UK: Private enterprise - small is painful. (2 of 3)

UK: Private enterprise - small is painful. (2 of 3) - Rather less is heard about small business these days - except in the cries of anguish emanating from bodies like the CBI and the small business lobby. The current recession, which has left companies o

Last Updated: 31 Aug 2010

Rather less is heard about small business these days - except in the cries of anguish emanating from bodies like the CBI and the small business lobby. The current recession, which has left companies of all sizes floundering, is particularly hard on the lesser variety, as the grim procession of businesses going into receivership demonstrates.

The present sorry state of affairs serves to point out the essential fragility of much that seemed to have been achieved during the good years of the '80s. One reason for this weakness, ironically, is that the clearing away of debris in the preceding recession removed so much of traditional British industry that little remains for survivors (or up-and-coming entrepreneurs) to feed on. In other words, critical mass is now seriously diminished.

Alex Hunter is a vigorous and engaging Geordie entrepreneur who runs a clutch of tiny businesses in Leicester, the most important of which distributes industrial fasteners - basically nuts and bolts. In the 1970s Hunter was a sales manager with Armstrong Fastenings. When the storm struck in 1980 he was asked to look after the company's crumbling activities in Wales. But having only lately relocated his family to Leicester, he declined, and left to set up on his own account.

It was mid-1981, in the depths of the recession, but customers were hopeful of an upturn in the following year - and it is always best to get in on a rising market. Hunter had intended to manufacture fasteners himself but was prevented by the cost of money, and it is doubtful now if he ever will. But to establish a customer base and generate some cash, he went into distribution, calling his company Bute Fasteners. Bute, he points out, means "small" in Gaelic. Maybe, although it has been suggested that the Isle of Bute takes its name from a Gaelic word which implies "fertile". There is no doubt that Hunter's is much the better explanation in the context.

As the market recovered in the 1980s it found a corner for Bute Fasteners. Unfortunately the market never recovered to anything like its former size. "The major element of the problem", says Hunter, "is that the manufacturing base has been denuded of assembly plants - we're becoming a nation of distributors." Assembly operations went on closing down right through the boom years; and such plants as remain use fewer fasteners every time a product is redesigned.

Bute Fasteners has just about kept its head above water by absorbing price increases and ensuring a rapid response to orders. As a result, boasts Hunter, "we tend not to lose customers: in 10 years we have only lost four customers through our own fault". But after 10 years Bute Fasteners is still trying to expand out of Leicestershire and into neighbouring parts of the Midlands.

It may be argued that nuts and bolts are the sort of low-tech product which an advanced industrial nation need not be greatly concerned about. However, the whittling away of assemblers is a different matter, since these factories were responsible for putting on relatively high added value, and the goods that they produce continue to be made elsewhere, very likely to the detriment of the balance of payments. The steady shrinkage of industries involving high levels of skill is yet more alarming.

It is many years since the English Midlands were a world centre for machine fabrication and precision engineering. Most of the well known names of half a century ago, along with almost all of their back street suppliers that made up a closely interwoven regional economy, have been swept away. But here and there one survives, like Coventry Gauge, now a small business and a long way from the Midlands.

Coventry Gauge and Tool used to be an industry leader; then it became a division of TI. In 1986 the precision gauge-making rump was acquired by Horstmann, and installed in a factory at Poole on the south coast. The deal brought little advantage to either parent or subsidiary. After only three years the latter's lately arrived general manager, Hamish Gracie, who formerly ran David Brown's tools division, was invited to lead a buyout.

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