Light up ahead? NEPIC’s Iain Wright on the way forward for the chemical sector

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1 Nov 2017

Light up ahead? NEPIC’s Iain Wright on the way forward for the chemical sector

Source: Process Engineering Magazine

Iain Wright succeeded Stan Higgins as chief executive of NEPIC this year. With a hard act to follow and unprecedented challenges ahead, the ex-government minister knows he has his work cut out, reports Brian Attwood.

Ahead of the last general election, a slew of Labour MPs who, one suspects, found themselves out of sympathy with the direction of their party, announced their decision to quit Parliament.

Of these, an appreciable percentage – comprising Shadow ministers and ex-ministers many years from retirement – have moved to influential new roles: Andy Burnham to Mayor of Greater Manchester, Tristram Hunt to V&A director, Michael Dugher to chief executive of UK Music.

Less extensively reported, but potentially of greater significance, was the appointment of Iain Wright to the helm of the North East of England Process Industry Cluster (NEPIC). An indication perhaps of how peripherally the area and also the chemical-using industries are viewed from the rest of the United Kingdom.

In one sense that is unlikely to disconcert Wright, whose various positions (including at Westminster) have betrayed a consistent north-eastern focus and who tends to see his region as the exemplar for the rest of the UK.

Yet it also implies the prime reason for the choice of this self-confessed non-chemist as successor to the formidable Dr Stan Higgins, chief executive since NEPIC’s inception in 2003/4.

Under Higgins and a succession of chairman (presently, the chemical engineer and former Lib Dem MP Ian Swales), the cluster has grown in size and influence.

In Higgins, NEPIC had a chief executive with a direct experience of chemistry in the workplace, a clear strategic vision of where the sector and UK manufacturing needed to be and a gift for articulating it in speech and print.

So what, then, will the former member for Hartlepool bring that enables him to fulfil the requirement in the original job advert to “lead NEPIC through its next period of growth and impact”?

“I’m certainly not being employed by NEPIC for my chemical engineering skills but what I probably am is a translator … because the language of politics and the language of business, often they are two very different languages,” says Wright.

The recent history of the UK chemicals industry bears witness to this. Not only in glaring examples such as the 2008 closure of Dow Chemical’s Wilton site; but also in the frequently reprised calls by NEPIC for more attention to be paid to the significance of supply chain integration and materials symbiosis, and for a greater appreciation of the role this key UK sector plays.

Foreign prospects

A weakened government, continuing Brexit uncertainty and greater global competition increase the need for the industry to have Westminster’s ear. It also requires the sector to adapt, lectures Wright.

“Politicians have a lot to deal with – they’ll have a dozen things to consider during the course of a day. Clarity and consistency of message is important to make sure policymakers do know what you want.”

One might expect that the present situation would be cause for pessimism. Not for Wright: “Three months into the job I’m surprised how much confidence there is locally. Membership is growing and growing quite sharply. Frankly, I’m surprised at the amount of confidence there is.”

This is reflected elsewhere. The Chemical Industries Association (CIA) August survey of members revealed more than half its respondents expected exports to increase over the next 12 months, while only 6% assumed a decrease.

On that score, financial analysts are less convinced. Of the £50 billion in annual UK chemical exports, 60% derives from EU trade – the future for which looks less than certain.

Meanwhile, analysts Plimsoll have warned that one in three of the UK’s top chemicals companies are already coping with falling profits, higher debts and reduced sales.

Wright too feels the export picture needs to be more encouraging. “I think [NEPIC members’] confidence comes from domestic trading. I think there might not have been as many export opportunities as I would like to see.

“With the fall in sterling you’d think there would be more of an export-led bounce – I think NEPIC can play a part in [achieving] that.”

He maintains a non-sectarian belief that government will seek to ensure trade with the vital European market is as frictionless as possible. While tariffs are a concern, his focus will be non-tariff barriers and the danger these present.

Borders and barriers

“It’s about the practical, logistical: do I need additional paperwork and bureaucracy if I’ve got bulk chemicals sat at the port and I’m waiting to gain entry into the United Kingdom?

“If I’m a manufacturer who requires the chemicals and I’m employing, quite rightly, a ‘just in time’ stock policy, I can’t wait for them to be three or four days.”

Additional tariffs of three, four or five per cent will affect the bottom line, he concurs, but “it’s that waiting in the port, waiting for the paperwork, waiting for the stock to be delivered, that will have an impact”.

Unsurprisingly, the majority of NEPIC businesses were identified in the Remain camp. Yet, says Wright, Brexit will imminently be a fact of life. Welcome or not, it has to be set against the context of a change in the economic order dating back to 2008, since when “uncertainty is the new normal”.

“It’s a case of capturing other markets. Having said that, our European Union partners are still going to be incredibly important. Certain components, certain services, certain commodities within the chemical supply chain, don’t travel well. We have to have them relatively close for a variety of reasons, volatility, what have you. So Europe’s always going to be important.”

Faced with the likelihood of contraction in its most reliable market and challenges expanding into new locales, that favourite theme of process engineers – efficiency – looms still larger.

Security of supply, safe energy and competitiveness has to be the cornerstone of government policy. These three elements are absolutely essential and will be a strong thread running through any industrial considerations

Even in the increasingly digitalised industries of today, the success of chemical industry clusters in Teesside, Scotland and elsewhere is a reminder that geographical proximity plays a decisive role in the integration of supply chains.

“Industry works better when it’s integrated, and I can think of no better example than the chemical industries sector because one person’s waste is another person’s feedstock and it will be a key part of that whole value chain.

“There’s an economic argument for clustering; there’s also a good policymaking argument.”

Yet a problem previously touched on is the dependence of that supply chain on a very sizeable component of small to medium- sized enterprises (SMEs). How can these firms, which are often detached from the export-driven imperatives of the larger companies they feed into, derive direct benefit?

“One of the challenges we’ve got is saying to global companies based in the North East, have you thought about a localised supply chain? You’ve got great companies on your doorstep who can supply into you,” says Wright.

Shared resources touches on another aspect of the NEPIC approach – its longstanding promotion of private wire networks, energy-related tax relief and free enterprise ports.

Positive thinking

While the latter in particular has been a contentious issue for some in the Labour Party, Wright remains an enthusiast. The core issue remains the need to address “the energy trilemma”: “Security of supply, safe energy and competitiveness has to be the cornerstone of government policy. These three elements are absolutely essential and will be a strong thread running through any industrial considerations.

“[It’s about] ensuring we have got that security of supply through a combination of renewables, nuclear and domestically- produced gas; and a regulatory regime that recognises both the importance of moving to a greener future and ensuring we hit the carbon targets, while not ending industry in this country.”

Where shale gas exploitation is concerned, his caveats are around expectations rather than usage.

“I would question whether we would see an industrial renaissance like the United States because I don’t know whether we have got the same level of reserves. I don’t know either [whether] it would be easy to extract it from the ground or the North Sea.”

Yet halting investigations into shale’s potential “makes no sense to me whilst we are importing shale gas from the United States and elsewhere,” insists Wright.

“Of course we want to respect the environment, ensure any concerns people have – that means strong regulation, it doesn’t mean stopping it altogether.”

Besides educating Westminster about the intrinsic value of the chemical process sector to economic regeneration, there is the greater challenge of developing an appreciation among the population at large and developing the next generation workforce.

Wright, whose eldest son recently qualified as a teacher, suggests that in education “the oil tanker is moving… but slowly” in an effort to promote scientific careers and training.

In parallel with secondary education’s attempts to connect better with STEM, there is the need to progress the digitalisation of the chemicals sector.

UK industries have traditionally struggled to compete with productivity levels elsewhere; digital-driven efficiencies offer a route to this. Yet its effectiveness will depend upon digitalisation being embedded through supply chains.

Knowledge acquisition depends upon sufficient quantity and quality of data derived, which itself depends upon investing in technology and skilled users. Once again the preponderance of SMEs with limited budgets means success is not guaranteed.

Here again, scale and shared resource will figure large, says Wright, who cites NEPIC’s work alongside Teesside University and the Middlesbrough-based Materials Processing Institute on projects such as Innovate Tees Valley (one of three designed by the cluster to promote SME innovation and growth).

“It’s about using data to improve your processes, get close to your customer and to improve innovation. The fact that we’ve got two great elements – digital and process – is why I’m confident about the long term future of this industry and Teesside.”

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© Copyright. North East of England Process Industry Cluster (NEPIC) 2015