What the Bible can teach us about economic cycles

At the beginning of 2014, lots of commentators are lining up to deliver good news about the prospects for the economy. Factors such as the purchasing managers’ index, last quarter growth figures and record car sales seem to herald better prospects than we have seen for at least seven years.

This brings to mind Pharaoh’s dream in the book of Genesis. After seeing seven fat and healthy cows emerge from the water to consume seven fresh heads of grain, they were followed by seven gaunt and unhealthy cows that ate the healthy cows. Joseph’s interpretation was that seven years of plenty would inevitably be followed by seven lean years.

When you look back on UK and world economic cycles since World War 2, it is remarkable how similar the pattern has been. From 1945, there were seven years of post-war austerity, followed by seven years of healthy growth in the 1950s, culminating in those famous words of Harold Macmillan: ‘You’ve never had it so good’. Then came the optimism of the 1960s, with another Harold (Wilson) who was master of the sound bite alluding to: ’the white heat of technology’. This was followed by the misery of the early 1970s, and so on.

So if history (supported by biblical reference) is repeating itself, we are at the beginning of another golden age, which will last for at least seven years. During this time, we can all look forward to increasing industrial output, lower unemployment, higher living standards and better prospects for the emerging generation. This trend is already being reflected by the sharp increase in UK exports and positive figures, in most cases, from the high street. We are also worryingly close to that familiar British phenomenon, the house price bubble, but that’s another story!

My only fear is that the opportunity will be squandered, as it has been so many times before. Economic growth that is driven by consumer spending on imported goods and services is not sustainable. We must continue with a re-balancing of the economy back towards manufacturing and exporting.

When I was growing up in the 1960s and 70s, my home city of Birmingham was one of the powerhouses of world industry. Anyone taking the train into New Street station would pass countless numbers of factories, both large and small, producing everything from nuts and bolts to articulated lorries, most of them working around the clock and making goods that were sold all over the planet.

The days of high volume production on this scale are unlikely to return, as these kinds of operations are generally going to low cost, developing countries such as China, Brazil and Mexico. However, UK Trade & Investment is doing a terrific job by nurturing high-end; high-technology manufacturing that is reaping dividends.

In addition, schemes such as Sir Richard Branson’s Virgin StartUp are providing the necessary liquidity for young entrepreneurs to realise their visions and invest in the machinery, premises and staff that new enterprises so desperately need. At Riley Surface World, we have seen a recent upsurge in equipment that is being acquired with the help of these programmes.

The surface finishing industry, in turn, must change and adapt to fulfil the demands of the new industries that are emerging. In the UK, we have unrivalled expertise in this sector and access to a great deal of plant and machinery that is becoming available from larger companies due to global restructuring. These opportunities must be grasped with both hands if we are to enjoy the spoils of the next seven years before it all goes downhill again. Happy New Year!

The use of power supplies in the modern surface finishing industry

In its simplest form, electroplating is a process that uses electrical current to reduce dissolved metal cations so that they form a metal coating on the surface of an electrode. The process is dependent on an effective and consistent power supply, or source, to produce the required electrical current, normally introduced into the process line by a device known as a rectifier.

The purpose of a rectifier is to remove any variation or fluctuation from the power supply, effectively ‘straightening’ it and making it consistent. Most power supply devices in metal treatments are set up to convert a standard alternating electrical current (AC) to a direct current (DC) in order to achieve the consistent input required for the plating process.

Earliest beginnings

Electrodeposition of precious metals can be traced back to around 1800, when Italian chemist and professor Luigi Brugnatelli developed a process for coating gold on to a silver substrate. He was aided in this project by Allisandro Volta, who was in the process of developing voltaic electrical batteries.

It wasn’t until the 1840s that the Elkington brothers of Birmingham, UK, refined the precious metal plating process and turned it into a proper commercial venture. From the UK, the technology spread rapidly to Europe and the USA. In Russia, large scale gold plating for cathedral domes, icons and religious statues were successfully completed. And as the growth of industrialisation continued throughout the world, electroplating using DC power based on the Elkingtons’ patents reigned supreme.

In the 20^th and early 21^st centuries, the electroplating process has largely adhered to its original principles, but at the same time developed improvements in chemical solutions, process plant automation and wave-form technology for rectifiers, turning electroplating into less of a black art and more of a sophisticated technical procedure, governed by industrial and international safety standards.

What is a power supply?

A power supply is a device that converts AC power from the mains into the appropriate source of power for, in this case, electroplating. The Power Supply Unit (PSU) most commonly used in electroplating is the rectifier.

The earliest type of electrical rectifier used to convert AC to DC was the Mercury Arc Valve, a type of Cold Cathode gas discharge tube invented by Peter Cooper Hewitt. As the commercial implications of this breakthrough invention became more significant, the need for rectification allied to electroplating began. So dedicated rectifiers were developed to support the new, booming electroplating industries, fuelled by world wars, consumerism and economic prosperity.

Throughout the 20^th century, original equipment manufacturers such as Westinghouse, Brentford and Drake exploited the demand for DC power supplies. In the UK, the aerospace, automotive and general engineering industries were booming in the period from the 1940s until the 1980s. Along with this surge in industrial production was a constant need for more sophisticated plating and coating processes, with a subsequent demand for efficient and reliable power supplies.

Set of standard rectifiers and transformers for electroplating

Decline in UK sales of standard rectifiers

Riley Surface World was founded in the white heat of this technological revolution, so the sale and refurbishment of DC power supplies took centre stage, allowing us to develop our company to the powerhouse that it is today.

The nature of manufacturing is that it is constantly changing. As products become obsolete and new ones take over, production lines are continuously being reconfigured, or in some cases dismantled and rebuilt. In the new globalised economy, these changes often take place across international boundaries, with the need for equipment suppliers to be very flexible and able to meet this ever changing demand.

Over the past 10 – 15 years, our company has seen a sharp reduction in demand for standard DC power supplies from the UK metal treatments industry. This decline is largely due to much of the bulk zinc plating of mass produced products, such as nuts and bolts or shopping trolleys, moving overseas to lower cost economies. As Britain moves to a more specialised manufacturing nation, traditional electrolytic treatments are being replaced by more modern e-coating and other organic coating processes, allied to the needs of the higher end aerospace, automotive and general engineering industries. These processes either do not require rectifiers, or use more compact switch mode units rather than the older ‘filing cabinet’ models traditionally associated with electroplating.

A good example is the power supply used for a powder coating gun. Older models use a separate, free-standing power supply unit, whilst more modern units have the power supply built into the device, resulting in a more compact and efficient unit.

Set of high powered rectifiers adapted from anodising to electrowinning applications

New, growing DC power applications

At the same time, new high powered rectifiers are being harnessed for a whole new set of industrial functions. In the oil exploration and construction industries, rectifiers are being utilised for cathodic protection of metal reinforcements in offshore platforms, bridges and other kinds of structures subject to corrosion. The introduction of the appropriate electrical charge to metal can work wonders for the life expectancy of such structures.

Rectifiers are also used extensively throughout the world’s mining and metal extraction industries in a procedure known as electrowinning or electroextraction. This is the electrodeposition of metals from their ores that have been put in solution via a process commonly referred to as leaching. Electrorefining uses a similar process to remove impurities from a metal. Both processes use electrolysis on a large scale and are important techniques for the economical and straightforward purification of non-ferrous metals. The resulting metals are said to be ‘electrowon’.

Detail of high powered rectifier

The most common metals to be processed as part of the electrowinning procedure are lead, copper, gold, silver, zinc, aluminium, chromium, cobalt and manganese. The growth of applications such as cathodic protection and eletrowinning are creating new markets for power supply manufacturers and resellers, such as our company.

Riley Surface World has recently won a large order from an Australian metal refining group for a set of 6 x 500 amp, 0 – 25 volt DC rectifiers formerly used in the UK for the anodising of surface finished aluminium coil, as used in light diffusers and other similar products. These high powered units are now being applied to electrowinning on a very large scale. This is just one example of how DC power supplies for one process can be adapted to another application in a different part of the world, providing opportunities for the UK electroplating and power supply industries. 

HS2 would be good for Birmingham, good for the surface finishing industry and good for the whole country

The government has yet again been forced to defend its investment in HS2. As Riley Surface World was founded in Birmingham and is still based in the West Midlands, I have decided to make my own views known on the subject.

The debate about the high speed rail network has inevitably polarised opinion. Those in favour point to Germany, France, Spain and the Netherlands as countries that have enjoyed the benefits of this form of rail travel for many years. Meanwhile, the UK lags far behind.

It has got me thinking as to why we are always behind the game when it comes to large, glossy infrastructure projects? After all, our economy may not rival Germany, but it is comparable to France and bigger than Spain or the Netherlands. What is it about the British psyche that causes us to shrink from such difficult decisions?

This reticence is not universal. In London during the last decade we have completed the O2 Arena, Excel exhibition centre, Olympic park, new Wembley stadium, Heathrow Terminal 5, two massive Westfield shopping centres and we are well into the multi-billion Crossrail project linking west and east London.

Londoners instinctively embrace these schemes. It is taken as read that a major international conurbation needs facilities like this. They project the image of a city that is constantly moving forward, responding to change and enhancing its global reputation.

However, the benefits of HS2 are not entirely for London. They begin with the line to Birmingham and eventually reach Manchester and Leeds, passing Nottingham and Sheffield along the way. The whole idea is about joining up the dots between the major provincial cities and the South East, making it easier for business and the public to engage with the Midlands and North and vice versa.

Once you reach the outskirts of London the opposition comes piling in. Residents of the affluent Chilterns and some of the most picturesque parts of Northants and Warwickshire, understandably, don’t want to suffer ten years or more of disruption and blight on their properties and idyllic lifestyles.

In more general terms, hard-pressed tax payers find it hard to envisage the benefits of spending £40 + billion on something that only a minority of the population will ever use. So how do you sell the case?

As a lifelong Midlands businessman and resident, I am conscious that I should have a view on something as important as HS2. When it eventually opens, I am sure that I will be one of the first to buy a ticket, if only for the thrill of travelling at 200 mph!

But putting frivolity to one side, there is no doubt that Birmingham will never return to its former glory without projects like this. Ever since the industrial revolution, Birmingham and the Black Country have thrived on bold, buccaneering industrial expansion. Without visionaries like Brunel, we would never have created the foundries and factories that were the basis of our famous metal bashing industries. Meanwhile, the great William Morris laid the foundations for our automotive industries that are such a feature of the West Midlands, now undergoing a revival that is contributing heavily to the 1 million plus cars that are built in Britain every year.

Although I have some sympathy with the sceptical, my heart tells me we should go for it. It is particularly attractive if the contracts for design, construction, rolling stock etc. are awarded primarily to UK companies. That will have a huge positive effect on employment and prosperity, not least in our own industry, which, as we all know, leads the world in its expertise.

Farewell to summer and hello to a new season of optimism

I am writing this month’s blog at the tail end of my summer holiday on the southernmost tip of Spain, just 12 miles across the straits to North Africa. Such a tranquil setting is the perfect backdrop to reflect on the busy trading season that we are about to embark on, as well as the prospects for our industry as a whole.

The beginning of September has brought a raft of good news stories for the global economy and the UK in particular. Vodafone selling its American business delivers a whopping £85 billion to shareholders, the majority of whom are in the UK. As is the norm nowadays with multinational companies, they will be deftly avoiding UK capital gains tax. However, an injection of liquidity on this scale into the economy is sure to have a positive effect.

There is further good news on the European front, as Microsoft buys Nokia for £5 billion. Even footballers are changing hands for staggering sums of money, with the total spent by Premier League clubs in the transfer window being somewhere north of £600 million. Rolls Royce and Bentley dealers should brace themselves for the invasion!

Which brings me nicely to the recent edition of BBC television’s Top Gear, which focussed on the current state of the UK car and commercial vehicle industries. Who could fail to be impressed by that huge fleet of British built vehicles that lined the Mall? Clear evidence, if ever there was any doubt, that Britain is a world class player in the automotive business once again.

To build on this success, we need a high percentage of the billions of pounds arriving in shareholders’ accounts to be re-invested in our manufacturing base. By creating opportunities for well-paid and highly skilled manufacturing and engineering jobs, we will begin to reverse the downward spiral of a low skill, low pay economy.

The banks also have an important role to play in this. I recently heard a respected economist liken bankers to toddlers. They run around in an excited frenzy, causing mayhem until they run out of energy and leave the room in a total mess. They then lie down and pretend that none of the mess left behind was their fault, and in any case, someone else will always clear it up for them.

The recent troubles at the Coop Bank illustrate that there will be consequences for banking profligacy in the future. Hopefully, this will encourage them to take a longer term and more measured view of their actions. Whilst there will always be a place for new shopping centres and housing developments, increased importance must be given to new manufacturing facilities, in order to harness the skills and talents that, as a nation, we have always possessed.

From high value consumer products to components and sub-systems for the automotive and aerospace industries, we still design and manufacture a great deal in the UK. All of these products and parts require surface preparation, cleaning, deburring, powder coating and all of the other processes that our own industry does so well. The greater the emphasis for investors on British made goods, the greater the benefit will be for industries like our own.

Tomorrow I will be leaving my Spanish sojourn for the grit, grime and graft of good old Birmingham. It is a journey that, for once, I will make with a great deal of optimism for the months and years ahead.

An important date for your diary - Surface World exhibition, NEC, Birmingham, UK, Sept 24 - 26, 2013.

The SurfaceWorld show takes place at the NEC, Birmingham, on 24 – 26 September 2013. I’ll repeat that just in case you missed it: The Surface World show takes place at the NEC, Birmingham, on 24 – 26 September 2013.

Now I’m not just saying this to get some cheap publicity for our company’s stand. Just for the record we will be there as always and would be delighted to meet as many of you as possible. On the contrary, I am reminding you all for the benefit of a successful event and for the good of our industry in general.

For the past ten years, the show has been held at the beginning of November and has steadily grown in size and visitor numbers, being particularly busy on the last two occasions in 2009 and 2011. There is no doubt that there are risks inherent in a change of date. For a busy industry like ours, with very little spare human capacity, visitors become easily conditioned to a regular date in the calendar. They will have it in their real diary, Outlook organiser or in the back of their minds for many months, or even years in advance.

The change of date to September, when some may still be on holiday, the cricket season is still in full swing and the Last Night of the Proms has not yet happened, requires a great deal of PR, communications and good old-fashioned arm twisting from the organisers to get the punters flowing to Birmingham.

All of us that exhibited in 2007 experienced the consequences of just a slight change of date, in that case to the last week of October. The clash with half term week took its toll in terms of visitor numbers and results.

My company, Riley Surface World had an even worse experience when we exhibited at USETEC, Cologne in 2012. This is a long-established and successful trade show for used industrial plant and machinery with an international audience. Until last year, it was always held in the third week of April to coincide with the Hanover Fair, the giant industrial show with a global reach. This enabled the huge number of regular visitors from all around the world to take in both shows in the same week.

Last year, some bright spark decided to move it back to early March to coincide with another large industrial exhibition that was in Cologne at the same time, thinking that there would be a natural synergy between the two shows. They could not have been more wrong!

Visitor numbers were down by more than half, as many regular attendees had clearly not got the message about the change of date. Furthermore, the expected overlap of visitors from the neighbouring exhibition never materialised. Either they did not have time to visit both shows, or the prospect of viewing used machinery was not to their liking.

And just to rub salt in the wounds of dispirited exhibitors, the hoteliers of Cologne had chosen that very week to double or even triple their room rates. It’s what they call market forces!

The surface finishing industry is in a very good place to take advantage of all the good things that are happening in the UK economy. Apparently, there was no double-dip recession last year, manufacturing output is showing a steady increase and we are now producing more cars per year than the French. As Raymond Blanc would say: ‘Voila!’

With all the good news around, don’t let’s forget to support our only local, specialist trade exhibition. And just in case you haven’t got the message, Surface World is on September 24 – 26. See you there!

Why buying and selling used equipment makes sense for surface finishing companies

Running a modern surface finishing plant requires a complex and diverse range of machinery, equipment and consumables, combined with human metal finishing expertise and experience. The products and processes are frequently changing, either due to new products and finishes being introduced or to comply with legislation. So there needs to be constant changes to plant configurations, process stages, control systems, transportation systems and ancillary equipment.

This means that metal finishing plant owners, managers and engineers face a multitude of tasks and challenges in order to implement the necessary changes. For instance, changing from an electrolytic plating process to electroless nickel requires modifications to pre-treatments, power supplies, chemical feeds, water treatment and extraction systems.

The introduction of new products to an established plant can often have implications due to product size; for instance, a manufacturer of bathroom and plumbing accessories introducing a new range of shower enclosures. This would increase the work envelope size and require a switch from decorative chrome plating to anodising or powder coating, entirely different processes with radically altered plant requirements.

Ancillary processes

A complete surface finishing or plating facility usually consists of a central, multi-stage wet treatment plant, with ancillary stages either inserted into the production line or operating as stand-alone processes. Products are invariably subjected to pre-treatments, such as ultrasonic cleaning, de-ionised rinsing and phosphating to prepare the surface for plating, anodising or powder coating.

In addition, there may be requirements for polishing, deburring, de-flashing, heat treatments, shot blasting, peening and the complex and diverse area of mass finishing. All of these processes have their own individual technologies and pieces of machinery, including manual and automatic variations. They also require different levels of expertise in terms of sourcing, commissioning and operating the equipment required.

Environmental considerations

No surface finishing plant arrives without a plethora of environmental and health & safety directives that companies are obliged to adhere to. These include the use of prohibited or restricted chemicals, wastewater disposal procedures, fume and dust controls, safety apparel and many more factors to take into consideration.

Asset realisation and procurement

When a company undertakes changes to surface finishing plant and machinery, either in a specialist electroplating plant or as part of a manufacturing facility, it is faced with a number of asset realisation and purchasing options.

Firstly, there are the options available for the safe disposal of the redundant machinery, taking into account the value to be recovered and the procedures to be undertaken.

With the globalisation of manufacturing and product finishing processes, it is quite possible that the potential buyer for the redundant equipment resides thousands of miles away on another continent. Specialist expertise is required to achieve the sale in terms of international marketing, finding and evaluating the prospective customer and completing all legal documentation.

With the speed of change in a modern, globalised industry, the adaptation of an existing plant can often be a quicker and more desirable option than commissioning a brand new plant from a process plant manufacturer. Environmental considerations are also in favour of the recycling and remanufacturing of used plant and machinery wherever possible.

De-commissioning and relocation

Next, there is the safe de-commissioning of the plant, the disposal of all hazardous substances and complying with national and international legislation. In the UK, this can include the surrender of the PPC licence to the Environment Agency. The plant then has to be moved and re-commissioned in its new location, with all the logistical hurdles to be negotiated. Once again, there is a duty to comply with local environmental and safety regulations.

New v used, the pros and cons

Companies face a number of choices when purchasing new or replacement surface finishing plant and machinery. The taboo surrounding used machinery is mainly something of the past, when there were few reliable and trustworthy suppliers of such products. Many of today’s industrial machinery merchants are world-class companies that are well-capitalised, employ knowledgeable staff and harness the power of the internet to achieve a global marketing reach.

You only need to see the thousands of serious buyers flocking to the USETEC exhibition in Germany every year to realise that the used machinery industry has moved on considerably from its rust-bucket reputation.

The used machinery dealers, auctioneers and strategic industrial asset management consultants of the 21^st century employ sophisticated online marketing services in order to achieve their clients’ asset realisation objectives. Many are working on behalf of blue chip companies, for whom only bona fide suppliers with the appropriate credentials will suffice. It is essential to understand fully the client’s business plan and technical aspirations in order to put a successful marketing plan in place.

Our company, Riley Surface World, operates through three distinct sales and marketing channels for the benefit of both sellers and buyers.

Retail machinery

Firstly, there is the retail channel. We carry large, physical stocks of individual machines for which there is a regular market demand. These include cleaning systems, ovens, polishing & linishing, shot blast machines, dust extractors, chillers and much more. In most categories, the buyer has a choice of brand new products, nearly new machines that require minimal updating or older machines that can be made roadworthy with some refurbishment. In most cases, the level of budget available determines the choice of purchase. Older used machines will often be heavily discounted, and can be acquired ‘run & checked’ or refurbished if appropriate.

Direct from Site Clearance

There are also cases where it is not feasible to take equipment into stock. This often applies to complete electroplating or powder coating plants. It can also be appropriate for very large or specialised items of infrastructure that can best be marketed ‘in situ’. These events are known as Direct from Site Clearances, with a time limit on the sale depending on when a factory has to be vacated or converted to new production processes.

Riley Surface World works on a commission of the selling price in return for photographic, technical and marketing services. The company will also charge a fee if there is de-commissioning and dismantling work involved. There is no buyer’s premium charged for this kind of sales event.

Online Auction

Finally, there are online auctions. This channel applies both to complete plants and factory contents, as well as stock clearances of individual pieces of surface finishing machinery from the retail channel. The great advantage of online machinery auctions is that the bidding process tests the true commitment of buyers. It also serves to realise the true market value of the machines being sold at any one day or time in the used machinery calendar, adding credibility to the adage: ‘The market doesn’t lie’.

Online auctions are normally subject to a buyer’s premium, although this does not always apply to individual stock items being auctioned.

Conclusion

The surface finishing industry operates with a mixture of traditional and modern technologies. The principles of electroplating have not changed a great deal from their 19^th century origins. However, modern plants incorporate a great deal of digital technology, robotics and new developments in chemistry, power supplies and fume abatement to name but a few. The constant evolution of this technology has created a marketplace within the industry for good quality plant & machinery that is surplus to requirements in one company, but is needed by another company. Often these requirements cross national boundaries.

Companies such as Riley Surface World, along with other specialist machinery merchants and auctioneers, exist in order to serve the needs of the industry and provide a point of contact for all companies that have plant to sell, or who are in the market to purchase new surface finishing machinery. We provide a vital service, not just to the surface finishing industry, but to the economy as a whole.

What Big Data means to the surface finishing industry

One of those catchphrases that emerge from time-to-time in business circles is ‘Big Data’. Its genesis would appear to have been the huge amounts of personal data held by social media organisations such as Facebook, Twitter and Linked-in. However, it has taken on great significance for all companies, large and small.

What the experts in digital marketing are saying is that success in business no longer depends on one powerful message being delivered to millions of consumers through the mass media. The theory goes that we all, as individuals, have different preferences in our daily lives, and that it is the prerogative of brands and companies to deliver messages to us that will chime with our personal aspirations.

So far, so good. But there is also a backlash taking place against those global giants with the fastest and biggest computers that are holding all of this valuable data. It goes something like this: Information is more important to the economy than manual labour, and yet we are expected to surrender information generated by or about ourselves – a valuable resource – for free.

For instance, digitisation has allowed banks to repackage the information contained in a mortgage debt and sell it on as an increasingly complex product, whilst excluding the indebted homeowner from a percentage of the profits.

Jaron Lanier, in his book ‘Who Owns the Future’ imagines a world in which participants achieve economic dignity by being awarded ‘nano-payments’ for all of their contributions to the Big Data that is circulating around the internet, a form of global digital democracy.

‘All very worthy’ I hear you say, but what does all of this mean for our highly specialised and technically sophisticated industry? Well for starters, the data that we accumulate is of a business, rather than personal nature, but it is no less valuable as a result. Business-to business data provides us all with privileged intellectual property, which we have a duty to use responsibly.

At Riley Surface World, we place huge importance on the quality, accuracy and security of the data that we hold, and treat it with great respect. We make great efforts to fine tune the information that we send to our opted-in members, in order to ensure that it matches the requirements that they have requested. I have to admit that we don’t always get it right, but we are constantly putting new processes in place to try and achieve this goal.

What our own ‘Big Data’ is telling us is that the applications for, as an example, automated vibratoryfinishing, no longer can be put into the predictable slots or traditional industries that used to be involved in the process. Enquiries for such equipment can nowadays emanate from a wide spectrum of manufacturers, re-manufacturers, sub-contractors, cottage industries, hobbyists, researchers and much more. This is without going into the geographical spread, which can range from Bradford to Brisbane and everywhere in-between.

We can often get sucked into a collective feeling of despondency due to the general state of the economy. As I am writing this, commentators are once again talking about ‘triple-dip recession’. However, one economist that I heard on the radio this morning pointed out that the majority of the world is booming. In the UK, our currency is weakening, something that will benefit our exports, and we are sitting on a wealth of knowledge that is unrivalled across the globe. This particularly applies to the surface finishing industry, where we are world leaders.

How we accumulate, protect and manage our data is something that will have a far greater impact on our future success, prosperity and reputation than almost any other measure.