NEPIC: Facing up to the challenges of an industry

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Stan Higgins, who is soon to retire from his role as CEO of the North East Process Industry Cluster, reveals the challenges NEPIC has faced during his tenure…

During my tenure as CEO of NEPIC, the chemical process sector has identified and faced many challenges. Not least that in 2002 many stakeholders, both local and national, believed that the chemical sector was dying and no longer worth supporting. A misconception caused by the fragmentation of the sector and the paucity of shared information about the investment and upside performance of individual units. On the other hand plant closures were always headline news.

The mistaken belief was that this sector would be disappearing just like the region’s mining and shipbuilding sectors?

This truly was the mood around Governmental and stakeholder circles. Too many in industry also believed this and nobody was pointing out nor talking up its potential. It is only when industry itself pulled together and took a collective view, that this perception began to change.

When NEPIC was established in 2003, there were certainly many challenges to face and, looking back, I must have been crackers to have left a perfectly good job to tackle them head on!

Challenge 1: Bring together all the players across a diverse and hugely fragmented sector

Regional industrialists soon realised that despite the diversity of the sector – that included chemicals, pharmaceuticals, biotechnology, polymers and renewables – chemistry-using industries have many cross-cutting needs. After countless one-to-one meetings between myself and the region’s industrial leaders, cohesion began to emerge. A leadership team of top executives was created by those enthused by the idea that that the industry’s fortunes had to change.

Challenge 2: Create an organisation that all stakeholders would buy into

The reality is that industry created NEPIC and, once the clustering concepts were articulated, support rolled in. Over 200 top industry executives have provided leadership and counsel to our organisation, with industry and the supply chain steadfastly supporting us since 2003.

Challenge 3: Identify and broadcast the real impact of the sector on the UK economy

The true impact of the process sector cannot be identified through standard industrial data used by the Office of National Statistics. This is due to an effect in the statistics that more people now recognise – “the branch office effect”. Latest reports based on Standard Industry Codes still suggest that no chemicals, no pharmaceuticals nor apparently any cars are made in our region.

However, through our work in identifying the true value, it is now appreciated amongst stakeholders that the process sector represents half of the North East industrial economy – and significantly more of the industrial landscape in the Tees Valley. In fact, 50% of the UK’s chemical Industry and 30% of pharmaceutical manufacturing is based in the North East region.

Challenge 4: Demonstrate the economic value of the sector to the local and national economy, and identify its future potential

This has been one of our most difficult challenges. The value of the sector to the economy of the region is still not reflected in the nation’s industrial data. However, by promoting the collective capability of the companies based here, others have begun to recognise the importance of the “process industries”, our exports and ultimately our Gross Value Added (GVA).

For the record, a worker in the pharmaceutical industry is worth ~£260,000 in GVA to the UK economy, chemical workers ~£92,000, aerospace ~£85,000, automobiles ~£75,000. Compare these values to our region’s average GVA and that of the UK – £18,500 and £25,000 respectively.) Such data should be used inform those about which industries we need to attract, support and grow if we are to grow our economy.

Challenge 5: Market the region’s process sector to attract inward investment and growth

By 2005, a portfolio of potential future investment in the sector had been compiled. It suggested that significant investment could be attracted to the region. Over the years this portfolio, which demonstrated growth was possible in the region, has borne fruit. It has amounted to 90 investments being delivered, totaling more than £6 billion.

When we add the impact of these investments to the work we have done in helping local SME’s to grow we can demonstrate that the industry collaboration through NEPIC has had cumulative economic impact of more than £3.5 billion of GVA for the local economy.

Challenge 6: Strengthen the industry’s supply chain in the region

When industrial leaders set this challenge, we at NEPIC devised a mentoring programme that received £1.5m of UK Government Regional Growth Funding, enabling us to implement the Business Acceleration for SME’s project (BASME). The concept centered around mentoring, via the NEPIC team and industry volunteers, that would ultimately facilitate the growth of local SMEs and in turn strengthen the region’s supply chain.

Our objective was to help 400 companies over three years. In fact, we helped 432. We sought to secure £40m of new business – we achieved £50m. We predicted that we may create 1,000 new jobs – the final number, audited by third parties, was 1,010*. Today, we continue to use the business processes developed for the BASME programme to assist SMEs across the region to grow and prosper.

Challenge 7: Raise the international awareness of the region’s process capabilities

Investment and trade are key to economic sustainability in a globalised industry. The cluster has been helping the industry meet this challenge through many strategically focused international activities.

First and foremost, we collaborated within the international cluster community and gained “Gold Label” cluster status. In doing so, we were one of the first out of the many thousands of cluster organisations around the world to gain this quality audited label – and very proud to have been the first in the UK.

We also publish many thought-provoking articles in industry trade journals around the world to constantly make those in the global industry aware of our region and its capabilities. Furthermore, our own in-house produced publications have become the standard to which many others aspire – and in 2015, the NEPIC Directory was cited Best-in-Class for promoting inward investment and SME engagement across all industry sectors. Cumulation of this activity resulted in my election as European Cluster Manager of the Year – an award that further raised our profile across many sectors of the economy in Europe.

Challenge 8: Trying to impact the Skills agenda

The changing landscape of Government support for apprenticeships has been an ongoing nightmare. Too few employers have to date committed to training our young people and too few companies have the inclination and wherewithal to train people. I am praying that the new levy system will make a difference to the numbers of technical apprentices put in place in the years to come.

Challenge 9: Explaining the needs of the foundation industries to indifferent governments

Most people understand consumer facing industries, whether they are automobiles or electronics. These sectors are underpinned by the foundation industries, those that turn natural resources into useful intermediates such as chemicals and polymers. These industries underpin the manufacturing sector and NEPIC was created to become their voice in North East England.

An example of our ongoing work in this area is in relation to the Government’s Industrial Strategy proposals. Although initially delighted that the Government was to introduce a strategy based on industry growth, we became somewhat despondent when the first draft barely mentioned industry and its infrastructural requirements.

Seeking to rectify this somewhat titanic anomaly we canvassed our members and the collective submission to Government said it needed to apply joined up thinking – and more importantly joined up doing. They wanted more emphasis on an “integrated” industrial strategy, linking cross-sectoral opportunities and – key to our sector – support for infrastructure that secures, long-term, globally-competitive supplies of both energy and feedstock.

Challenge 10: Sustainability of the work of the cluster

The NEPIC cluster has survived on the membership fees of its members. Our cluster management competitors based all around the world are almost all supported by a combination of public and private funds from local and national government from industry.

NEPIC has over the years received nearly £10 million of public funds for various projects and initiatives and yet in that time this work has returned £3.5 billion of value into our local community and economy. Show me a publicly supported project with a return that betters this.

Our limited funding has limited the returns that our fragmented and diverse industry could have achieved. Many specific infrastructural and growth projects proposed by our industry leadership remain unsupported. Some of these projects would transform the UK economy and have a hugely positive impact on the UK balance of payments.

The success of NEPIC has come from the support we have had from industry and the leadership of many local industrialists as well as our staff. We have put together a team of dedicated professional cluster managers who buy into the objectives of the cluster, its importance to the local economy and the needs of its members. By working together and encouraging collaboration in a highly fragmented industrial sector we have turned around the perceived negativity amongst our industry stakeholders about the sector’s future. This has undoubtedly been our biggest triumph.

 

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