New Annual Investment Allowance is welcome news for manufacturers

The beginning of 2013 has brought some welcome news from the government for any company involved in manufacturing. Improvements to capital allowances, bank lending, and corporation tax rates, set against the background of a growing manufacturing sector should give us all reasons for good cheer.

In his autumn statement, Chancellor of the Exchequer George Osborne announced a temporary increase in the annual investment allowance for plant and machinery from £25,000 to £250,000.

Starting on 1 January 2013 and for the next two years, £250,000 worth of investment will qualify for 100% relief. The chancellor said. ‘This capital allowance will cover the total annual investment undertaken by 99% of all the business in Britain. It is a huge boost to all those who run a business, who aspire to grow and expand and create jobs.’

The allowance, introduced in 2008, was reduced from £100,000 to £25,000 from April 2012.
Today’s announcement will be welcomed by many SMEs. Leaders of 14 trade bodies last year wrote to The Sunday Times urging the government to increase capital allowances.

Critics have pointed out that cuts in the main rate of corporation tax have not benefited smaller companies, some of which have been worse off as a result of recent changes to the capital allowances regime. This new allowance should address this problem.

Chris Sanger, head of tax policy at Ernst & Young, said the announcement represented the fourth change in five years:

‘The last government introduced the allowance at £50,000, increasing it to £100,000 and it was cut by this government to £25,000 from April 2012. Whilst such rapid changes could look incoherent, these incentives are clearly linked to the state of the economy and can accelerate investment,’ he said.

The introduction of the 100% Annual Investment Allowance, together with April’s long awaited reduction in corporation tax will make the UK the most favourable regime in the EU for manufacturers and sub-contractors. It provides the incentives that are needed to invest for expansion and to seek new market opportunities.

Another measure that should be a great help to SMEs in 2013 is the Funding for Lending Scheme (FLS). Banks and building societies can borrow in the FLS at cheaper rates, for periods of up to four years.

The Scheme delivers credit easing to the whole economy, and has strong incentives for banks and building societies to increase lending to UK businesses. Those that lend more, can borrow more in the FLS, and can do so at lower cost than those that scale back lending.

For companies in the Surface Finishing industry, all of this will come as welcome news. Many SMEs have been reluctant to invest in plant and machinery during the recession. This is either because of shortage of demand or uncertainty about the long term prospects for growth.

The widespread availability of good value redundant finishing plant and machinery, together with the increased capital allowance, means that companies’ budgets can be made to go much further.

Many of us, like my family, have been in the surface finishing business for several generations. For us it is not just a way of making a living. We share a passion for a business at which the UK has excelled historically. This more favourable environment should give all of us the incentive to do even better in 2013.

Electroplating. Past, present and future.

The origins of electroplating go back to the early 19th century, and have been variously attributed to Michael Faraday, Luigi Brugnatelli and Allisandro Volta (after whom the the electric unit ‘volt’ was named). However, it was the Elkington Brothers of Birmingham that submitted the first viable patent for gold and silver plating in 1840. This development was rapidly followed with processes for plating in bright nickel, brass, tin and zinc. As with much of the world’s manufacturing technologies, electroplating was founded in the white heat of the Victorian industrial revolution.

The explosion of the automotive and aeronautical industries of the early 20th century, as well as those serving the construction industry, saw another surge in electroplating processes, particularly in the use of chrome plating on steel.

However, things did not radically change for over 100 years. It was the growth of the electronics industries in the 1940s, accelerated by the technological and communications demands of World War 2 that saw new chemicals, pre-treatments, cleaning systems, acid bath preparations and more accurate DC power supplies come into force.

This barrel plating plant was relocated from the UK to a large automotive sub-contract electroplating company in Durban, South Africa.

Change driven by legislation

Whilst technology and the demands for new consumer products have always been the main drivers of electroplating advances, from the 1970s onwards environmental and health & safety practices have had increasing influences. Legislation both at home and overseas governs waste water and chemical disposal, water recycling, dust and fume extraction and energy efficiency to name just a few. These regulations impose challenges on electroplating companies to maintain high standards of product quality, whilst at the same time being aware of potential harm to the environment and the health and safety of employees.

In this respect, we are not talking about some vague notion of how to prevent global warming. The dangers inherent in allowing toxic chemicals into public water systems were illustrated in a dramatic way by the year 2000 film ‘Erin Brockovich’, starring Julia Roberts and Albert Finney, which was based on a true story. The film highlighted the dangers of not properly controlling the safe disposal of hexavalent chrome (CR6) as a passivation agent. Similar issues have recently emerged in relation to the use of cadmium in the aerospace industry.

Modern electroplating plants are light years away from the dirty, smelly, polluting monstrosities of yesteryear. As well as being environmentally sound and energy efficient, they incorporate a number of improvements in order to achieve a higher quality of finished result. New practices enable greater plating speed, better ‘throwing’ power (the ability to produce a more uniform distribution of metal on products of irregular shapes), as well as a far greater variety of robust and decorative plating finishes.

This precious metal plating plant was relocated within the UK and reconfigured for zinc plating

New materials and processes

In addition, the electroplating of materials such as platinum, osmium and ruthenium are now used widely in electronics for connectors, circuit boards, contacts etc. Keeping up with the ever more demanding needs of the electronics, computing, aerospace and automotive industries is what is driving through improvements to electroplating worldwide, creating ever more sophisticated materials and processes.

In the UK, a particular growth area for electroplating is in the medical prosthetics sector. Hip, knee and whole limb replacements are heavily dependent on the precision surface finishing of metals such as titanium, platinum and rhodium.

The development of more sophisticated and specialised electroplating processes for niche industries has brought about a major change in the structure of companies supplying the industry. Until the 1980s, the surface finishing requirements of Britain’s manufacturing and engineering sectors were largely served by electroplating sub-contractors (otherwise known as ‘jobbing shops’) that dominated the industry. The decline of heavy engineering throughout the 1980s and 90s saw a parallel downsizing of electroplating sub-contractors, with many disappearing altogether.

As the UK economy has moved towards more high end and specialised manufacturing, such as the hugely successful Formula One industry, many bespoke and confidential metal coating processes have moved in-house. Today’s electroplating operations are more likely to feature clean room environments populated by people in white coats, with correspondingly safe and efficient working practices.

Modern plants include computer controlled automation of product transportation, chemical dosing, pre-treatments and other critical process stages. PLC controls are replacing manual systems and modern rectifiers are delivering far more reliable current densities to ensure consistent results.

This general purpose plating plant was relocated from Ireland to Pakistan to be used by a large fasteners manufacturer

Recycling of redundant plant and machinery

The restructuring of the industry has created a large number of redundant electroplating plants and ancillary equipment that need to be put to good use. Just as legislation requires the safe recycling of chemicals, waste water etc., there is also a duty of care to the environment in relation to the de-commissioning and recycling of complete process plants. 

Developing countries such as India, Brazil, South Africa and Turkey are emerging markets for recycled electroplating plants. At Riley Surface World, we are seeing an increased demand for used process plants both at home and overseas.

A good example is this fully automated barrel acid zinc plating plant (pictured) that was de-commissioned in the UK, shipped to Durban, South Africa and re-assembled there for inline production. The client, one of South Africa’s largest plating specialists, enjoyed the benefits of a modern, efficient European plant at a fraction of the cost of having it built locally from scratch.

Another recent development is the adaptation of used electroplating plants for different applications within the UK. Wet treatment lines are relatively easy to re-design and re-configure, sometimes with the introduction of transportation, heating and PLC controls to an outdated manual plant. 

There are two good examples of this. Firstly, a precious metal plating plant (pictured) which was sold, relocated and converted to zinc plating for a global remanufacturer of automotive parts in a different part of the country. Secondly, we assisted an Irish company, by auction, to exit electroplating and to sell and relocate two modern electroplating plants (pictured) to a large manufacturer of fasteners and die castings for the automotive industry in Pakistan.

Even effluent treatment plants can be subjected to the resale and recycle process. Our company recently carried out the sale of a substantial K-Pack dissolved air flotation facility (pictured) from the paper industry to the oil industry in the UK.

There has been much speculation in recent times about paint and powder coating overtaking electroplating as the metal coating process of choice for many companies. Whilst this may be viable for lots of products, there is no substitute for the fine layers of coating and the range of quality finishes that electroplating can achieve. As a new industrial revolution takes shape in the re-balancing of the UK economy back towards manufacturing and exporting, electroplating is once again coming into its own, in ways which the Elkington brothers could hardly have predicted.