Member Article

Keeping the manufacturing faith

Pemberton Capital’s Nick Brainsby explains why funding manufacturers shouldn’t just be about the good times

Manufacturing hasn’t always been the flavour of the month like it is at present; in fact for the majority of the last twenty-five years it has been the poor relation of the British economy.

This reputation – coupled with the high profile collapses of MG Rover, Peugeot’s Ryton plant and AGCO – has made the banks, financiers and less conventional funders more than a little sceptical about the potential of the sector.

Fantastic engineering businesses with great potential have been turned away when pitching for cash to aid their expansion, whilst struggling companies have had a possible life jacket ripped away due to over cautious decision makers. The latter is often out of the hands of management and down more to external market and economic factors.

At Pemberton Capital we took a different approach. Whilst I’m not for one minute suggesting we have been a knight in shining armour for industry, we certainly haven’t just jumped on what now appears to a potentially lucrative investment opportunity.

Manufacturers in the UK haven’t all of a sudden become highly competitive, high quality producers, who can compete very effectively in the international marketplace. We have always had access to a committed, flexible and skilled workforce and our world leading position for quality has never really strayed far from our shores.

I am also regularly surprised and impressed by the level of genuine innovation you see in smaller companies. Yes, the big boys tend to get the headlines, but the genuine breakthroughs or new technologies come from England’s SMEs…usually without huge budgets. It’s amazing what can be achieved at the coalface when a practical problem needs solving.

All of these factors make a strong business case for investing in UK manufacturers and are some of the reasons why Pemberton Capital has been backing industry since 2010.

Most of the companies we’ve funded have been in a state of distress and we have worked extremely hard to turnaround their fortunes. It’s not easy and difficult decisions have to be made, but the key is in unlocking the market differential that had got lost along the way or been weighed down by economic conditions.

Our latest investment is a prime example. Cobra Automotive Engineering, based in North Wales, was in terrible shape after falling victim of overspending on capital equipment and a lack of cash as it sought to finance rapid expansion.

However, the firm had a long-stranding reputation for providing innovative interior trim products and outstanding quality in a market that had a shortfall in local supply. This made its strategic position very strong.

The turnaround hasn’t been easy; it has been expensive and complicated. However, we always knew that once we resolved these internal issues, the company would be very well placed to grow and we are beginning to see the start of this phase.

Of course we invest to make money, but we do passionately believe that UK manufacturing has to be a central part of the growing economy. According to the recent MAS Barometer, we have started to bring production home and reverse the offshoring and outsourcing trend that dominated the early part of the noughties.

Let’s hope more investors and banks start to put their money where their mouths are when it comes to backing our manufacturers.

This was posted in Bdaily's Members' News section by Russ Cockburn .