as well as final products such as household appliances, utensils and heaters. The manufacture of fabricated metal products involves such processes as cutting, pressing and welding of metal components accompanied in many cases by a wide range of additional processes such as metal milling and grinding, shotblasting, braising. Sanding or disking of metal surfaces, etc. Many of these operations also involve the use of hazardous chemicals. In many respects a "traditional" and somewhat conservative industry, changes in production methods and products have tended to be introduced only gradually, partly because of the high cost of much new equipment but also because of the relatively long lead times often necessary to bring new equipment into operation such that even new process technologies that fundamentally change the industry are only adopted over long periods of time.

Graph showing how the metals industry's turnover, purchases, gross value added and net capital expenditure have changed in Lancashire from 1994 to 2004 - see text for details Source Annual Business Inquiry

Annual turnover in the Lancashire metal & metal products industry touched £1bn in 2000 for the first time (Figure 4). Even though this total has subsequently changed little (reaching £1.1bn in 2004 or the third highest in Lancashire manufacturing after other transport equipment and food & beverages), in production terms the industry has been a solid performer locally with the pace of output growth over recent years exceeding that nationally. Gross value added in 2004 was in excess of £387m or about 60% higher than a decade earlier – a much faster pace of growth than experienced by the industry nationally (+36%). Indicative of its increased weighting within the local economy, the metals & metal goods industry accounted for about 5% of Lancashire's manufacturing gross value added in 1980; by 2004 this share had risen to nearly 8%.

Traditionally a relatively labour intensive and lower value added part of the wider engineering group, over recent years the industry has been subject to fierce international competition across many of its market sectors, forcing manufacturers to rationalise production processes, to innovate and to improve quality and service. The local industry has responded with a healthy surge in new investment (averaging about £40m per annum over recent years) directed at both capacity and productivity improvements. Net capital expenditure per head since 2000 has been well above that of the industry nationally. It has introduced lean production, JIT and other forms of modern industrial production as well as focusing more on new technologies and advanced equipment. Inevitably much lower value work has been outsourced overseas but this focus has brought about significant productivity increases: over the period 1994-2004 gross value per head in the local industry rose by over a half in real terms, significantly out-pacing the improvement in the industry nationally.

Increasingly the industry is emphasising niche markets and moving into higher value quality products and services with larger profit margins. This has been particularly notable amongst a number of smaller sub-contract engineering service companies who have invested in new technology and top of the range production equipment to maintain competitiveness in the face of threats from low cost overseas rivals and to better service the requirements of larger businesses who now out-source much of their detailed manufacturing requirements. The increased demand for higher efficiencies in downstream industries (notably in Lancashire from the aerospace and automotive sectors) and growing environmental concerns is stimulating companies to direct more efforts towards in-house R&D, design and innovation. Technical know-how and high product quality, and service support are enhancing the core competences of the sector and creating a demand for higher workforce skills. Many companies are now actively recruiting graduate level employees. The industry is also being required to forge ever closer links with its clients and customers within formal supply chain networks and mutual dependency between companies at all levels of the supply chain is increasing and making a virtue out of operating factories that are geographically closer. Merger and acquisition activity, joint ventures and co-operation agreements between firms supplying a common client is becoming increasingly common.

This page was compiled by Peter Kivell .

All enquiries from the media should be sent to Corporate.Communications@lancashire.gov.uk .

Any other questions about the content of this page may be sent to EconInfo@lancashire.gov.uk .

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