National treasures: best of British

They say Brits don't blow their own trumpets enough - so MT showcases five businesses that are quietly forging ahead, even in these tough times.

by MT Staff
Last Updated: 09 Oct 2013
BROMPTON

The UK's largest bike maker has turned its hand-crafted folding bicycles into a global hit

Like so many great British artefacts, Brompton's eccentric folding bicycle is a product of confident amateurism. For 10 years, Brompton wasn't so much under-capitalised as not capitalised at all. Founder-designer Andrew Ritchie sold his bikes to friends.

My own lovingly acquired and patiently fettled Brompton was a perfect symbol of Britain at its best. High performance, but intelligent and responsible too.

Nor am I the only one to appreciate its improvisatory genius. The order book has been full ever since production began in 1988 and 150,000 have been sold. That makes Brompton the largest manufacturer of bikes in the UK. Its turnover last year was £11.4m and is due to hit £14m in 2010. Net profit margin is 8%.

Even now, as 75% of production is exported to 35 countries, Brompton's style and specification are defined by the landscape of local ambition. That locality is an unlovely part of Brentford, virtually inaccessible to a prudent person on a bike.

To show that the gods of geography have a sense of humour, the Brompton factory is next door to a huge Mercedes-Benz depot. First impressions are not auspicious. It reminded me of the factory my father used to manage in Speke - mildewed, smelling of hot oil and swarf.

But there have been improvements under the new management. Will Butler-Adams joined in 2002 and became MD six years later. In one corner, as if to advertise the decline of the old order, Ritchie sits and stares at a screen. He's regarded as a useful irritant.

Meanwhile Butler-Adams, a fluffy-haired public school boy, is on first-name terms with solemn proletarians brazing things. Making a Brompton is labour-intensive, although there are new tools for testing the 1,200 components in a bike and Kanban logic has tidied up processes.

The factory - Xanadu to the old order's Coketown - is charmless, the sense of euphoria in the workforce moderate. If this is the thrilling pleasure to be had from manufacturing, I am not absolutely sure we want more of it.

Butler-Adams takes me outside to try the new Brompton electric bike. It does not work.

Brompton is not desperately clinging on. No, its fingers are dug quite firmly into the edge of the precipice. And to get another one (titanium, two-speed), I must join a waiting list.

The artisan craft impresses, as does the eccentric commitment. However, a modest view of the future and iffy media tact do not. Brompton, like Britain, is wonderful and exasperating in equal measure.

Stephen Bayley

ARM

World-leading chip designer uses UK expertise and licensing to create a global impact

ARM may not be a household name, but you almost certainly own one - or more likely several - of its products. ARM is the Cambridge-based microchip designer whose chips power today's most popular devices - smartphones, handheld computers, video games, GPS, tablet PCs and MP3 players.

The company has offices across Europe, the US and Asia. Last year, it made a profit of £40m on turnover of £305m. But this is a microchip firm with a difference - since it set up shop in 1990, it hasn't actually made any of the 15 billion ARM chips which have been produced all over the world.

How does a chipless chip business make money? By licensing - it creates and owns the designs, but leaves the complicated and capital-intensive hassle of manufacturing to others. 'We design microprocessors for chip manufacturers to make and sell. We charge them an up-front licence fee and then a downstream royalty, payable when they start selling chips,' says ARM CEO Warren East. 'Because of that royalty, we're highly motivated to make sure our licensees succeed.'

More than 600 licences have been sold over the years, to the likes of Samsung, Yamaha, Alcatel-Lucent and Apple, or even to arch-rival Intel. The USP of ARM's RISC (reduced instruction set computing) architecture is that it facilitates small chips that use little electrical power - ideal for the burgeoning market in mobile devices, where it is market leader.

The firm has been headquartered in Cambridge's Silicon Fen from day one and, despite the fact that none of its actual customers are here, 40% of ARM's total workforce is still UK based. Why? 'We are a design company and we need good engineers,' says East. 'The UK is a good place to find talented and creative engineers.' And even though its customers are far to the east and west, the UK is a good base to service them from. 'You have to have the right people in the right regions, but UK business culture goes across well in the US and Asia,' he says.

East reckons that the prospect for ARM - and for the UK's small but perfectly formed tech sector in general - is bright. There are strong hubs in Bristol and London, he says, and big opportunities on the horizon, thanks to a likely surge in demand for intelligent sensors, tiny silicon devices which will enable systems - from production lines to the human body - to be monitored and optimised in real time.

He's confident ARM will continue to prosper, thanks to the firm's distinctive British way of doing things, a mixture of commercial nous and academic-style knowledge-sharing. 'The essence of ARM's culture is a realisation that it's better to share a huge pie with partners than have the whole of a much smaller pie to yourself,' East says.

ICAP

A 1980s financial start-up which grew into the largest money-broker in the world

Icap and its swashbuckling boss, Michael Spencer, are the stuff of City legend. After an early career that included being fired from his first job as a stockbroker, Spencer founded inter-dealer broker Intercapital (as it was then) on a shoestring in 1986, only a year before the electronic Big Bang that revolutionised the City.

A lot has changed in the intervening decades; not least that the capital's financial district is now a great deal less British, at least in terms of ownership, than it used to be. The staid old home-grown banks and brokers have gone, ousted by bigger, sharper and faster foreign rivals. Of the few British firms still flying the flag in the Square Mile, Icap is the leader of the pack, not only London's but the world's largest interdealer broker, making £1.6bn of sales and £333m profit in 2009-2010.

Fittingly for a firm founded by a man who admits to having been 'fascinated by money' even while studying astrophysics at Oxford, Icap is a money broker and deals directly in the stuff. It acts as an intermediary, a wholesale buyer of derivatives, bonds and securities for financial institutions and professionals, taking a small commission on every trade.

Clients in 32 countries use Icap because it provides liquidity, anonymity and convenience, but it's a model which relies on huge trading volumes to keep the cash rolling in. So market volatility is Icap's friend, both because it tends to boost trading volume anyway and because volatility increases demand for derivatives, futures and the other financial instruments needed when times are tough. This has helped shield it from some of the worst effects of the financial crisis and subsequent recession.

It hasn't all been plain sailing. Icap issued a surprise profit warning in February after a slump in trading volumes and closed its unprofitable cash equities business in March, writing off 114 jobs and £18m. Spencer himself took a £100m bath as a result of the financial crash in 2008/9, although he's still reckoned to be worth £150m, according to this year's Sunday Times Rich List. But by the standards of many big names in the financial sector, Icap has emerged unscathed. No state bailouts required here.

Of course it's not just profits that have taken a dive in the City of late. Corporate reputations have been left battered too and the bonus culture ballyhoo isn't going to go away any time soon. But if the nation's financial Augean stables are in need of a bit of a spring clean, we ought to think carefully about burdening the sector with too many new caveats and restrictions. It's an industry that the UK has proved itself to be very good at and even if its protagonists do reward themselves with tastelessly large sums of dosh they also provide good jobs, pay taxes and generate GDP.

Spencer is the archetypal City entrepreneur, a serial taker of large but calculated risks who likes to make money and likes to spend it. He's also extremely competitive, once saying 'I like a good fight' when questioned about his longstanding rivalry with Terry Smith's Tullett Prebon. If London is to retain its place as the world's financial capital, we need more like him.

SHINE GROUP

Independent TV producer whose hit Brit shows go down a storm with foreign audiences

Spooks, Ashes to Ashes and MasterChef: all three are hit TV shows watched by millions worldwide - and they're all British.

In nine years, Shine Group, the company behind the programmes, has grown to become Britain's biggest independent production group. Last year, it increased its turnover by 23%, from £216m to £265m - and if predictions are accurate, this year's revenue could be double that. 'We're a big global company now. We wouldn't be surprised if we were up around 50% this year,' says Alex Mahon, its president.

The company started out as Shine TV in 2001, founded by Elisabeth Murdoch. In a break with received wisdom, she concentrated on building a multi-genre company that covered drama, factual and entertainment programmes while competitors remained specialist. It paid off: five years later the group bought rival production companies Kudos, which makes Spooks and Hustle, and Reveille, creator of the US version of The Office. It is still expanding.

Mahon reckons Shine's success is due in part to the fact that its headquarters are in the UK, where copyright and intellectual property legislation protects producers' interests better than elsewhere. 'Producers get to retain all the intellectual property and maintain the majority of earnings from it,' she says.

There's also huge investment in public service broadcasting through the BBC and Channel 4. This funds new ideas and encourages suppliers to become more experimental, building a thriving creative sector in the UK and allowing Shine to have its pick of writers and producers. 'The secret of our success is recruiting only the best people and leading them - and they have delivered ideas that are exported globally.'

The fact that two-thirds of its revenue comes from outside the UK shows just how popular British programmes are abroad. MI5 drama Spooks is sold to more than 100 countries and MasterChef Australia is one of the most watched programmes ever down-under, with more than 3.7 million viewers for last year's final episode. Foreign audiences have a huge appetite for British reality shows.

The group plans to stay on top by producing more multiplatform content - Facebook groups and Twitter feeds - so consumers can engage with the show. 'You have to do that because that's what people expect. It's about creating a deeper engagement with your brand,' Mahon says. 'We must evolve with our audience or we will be defunct.'

Elizabeth Anderson

COBHAM

Septuagenarian UK defence firm that punches far above its weight in export markets

A minnow by comparison with US rivals such as Lockheed Martin, Raytheon or General Dynamics, Dorset-based Cobham is in many ways a metaphor for the whole UK defence industry: a relatively small operation that manages to compete successfully on a global stage, thanks to agility, technical excellence and a proven track record of delivering the goods.

The 'goods' in Cobham's case is high-tech military and defence equipment - aircraft avionics, battlefield comms and radar - plus an aircraft maintenance division. But Cobham's main claim to fame is as a world leader in in-flight refuelling (IFR) systems, a subject on which the firm and its adventurous progenitor Sir Alan Cobham pretty much wrote the book.

Cobham founded the firm in 1934, having made his name as a pioneer of long-distance flying. In 1949, his firm invented the 'probe and drogue' method of refuelling which is used by all Nato air forces to this day. It was a major technical breakthrough that paved the way for the highly flexible, multi-role military jets of today.

Recently, Cobham has concentrated on new markets in the search for growth - most obviously the US, whose $520bn defence budget dwarfs all others. Under Allan Cook, CEO from 2001 to 2009, it pursued a vigorous series of acquisitions, spending almost $1bn on US firms in 2008 alone. It has also diversified into avionics and high-tech communications, specialising in the aerials and infrastructure which allow the military to take the internet to work with them. The US now accounts for 60% of Cobham's £1.9bn annual revenues. The firm made a profit of £186m in 2009.

Sir Alan's ambition to see his IFR systems used in civil aviation never came to pass, but the business has done pretty well out of the idea. Cobham has produced 95% of all probe and drogue IFR systems, over 1,000 sets in total.

Of course, with defence spending being reined in as the Coalition struggles to bring down the deficit, Cobham is bound to feel the effects of this, if less so than some rivals. But the bigger question facing the industry is to what extent the UK as a nation will wish to continue to be seen as one of the world's major defence exporters.

It's a moot point - like financial services, defence isn't going to win many popularity contests, but it's something which we in the UK are good at, and whose contribution to our prosperity should not be underestimated. Relative to their size, UK defence firms such as Cobham have a disproportionately large share of the world export market.

Cook's successor, Andy Stevens, took over the top job last year. The former COO of Rolls-Royce, Stevens should be ideally equipped for continuing the pursuit of Cobham's goal of superior technology. But engaging with the wider issues of the role of the defence industry itself may call for some nifty footwork, and greater efforts to demonstrate the crossover of ideas and technologies into civil fields.

One thing is for sure - with the economic future uncertain, we need all the world-class businesses we can muster. And whether you like what the industry does or not, Cobham is certainly one of those.

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