UK: A right moving story - PILKINGTON TO SET UP HEADQUARTERS IN BRUSSELS.

UK: A right moving story - PILKINGTON TO SET UP HEADQUARTERS IN BRUSSELS. - Pilkington's switch from St Helens to Brussels could mark a pattern. Peter Wilsher.

by
Last Updated: 31 Aug 2010

Pilkington's switch from St Helens to Brussels could mark a pattern. Peter Wilsher.

Pilkington's decision to move a large part of its headquarters operation from St Helens to Brussels may well turn out to be a landmark in Britain's industrial history. For the first time a major manufacturing company, long intimately linked, and in this case almost inextricably identified with a particular geographical location in the UK, has seen no alternative to pulling up its roots and transferring them to the European mainland. It is perhaps the starkest warning yet of the "peripherality" that threatens increasingly to erode the economic raison d'etre of these offshore islands.

For Pilkington, and for the Lancashire community whose skills have helped underpin its worldwide reputation since the early 19th century, the move represents a wrenching, if somewhat belated recognition of reality. Only two years ago, the directors rejected a site near the Channel Tunnel and agreed to open yet another massive float glass plant - their fourth in the town. Now at least one of those plants is already marked for closure, eliminating 400 production jobs. Central management will shed a further 250, and there will be 100 more redundancies and transfers from the main research establishment nearby. With a local workforce already pruned back from 13,500 to fewer than 5,000 in the past 15 years, the glassmaker's Merseyside presence will soon be slimmed down to little more than a nostalgic shadow.

The reasons behind this particular upheaval are complex, and to some extent parochial: Pilkington has suffered badly from the costs, both human and financial, of fighting off BTR's 1987 takeover bid, and further from a series of rather unhappy attempts at diversification.

But its core problem is one that faces any manufacturing firm that outgrows the purely UK marketplace: how to reconcile the logistical impediments to direct export (especially when the product is bulky and relatively inexpensive) and the demands of a fiscal system that penalises most other ways of developing the business overseas.

Under the arcane rules for calculating liability to advanced corporation tax (which will eat up more than half Pilkington's earnings this year), it is extremely punishing when a company makes a large proportion of its profits abroad and incurs most of its central costs at home. Unfortunately, in the Inland Revenue dictionary, our 11 partners in the forthcoming European single market are still defined as "foreign", so that the wrong kind of success there can become seriously damaging to corporate health.

Many more chairmen and chief executives will be squaring up to this sort of problem this coming year as the full implications of 1992 start to strike home. Looking round their own familiar landscape of chimneys and executive car-parks they will increasingly find themselves forced to ask: "Can we really still afford to run things from here?"

In some cases, indeed, the size of the executive car-park will itself be one of the determining factors. Pilkington has not been alone in accumulating managerial fat down the decades, and a radical relocation exercise often offers the ideal occasion for serious slimming. Running the firm's extensive European float and safety glass operations (including St Helens) from the other side of the Channel is scheduled to require less than 50 people. Prior to the recent shake-out it occupied five times as many, virtually half the swollen head-office staff, with all that implied in the way of overlapping responsibilities and bureaucracy. Cutting through that degree of tangle alone is sufficient to justify substantial upheaval.

Even for those businesses, though, which are already managed as slimly as possible, the question of re-focusing will need to be kept increasingly under review. The uncomfortable fact is that Britain's home demand, even in good times, can be restrictingly small for a product that aspires to world leadership in its field. For the ambitious entrepreneur with a success on his hands the obvious first step is to cultivate the 350 million customers more or less on the doorstep. But once significant penetration has been achieved, what then? When the combined French, German, Italian and Iberian sales are regularly eclipsing those in the UK it becomes far from clear that future development strategy can be best planned in Smethwick or South Glamorgan.

Barclay's chairman, Sir John Quinton, was recently musing along these lines, and came to the conclusion that "in future we should regard ourselves as a European bank that happens to be headquartered in London".

But although that may be perfectly satisfactory for someone in financial services, where both raw material and finished product move at the touch of an electronic button, the position is less clear cut when you are talking about, say, rooftiles or ready-mixed concrete.

Those happen to be two industries where Britain is building up towards Europe-wide dominance, and it is not difficult to imagine circumstances when Redland or RMC might face the same sort of wrenching dilemma that Pilkington has been required to resolve.

Innovation, manufacturing efficiency and marketing flair all tend, like charity, to begin at home. But once they are established, at least in a UK context, it may become increasingly necessary in future for them to go on their travels.

Peter Wilsher is Assistant Editor of the Sunday Express.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today