Conscientious Collaboration
Germany has been one of Britain’s greatest trading partners since the Ruhr became its fast-growing industrial heartland in the mid-19th century.
India, China and other emerging markets may appear more tempting, but if a Midlands business is serious about exporting, Germany must be high on its list of potential targets.
Not that winning over the most demanding of consumers will ever be easy. Thomas Schaal, an international trade officer with UK Trade & Investment (UKTI) in the East Midlands, admits his homeland has always been tough to crack.
“Price is becoming more of an issue, but quality is still the most important aspect when dealing with Germany, whether it is regarding the original product or service, or the level of follow-up support,” he says.
“Germans are used to high standards of service from their domestic brands, and companies like to feel they have a close relationship with their suppliers.”
However, Schaal says the potential for Midlands firms is significant, and across a range of sectors. “The purity laws may cause difficulties for food and drink suppliers, but we are seeing opportunities for the professional services sector, architects, engineering companies and many more,” he says.
“Germans appreciate factors such as quality, reliability and efficiency, but they also like English creativity and ideas. The Reichstag, for example, was designed by Sir Norman Foster.”
Schaal sees scope for law firms and accountancy firms in the Midlands to win business from their German peers.
“German companies are shocked by the fees London practices charge, and they often try to find advisers for their clients based in the regions,” he says.
The recent UKTI trade visit to Germany from the East Midlands reflected Schaal’s optimism, with five lawyers and six accountants filling the spaces. A second mission is likely to be held in 2009, this time focusing on training companies, specialising in leadership and management skills.
Another observer who sees Germany as the place to be is Lance Taylor, the UK chief executive of quantity surveyors, Rider Levett Bucknall, based in Birmingham. Expansion by organic means, rather than acquisition, is his strategy, and with some chunky growth forecasts to meet, he’s been eyeing the Continent for the past year.
“Having a presence in the Middle East is a no-brainer, and you also have to be in China and India, but Europe is more complicated,” says Taylor.
“You’ve got the traditional markets, the newer ones in central Europe, and the emerging ones in the East. We’ve also seen plenty of sizeable quantity surveying practices head into Europe, throw money at it, then retreat.”
Taylor’s solution has been to create RLB Euro, which operates Europe-wide, but as a partnership network rather than an expensive chain of RLB-branded offices. The venture is being launched on 7 October in Munich, reflecting the presence of the Expo REAL exhibition and Taylor’s confidence in Germany.
“We reckon the market for QS services is larger than the UK. The economy has performed better than elsewhere in Europe, and we still think Germany is recovering from its 2006 recession, rather than starting to slide,” he says.
Even before the launch, the German office is advising one of RLB’s global investment clients on a 200m Euro acquisition, and Taylor says others are eager to follow.
Why isn‘t the set-up receiving a MIPIM launch, though? Cannes in Spring would surely attract a larger property audience than Munich in October.
“About 20,000 exhibitors and visitors go to REAL, so it’s already the secondlargest real estate show. The difference is that Munich is a genuinely European conference, not an English conference being held in Europe,” says Taylor.
Regardless of the merits of the Cannes Champagne-fest, there is no doubt Germany remains the place to go to launch a product or venture.
Malcolm Vaughan, a UKTI international trade officer based at Coventry & Warwickshire Chamber of Commerce, says these events have been a key element of the German economy for decades. “It hosts about two thirds of the world’s largest trade fairs, which is why six of the biggest ten exhibition companies are based there.
“The Germans pioneered these commercial events, and if you are in sectors such as automotive, engineering, plastics, print, manufacturing, railways and machine tools, they’ll almost certainly hold its flagship show.”
Vaughan has worked for five companies, all of whom did well in Germany, and is advising several businesses achieving similar success. “We have one firm producing components for VW, another selling training shoes to the Bundeswehr and a software business doing well there with its ‘intelligent’ liquid level sensors,” he says.
Vaughan is in regular contact with UKTI teams in Berlin, Düsseldorf and Munich, which would be expected, but he also sees merit in the twinning arrangements between Midlands cities and Germany; notably Birmingham with Frankfurt, and Coventry with Dresden and Kiel. “They really do open doors. The involvement of local politicians and people does strengthen relationships between the different areas,” he says.
The more formal ties between Germany and this region are also strong and long-established. Of the 25 countries that invested in the UK during 2007 and 2008, Germany was second only to the US; in front of Japan, and way ahead of China and India. Tata’s acquisition of Jaguar and Land Rover notwithstanding, the same pecking order has been noted long term across the Midlands, although most major projects from Germany arrive in the west of the region.
However, unlike many inward investors, German companies don’t shout their success from the factory gates. Automotive component supplier Mann & Hummel set up a major manufacturing plant on the outskirts of Wolverhampton in 1996, but you wouldn‘t know unless you drove past its Hilton Cross Business Park site.
It may be a global €1.75bn corporation, but the web pages created for its UK operations contain no news or events – nothing bar – with gentle irony – a lengthy privacy statement.
Nor is it the exception.
Two years ago the German group Profine, Europe’s largest supplier of PVC-u profile for the residential sector, spent £6m establishing its UK distribution centre at Fradley Park in Lichfield.
It was successful by all accounts, but try to catch the managing director for a chat, and even Profine’s PR agency gives up – after three weeks.Not that words alone matter much in the scheme of things, but bashful corporates could create the illusion that Germany isn’t that important to the region’s economy.
“Many German companies in the UK tend to be quiet about what they are doing, even though they are successful,” says UKTI’s Schaal.
Fortunately, the latest inbound activity is being managed this side of the Channel, by the affable managing director of the company building Birmingham Development Company’s The Cube. Neil Edginton, who formed BuildAbility for the £100m mixed-use project, has brought in two German companies for different phases of the MAKE-designed scheme.
Haga won the £11m contract to design, supply and install 16,000 aluminium panels on the 23-storey Cube, and Wohr is supplying £2.5m of automated stacking systems for the car parks. Disappointingly, no UK-based business was able to even tender.
“Demand for sophisticated underground parking equipment tends to come from Germany and Italy,” says Edginton. “The cladding has to be made from anodised aluminium, which will be glazed and hung onto the building. The best supplier was in Germany.”
Edginton visited Haga’s Stuttgart plant in August to see the first samples, and was impressed. “We always try to pick companies we can build relationships with, and we get on well with Haga, but this is a seriously big order, even for them,” he says.
Haga is sending its own installation team to Birmingham in December, and they’ll stay for the duration of the 11-month contract. Edginton has strengthened the commercial ties that bind BuildAbility to the two suppliers by advancing Haga £1m upfront for the design phase, and giving Wohr a £250,000 on-demand bank guarantee.
“Normally cladding sub-contractors aren’t paid until the first panel is delivered, but we didn’t think that was right, as they’d have been seriously out of pocket,” says Edginton.“We also thought it only fair to provide Wohr with the security of a bank guarantee.”
