KNITTING YORKSHIRE TOGETHER SURVEY FINDS LITTLE WRONG WITH U.K. WOOL INDUSTRY

Press, Volume CIX, Issue 32019, 20 June 1969, Page 14

KNITTING YORKSHIRE TOGETHER SURVEY FINDS LITTLE WRONG WITH U.K. WOOL INDUSTRY

(Reprinted from the "Economist" by arrangement) What distinguishes Yorkshire textiles from most other industries in need of rationalisation is that the consultants employed by wool’s “little neddy” (an offshoot of the National Economic Development Office) do not think it is in any need of an injection of Government aid, or of tariff protection or Government intervention of any kind save one—that it should get the same rate of investment grants as development areas do, which would cost a total of £7 million. The rest of the £4O million it looks for—£ls million of which, it says, should be spent immediately, mainly on worsted spinning plant and on looms of all kinds—could come from within the industry itself. 1

The consultants, W. S. Atkins and Partners, have made more than 300 recommendations, designed mainly to correct the industry's chief structural flaw: weak selling, with too many products marketed at too low prices. This in turn is the result of overcapacity and undersized units. In some ways the industry approaches the textbook form of perfect competition, except that, in the textbooks, those firms that make inadequate profits go out of business. This has not been happening in real life in Yorkshire, or not fast enough. Small Companies But it is not an industry with its back to the wall; exports are running at £l2O million a year; the labour force has been cut from a peak of 210,000 (reached in 1950) to 144,000 without loss of output. But the nub of the consultant's complaint is that a host of small companies with obsolete and writtenoff machinery are, by their undercutting, making it hard for the better companies to earn profits that will allow them to finance investment in new plant. The first question to ask is why shouldn’t they? The consultants have assembled some eye-opening data showing how small the output of a small mill can be for it to be still commercially viable, once its heritage of old plant has been fully written off. Taking yarn production as an example, a company that has only its operating costs to worry about can survive on a production of 1001 b an hour. One that has invested in the best new machinery needs an output 15 times this size to cover its higher overheads. During a recession, the price-cutting hits the progressive, modernised plant with its overheads relatively harder than the weaker brethren. And there is a sociological factor at work, too: many mill owners are satisfied with a low level of profit—just enough, as one Bradford wag put it, to run a Rover and send their kids to Oundle. To Aid Liquidation There is no law that prevents this; and it will be a sad day when there .is. But there is a growing feeling that the old brigade’s days are increasingly numbered, if only because customers are demanding a level of quality control they cannot provide. The consultants recommend

the setting up of a bureau to aid liquidation, and the strengthening of such schemes as there are, such as the Woolcombers’ Mutual Association, for buying up and scrapping excess capacity, to assist them on the path out of business. There is another way of looking at this, which the consultants also tackle. Were the bigger companies better salesmen, they could see these backwoodsmen off by streamlining costs to a point where their price-cutting no longer hurt. The recommended strategy is that chosen by such efficient firms as John Haggas, which only produces a tiny range of worsted yarn, but keeps its highly productive ring spindle spinners (the process recommended by the report) busy on three shifts seven days a week. Another technique adopted by Allied Textile Companies, selected by the Industrial Reorganisation Corporation as a focus for rationalisation, is to see that each of its 25 member companies excels in a particular field. During the last recession in 1967 these companies, with their new machines and their quality control, were not too badly hit by price-cutting because customers had become more concerned about quality than price. Mills And Labour Cuts The difficulty about rationalising the industry is that there is no particular advantage in being big. Mergers must therefore offer something other than size. The consultants recommended a reduction by the mid-1970s in the number of mills and the labour employed. There are 1470 mills and other establishments now: this should come down to 950 and considering what the consultants have to say about the backwoods companies and the size of some businesses with only a handful of workers, this is not much of a drop. Nor is the labour rundown from 144,000 to 121,000 if, in fact, new machinery can lead to increases in productivity. For the increase in production to come from all this is put at only 6 per cent, broken down as follows:

Knitted Goods’ Rise The relevant figure here is the rise in knitted goods from nil to a significant element in output. This is a development to which Yorkshire was once blind and cotton textile companies collared the market. They need not have done. Present-day wool machinery can handle almost any fibre, and wool is becoming progressively less important. Already 26 per cent of Yorkshire’s raw material is man-made. This proportion is expected to rise to 40 per cent in the mid--19705. Worsted yarn, made increasingly of wool/manmade blends, is used for worsted weaving and knitting. One thing this means is that a real move by Lancashire companies across the Pennines into wool territory is no longer as inconceivable as it once was. Coats Patons controls one of the most respected Yorkshire companies. West Riding Woollen and Worsted, and most of the big Lancashire textile companies now have interests in Yorkshire. The structure of the wool industry is an open temptation for more to cross the Pennines. To Retain Character If mergers have any advantage at all, it is not for technical reasons but because they create financially strong companies. The usual economies of scale and long production runs would merely mean that the Yorkshire industry lost its customers and its character as a producer of high quality in great variety. It might then emulate the American wool industry, but this is not what anyone at present recommends. But there is a real temptation for fibre producers, Courtaulds looming large among them, to buy into Yorkshire to secure their outlets, just as they have in Lancashire. The consultants think this would be a bad thing, as a “competitive landslide” of acquisitions would not produce the best structure for the industry. What is not clear is why, when the wool plants are so versatile in their choice of raw material, this should be so undesirable. It may be congenial advice to the wool “neddy” but is the wool being pulled over our eyes?

There is nothing wrong with Yorkshire, according to the latest survey of the wool industry, that the judicious spending of £4O million would not cure.

Output (million lb a year) At MidProduct present 1970s Combed tops 202 175 Converted tops 55 91 Worsted yarns 201 217 Woollen yarns 207 216 Semi-worsted yarns Worsted woven fab15 37 rics 80 79 Woollen woven fabrics 138 126 Knitted goods 0 24