DFS supports British manufacturing resurgence

Sofa maker is among firms bringing jobs back to the UK from overseas as Chinese labour falls out of favour

Anyone subjected to brash DFS adverts promising double discounts and 0% finance on sofas would think it was impossible for the furniture firm to get its products from anywhere other than low-cost factories in the developing world.

However, the company is one of a number of British businesses, including Golden Wonder, Hornby and Aston Martin, that has stopped shipping products back to the UK and is transporting jobs to these shores instead, making it the biggest sofa manufacturer in Europe.

At a DFS factory on an industrial estate in Derbyshire there are banks of sewing machines, state-of-the-art fabric cutters and gas-powered staple guns.

Harvey Ellis, head of manufacturing at DFS, who oversees the 838 workers on three sites and in two woodmills, explained: "Once we receive an order, it takes just four days to go from an order on our screens to being loaded on to a van. The frames are shipped in from our wood factory six miles away and we will make 3,000 pieces a week. Today we'll complete 900."

In three years DFS has toned down its Chinese activities to join the march of the makers, increasing UK production by a quarter. One worker, nail gun at the ready, said he could cover an entire sofa with fabric – sewn by the factory's seamstresses – in less than 30 minutes.

It is a skill in much demand. The desire for British-made products has become so great that the factory in Alfreton has just increased its workload, adding an extra shift to keep it running 16 hours a day. Along with two more factories in Doncaster and Long Eaton, it means DFS now makes nearly all of its fabric sofas in the UK, accounting for half of all furniture sold by the company. Only the labour-intensive leather products are still made abroad.

DFS chief executive Ian Filby said he wanted to see the business return to its British roots, and that customers now asked why the company did not make more of its UK credentials.

"Customers are astounded to think that a value-for-money player is also a major UK manufacturer," he said. Then, with a nod to the dark days of the three-day week, he added: "We all know about the bad old seventies, but the historical mindset of 'all UK manufacturing is shoddy' has gone full circle and people now see the UK as the sort of place where people work hard and make a decent crust. People believe that quality product is made in the UK and aren't going to buy British if the product is poor."

DFS appears to have tapped into a patriotic zeal among the British public. Its market share has risen from 25% to 28% in the last three years and Filby believes that there are also compelling financial reasons for bringing work back to the UK.

"I'd be surprised if there's not a lot of British manufacturers wanting to be more responsive to shorter lead times. We're never going to compete with the sweatshops of the Far East as a country, but you can manufacture here as long as you're adding design or R&D [research and development]. I think the other phenomena which people recognise and is going to continue, is that moving things around the globe is expensive."

And it is not just DFS that has seen the benefits of shifting work back to the UK. This year Golden Wonder revealed that its Pot Noodle snack will be made in Leeds instead of being shipped 10,000 miles from China, and Aston Martin Rapide S cars are now built in the Midlands, while clothing businesses including Topshop and Marks & Spencer are selling more British-made outfits.

Lee Hopley, chief economist at the EEF manufacturing association, explained that manufacturing in the UK was increasing as costs overseas grew and customers became more demanding.

"I think customers would be surprised by how much is made in the UK," she said. "There is a lingering perception that it is still made overseas. Manufacturing output is higher now than the 1980s in real terms, although we're still 11% below our pre-recession peak. There's been big investment in technology and equipment, while there is also a focus now on innovation to look beyond the product."

Model railway maker Hornby is another example, shifting its paint production back to the UK from China after there were fears that any quality issues would take several weeks to be resolved. Executive chairman Roger Canham added that making products closer to home helped businesses respond to demand – and check for errors – more easily.

"It takes four weeks for a shipment to arrive from China, which means if you want to check the quality you have to wait until it arrives," he said. "Now, if I want to check all I need to do is jump in a car and go to the factory.

Bringing jobs back home: DFS chief executive Ian Filby at the furniture manufacturer's production facility in Somercotes, Derbyshire"There was a huge surge in manufacturing from China in the 1990s, but now that wages are increasing and shipping is more expensive it's slowed down. We've got a new range of Airfix quick- build models which we will manufacture in the UK because it gives us a better chance to respond to demand quickly."

And with the shift in work back to the UK come much-needed new jobs, at a time when youth unemployment running at around 20%.

Filby said he would create 250 new jobs at DFS this year, having hired 400 new people in the 18 months to January, and revealed that one of the benefits of having UK factories was the loyalty he got from the staff who had worked there for generations.

At Alfreton, for example, nearly half the staff have been there for five years, and 35% have notched up 10 years' service. Owned by private equity group Advent, DFS has promised to reward staff for their loyalty with 1% of any profit made from the company's sale, which is expected to happen over the next few years.

Another reason why British workers will welcome the return of a manufacturing base that dwindled for decades but is showing renewed determination to compete with the rest of the world.

Article Source : http://www.guardian.co.uk

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Archbishop backs payday loans alternatives

Justin Welby suggests credit unions use church halls in effort to promote alternative to £2bn payday lending industry

Two thousand years after the financial services industry was ejected from church premises, the Archbishop of Canterbury not only wants to invite the money-changers back in – he wants churchgoers to help them expand their lending.

Justin Welby is promoting credit unions as a credible alternative to the booming £2bn payday lending industry, and says it will help match often vulnerable, low-income borrowers with the most appropriate lenders. He is proposing that credit unions be allowed to use church halls and other properties in order to better access customers. Welby also wants to encourage churchgoers with financial expertise to help these lenders.

Welby, who sat on the parliamentary commission on banking standards and has been an outspoken critic of the financial industry, believes a successful credit union sector could pose a challenge to high-street and internet payday lenders, who target often vulnerable borrowers with expensive loans.

Malcolm Brown, the Church of England's director of mission and public affairs, yesterday said: "It is not about regulating them [payday lenders] out of business. If the market is functioning as it should, there should not be any need for them to exist."

The government has also pledged to spend £38m to strengthen credit unions.

Speedy Cash loans shop in Brixton, south LondonMany high street banks have retreated from offering small, short-term loans in recent years, while demand from low-income groups has soared, sparking an explosion in lightly regulated payday lenders.Welby's intervention comes as ministers and regulators also grapple with how best to curb the ballooning payday lending industry without choking off small-sum credit to low-income groups. Consumer minister Jo Swinson will meet with lenders as well as with debt charities and campaigners to discuss what she calls "widespread irresponsible lending".

Last night she said she would tell companies: "The industry needs to do so much more to get its house in order, particularly in terms of protecting vulnerable consumers. I am concerned that the lenders are not living to the spirit or the letter of the codes of practice."

However, in a weekend column in the Sun newspaper Swinson made clear the government would not impose a cap on loan costs. "That could shut down short-term loans and force people towards illegal loan sharks or other extreme measures," she said. "The solution needs to be more sophisticated than this."

While Welby's plans stop short of inviting church commissioners, who oversee £5.5bn of the Church of England's wealth, to put financial muscle behind credit unions, he nevertheless wants the church to use other means at its disposal to get behind such lenders. The church is also building plans for its own in-house credit union for the clergy, which it hopes will eventually help it build expertise that can be shared with grassroots lenders.Labour's shadow treasury minister Chris Leslie said ministers had "consistently ducked clamping down on predatory pricing and extortionate interest charges". He said regulators already had the power to control costs and loan duration but the political will was absent.

Payday lenders have variously been accused of failing to properly compete with one another on the cost of loans; of conducting too few checks on the financial means of borrowers; and of using overly aggressive tactics to extract repayments.

The OFT referred the industry to the Competition Commmission last week, after repeated warnings that it must get its house in order met with only mixed responses.

Justin Welby, the archbishop of Canterbury. His intervention comes as regulators grapple with how to curb the payday lending industry.One successful payday lender, Wonga.com last week increased customer loan costs to the equivalent of 5,853% APR. Speaking ahead of the meeting with Swinson, co-founder Eric Damelin claimed his company and others were being "used as political footballs". He claimed to be in favour of regulatory reform. "We don't want no regulation, as we want to keep the bad guys out".

At the top of the agenda for the meeting Swinson has called will be the new regulatory regime, which comes into force from April next year, under which industry must answer to the Financial Conduct Authority rather than the Office of Fair Trading. Officials from both the FCA and the OFT will address the meeting.

Last month the House of Common's public accounts committee said the OFT had been "ineffective and timid in the extreme" in regulating payday lenders.

Article Source : http://www.guardian.co.uk

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Rail franchise timetable already showing signs of delay

Department for Transport grapples with lengthy negotiations to extend current contracts before franchise contests can resume

Train operators fear the revised rail franchise timetable announced in the wake of the west coast fiasco is already slipping as documents for the first contest appear likely to be delayed until autumn.

The invitation to tender for Essex Thameside, a competition paused during inquests into the Department for Transport's (DfT) botched award of the London-to-Glasgow line, is due in July. But companies have now been told the schedule may not be met.

The DfT has been grappling with contract extensions that, while intended as breathing space before longterm franchises could be awarded, have themselves required lengthy negotiations with the existing train operators.

The recent extension to National Express's current c2c service on Essex Thameside was signed off a week before the old franchise expired, and on more favourable terms.

Virgin is still renegotiating its west coast contract, while struggling FirstGroup has been frustrated with the progress of discussions for the extension of the Great Western franchise. Any agreement will be heavily scrutinised because FirstGroup has activated a termination clause that allowed it to avoid £800m in premium payments to the taxpayer, but is now negotiating a contract extension that is expected to be on more favourable terms.

Although the train companies want franchising restored, the current swath of extensions offer some security. Stagecoach's finance director, Ross Paterson, last week said that extensions on Southwest, East Midland and Virgin Rail – 49%-owned by Stagecoach – meant his company had "nine years of cash flows and earnings guaranteed".

Labour has called for the retention of the East Coast service as a 'public sector comparator' because it is currently run by the state-owned Directly Operated RailwaysBut the agreement reached with FirstGroup will be politically sensitive, with Labour considering whether the Great Western service could be brought into public hands should it win the election.

Labour has called for the retention of the East Coast service as a "public sector comparator" because it is currently run by the state-owned Directly Operated Railways. However, the coalition has brought the London-Edinburgh train service to the front of the queue for new awards once the "paused" Essex Thameside and Thameslink competitions are completed.

That means East Coast should be in private hands before the 2015 general election. However, the invitation to tender for Great Western is due just weeks before the election is called – potentially allowing an incoming Labour government to void the competition.

The DfT announced a revised programme for awarding franchises in March after the 2012 debacle, in which the award of the west coast service to FirstGroup was scrapped after legal challenge. An inquiry by Sam Laidlaw, the chief executive of British Gas parent Centrica, identified serious errors in an under-resourced and overstretched department, warning that there were "significant issues about the ability of the DfT effectively to conduct rail franchise competitions".

An interim franchising director, Peter Wilkinson, who was appointed to bolster the staff, is due to leave next month. The DfT declined to comment on whether his contract would be extended. The department has also been labouring with the procurement of Thameslink rolling stock. The controversial deal was signed off this week two years after Siemens was chosen to build the trains.

A DfT spokesman said: "The Department for Transport is working hard to deliver the ambitious rail franchising schedule that the secretary of state announced on 26 March. We fully expect to deliver both the Essex Thameside and Thameslink franchises to the published timetable."

Article Source : http://www.guardian.co.uk

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