To combat the impact of the Covid-19 pandemic on jobs and livelihoods, the Government has pumped billions of pounds into the economy. We will all be paying for this expenditure through our taxes for years to come. There is, I believe, a collective responsibility on all parties to ensure that these monies remain within the UK economy to pump prime its recovery.
In no sector is this argument more valid than UK manufacturing. As Alok Sharma* wrote to me, and other leading manufacturing companies, ‘manufacturing is a critical part of our economy’. Unlike other sectors, start-up costs in manufacturing are high. Once manufacturing capability and capacity has been lost, it rarely returns.
I would like to make it clear that I am not suggesting that UK manufacturers get a ‘free ride’. I am arguing, however, for a different approach to procurement, one that appreciates and values investment in quality, skills, innovation, logistics and manufacturing facilities; an approach that sees its planning horizon as the long-term rather than simply today’s lowest price.
I am Chairman of AVK UK Group. The Group employs over 600 people and has a UK turnover in excess of £90m. It has a long and proud history of manufacturing products for the UK gas and water sectors as witnessed by brands such as Donkin, Fusion, Glenfield, Syddal and, last but not least, AVK itself. It is part of a global group with a strategy of serving water and industrial markets. Implementation of this strategy is, however, focussed totally on the needs of local markets. Even during the Covid-19 lockdown we have continued to invest in new product development, our new AVK Academy, ERP systems and the implementation of lean manufacturing principles. We do this because we believe it is what the utility sector both wants and needs.
The UK water and gas markets in which AVK operates are dominated by regulatory five-year price reviews and the associated capital and operational investment plans of the utilities. It is an industry structure marked by five-year framework contracts and balanced scorecard procurement. However, as the recent Public Accounts Committee report on Water Supply and Demand Management made clear, it is a sector that also has to meet challenging long-term sustainability and climate change goals.
To achieve both short-term and long-term goals, I believe all parties in the utility sector should further embrace open engagement, collaboration and a strategic perspective on procurement. For example, water and gas companies, tier one contractors and consultants would benefit from deeper engagement with manufacturers and suppliers that have shown their commitment to the sector by investing in it. There are innovation and engineering resources to tap into, different perspectives to evaluate, and datasets to be shared. Diversity is key to unlocking the sector’s challenges.
It is not a one-way street. I recognise that AVK needs to continuously grow, adapt and evolve to address the new economic realities. To this end, AVK is an active participant in Project 13, an ICE-led (Institute of Civil Engineers) collaborative model for enterprise, as opposed to transactional, delivery of infrastructure; water companies and Tier-1 contractors are among the early adopters of Project 13. We will shortly be opening the AVK Academy, a hi-tech facility that will enable us to learn more about the challenges facing our gas and water company customers, and share our knowledge and expertise with them. Furthermore, we are developing a portfolio of ‘first to market’ smart technology products including pressure management devices (PMD) and smart air valves.
The Water Act 2014 added a new obligation on Ofwat and water companies; to increase the resilience of water and wastewater systems. It identified the need to promote long-term planning and investment. Water and gas companies, in turn, need resilient suppliers with a parallel commitment to long-term investment. It is investment of this type that enabled AVK and other UK manufacturers to help the water and gas companies maintain supplies during the Covid-19 lockdown.
For the reasons I have outlined above, the UK needs a strong and innovative manufacturing sector. The UK gas and water industries cannot afford to sub-contract their futures to the vagaries of international markets and the volatility of exchange rates.
Regional Director AVK Holding A/S
*The Rt Hon Alok Sharma MP. Appointed Secretary of State for Business, Energy and Industrial Strategy February 2020.