Why does Baxall still make printed circuit boards for its world-leading CCTV cameras at its bursting-at-the-seams Stockport plant instead of in China, as most firms in its position do? MD Dominic Oughton doesn't hesitate: 'Our labour cost is 7% of sales - it would cost us that in freight and duty to bring boards from China, even if they cost nothing. So the first answer is that we can.
'Second, we design for manufacture. Direct feedback from the factory to development gives us a tremendous ratchet upwards. What we'd gain in cost we'd lose several times over in the direct contact we have between engineers and manufacturing. Third, our key differentiator is rate of innovation. Even though we're running at high volumes, we can easily slot prototyping into the manufacturing process.'
In other words, far from being a handicap, Baxall's UK manufacturing base is critical to its success. This contradicts the conventional wisdom that the UK can't both develop and make high-tech products. Unfashionably, vertical integration is an essential element of its business model, enabling it to maintain a unique and profitable niche between the big-name brands (JVC, Panasonic) and the anonymous commodity suppliers of Taiwan. Perfectionist design and manufacturing ability is also an essential part of sophisticated partnership relationships with some of the biggest US system suppliers, which provide a vital route to market. Baxall raises other intriguing issues.