James Caan: "The UK can kiss manufacturing goodbye"

by Kate Pritchard - Wednesday, 16th April 2008 - (14) comments - Business comment

Dragons’ Den investor James Caan stirred up angry debate among business owners at yesterday’s Entrepreneurs’ Summit by claiming that British manufacturing is dead.

“In our lifetime, I don’t think we will compete with India and China,” he told the audience of 250 entrepreneurs.

“We don’t have manufacturing anymore. If somebody approached me tomorrow to invest in a business where they were going to manufacture something in the UK, I probably wouldn’t invest. Within six months, that same product in India or China would be a third of the price.

“We have to recognise what we’re good at,” he continued. “I think our current cost base means that we can kiss manufacturing goodbye. In Britain, we are – and we will continue to be – a service culture country. I think that is where our income’s going to come from."

Well, that certainly caused a few raised eyebrows.

“James Caan must win the prize for daft comment of the day,” said Gary Dutton, the entrepreneur behind windows and conservatories firm Synseal. “Well, I’ve got news for you, James. Good old Gary is in manufacturing and could likely buy you and Peter Jones out.”

"James should listen to someone who knows about the British manufacturing industry properly.

"The fact is that the unions and then the Far East have, in turn, decimated the UK manufacturing sector. But some industries such as mine are not labour intensive. In fact, 80 per cent of our cost is made up of raw materials. These are commodities that we and the Chinese buy on the markets. Therefore, what advantage they have by way of notional labour cost reductions are balanced out with getting the finished product from the other side of the world."

Sir Robin Saxby, the founding CEO and chairman of ARM Holdings, threw more fat into the fire.

"With increased pressure on our planet’s scarce resources, final assembly of finished goods close to the end customer will become a new trend, especially where products require a high degree of customisation.

"It would be foolish to consider that a modern thriving economy could survive with a service only culture.”

Harry Rawlinson, chief executive of upmarket shower-maker Aqualisa, also joined the fray, pointing out that, with labour comprising less than five per cent of his manufacturing costs, he would continue being a proud UK manufacturer. He was joined by at least two other high-end manufacturers who took umbrage at Caan's comments.

Should we kiss manufacturing goodbye? Let's hear your views.

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14 Comments

May 18, 2008 9:52pm
Manc Says:

James Caan just told an inconvenient truth, period.

May 14, 2008 3:45pm
Nigel Slator Says:

I hope James Caan reads the feedback on forums such as this. I thought he had more credibility than that. UK manufacturing has its place. Our business outsources to Eastern Europe for higher volume cost sensitive products but we manufacture our customers electronics here also. Some products are low volume, high complexity and rapidly evolving and UK “entrepreneurs” need facilities such as ours to bring their ideas to life. The UK offers high quality, value added manufacturing free from the risks of plagersim that afflict many far eastern services. In time, who knows how long, but the pendulum may swing back again and it may even be competitive to produce cheap “stuff” to satisfy our demands back, here in the UK. We need to keep the body of manufacturing knowledge in tact for future generations. I think James should make an equally public apology for his gross generalisation and the potential damage it can do. He is welcome to our facility to do it if he pleases.

May 11, 2008 3:44am
Deb Says:

Proof of the pudding....I haven't bought anything in donkeys years that has been manufactured in the UK! 'Manufactured in China' is an all too familiar sight now. It may be a severe annoyance for many patriots, but it is a fact. 'Made in the UK'? That's as rare as a blue whale these days!

April 18, 2008 5:10pm
Graham Pitman Says:

Factual distortion, deletion and generalisation are typical mistakes of a bad analyst. I would have thought that someone of James' experience would have avoided such basic mistakes. Unfortunately ill informed comments by high profile but small minded investors such as James make the public as ill informed as he appears to be. Fortunately there are a many private equity investors and entrpreneurs who have better business environment and analytical skills. Fortunately Digby is a champion of manufacturing, although I am not sure that he is having the impact at UKTI that we might have hoped. Ah well. I will continue to enjoy my own hi-tech manufacturing business which has just won a major contract in China (against Chinese competitors) exports 70% of output worldwide. Gary Dutton, said he could likely buy James out, I wouldn't consider that - I prefer to "stick to the knitting" - James should try doing the same.

April 18, 2008 12:00pm
Chris Toy Says:

I think James is right with regard to large-volume manufactured goods. Sure, some low-volume goods (customised and to a high standard) can survive but in the long run they will outsource the manufacturing abroad, once they build their brand up.

Surely the most innovative and profitable entrepreneurs today are involved in service industries (and/or online), where variable costs are minimal and fixed costs can also be kept down. The markets and business community see these business with long-term growth and profitability, hence they will always sell for higher.

Investors won't pay a premium to buy a manufacturing business in the UK.

April 18, 2008 10:16am
Liam Austin Says:

Manufacturing dead? I think not! For example, take a look at the winners of the 2007 International Trade Awards, high growth companies who are successful manufacturing in the UK and selling overseas http://www.internationaltradeawards.co.uk

April 18, 2008 10:02am
Kevan Jones Says:

Oil is almost double the price of 12 months ago and looks set to continue rising in the longer term if not immediately. Factor in more extreme weather patterns and shipping from the far east is going to look less and less attractive. It would be folly to ignore domestic manufacturing and education must restore some emphasis on the essential skills for this sector.

April 17, 2008 10:55pm
Will King Says:

Apple. Designed by Apple, in California. 'King of Blades'. Designed (engineered, manufactured & packaged) by King of Shaves, in Chesham, Bucks., UK. Britain Can (not Caan't) manufacture.

April 17, 2008 4:17pm
BRIAN ROGERS Says:

UK manufacturing is not dead and will not die so long as Gordon Brown wakes up and realises a country needs a strong manufacturing base for a strong economy and starts supporting industry instead of grinding it into the ground. James Caan would do better talking about supporting British industry which has many advantages over cheap Chinese products,not to mention all the political & green issues which are gathering momentum all the time.

April 17, 2008 4:09pm
Chris Says:

It can take months to get product from China to the UK and through customs, so stock must be kept in the UK to cater for demand variation rather than being called off from a UK supplier in smaller quantities, a high additional cost considering property cost in the UK and one that doesnt often get factored in when choosing a supply source. You also have the carbon footprint issue by shipping these products thousands of miles and then problems with getting replacement parts, which prevents local repair, which consequently adds to the landfill mass. This alongside extra packaging for shipping, communication problems, legal issues regarding patent's and the high cost of shipping larger products that contain a lot of air might have been overlooked by James Caan.

April 17, 2008 3:30pm
Kevin Nicholson Says:

I think James Caan on Dragons den is great, but what a stupid thing to Say, If he thinks UK Manufacturing is dead come to Bristol and have a look around Our CNC Machine shop, we are full to capacity producing many parts in exotic materials for the Oil Industry that the Indian and Chinese markets can not produce because they dont have the brains or technical equipment to do It. A very happy Director

April 17, 2008 3:24pm
Dan Matthews Says:

It's a bit daft to make generalisations like this. But he's right to an extent - look at the number British production companies 75 years ago and look at the number today. Likewise look at the same stats for China. There's your answer (barring a few exceptions as always). But another truth is that China specialises in high-turnover low-skill manufactured goods. And it's this type of activity that's moved over there. But there's still room in the UK for skilled niche manufacturing and there probably always will be.

April 16, 2008 10:28pm
Paul Bogan Says:

You mean James Caan told a roomful of manufacturing entrepreneurs that their sector doesn't exist anymore? Priceless.

April 16, 2008 10:16pm
Dan Martin Says:

I was at the summit and James' comments certainty caused anger in the room. I've posed the same question http://www.ukbusinessforums.co.uk/forums/showthread.php?t=64087 and many entrepreneurs report that small manufacturers are very much alive and kicking. This comment from a Rochester based manufacturer stands out: "Our industrial estates contain a lot of small companies making all the stuff that the Asians either don't know how to do, or can't do quickly enough. There is also a linkage between construction and manufacturing. Most buildings contain lots of manufactured products - doors, windows etc. Have you seen those steel 'juliet balconies' that are popular on new blocks of flats? A good friend of mine has manufactured literally thousands of those." So come on Mr Caan; what is your response to that? Dan Martin Editor, BusinessZone.co.uk Administrator, UK Business Forums