"We’ll go where our business is, where our customers are"

“We’ll go where our business is, where our customers are”

McAree Engineering was interviewed by Brexit Border Blog on behalf of Intertrade Ireland. The interview was first published on Intertrade Ireland’s website

There is an arc of engineering and metal fabrication that curves from south Cavan through north Monaghan to end in a tight cluster around Dungannon. They are all but invisible to the casual traveller, down lanes or in small industrial estates with no shop front and barely a sign on the gate, but once inside you find they are busy places and significant employers of highly skilled staff. The main McAree plant in Ballinode is close to the mid-point of the arc, but it also has metal fabrication at Carrickroe, almost within sight of the Tyrone border. They have a workforce of just over 100 but would employ more skilled people if they could find them. “Our sales break down at 60% in the Republic, 35% to Northern Ireland and 5% to Britain,” says sales and marketing manager Peter Richardson. “But since we are mainly second-tier manufacturers, a lot of what we sell in the home market actually ends up being exported, so altogether about 86% of our output goes to export directly or indirectly.” The company has not suffered unduly from the decline in the value of sterling because it has an exceptionally good natural hedge. “We buy more than 100 tonnes of steel a week – maybe 6000 tonnes a year – and almost all of it comes from England or Wales priced in sterling. Steel is about £700 a tonne so that’s £4.2million we paid out in the last year.” In the great production sheds it is hard to miss the massive shiny grain silos, great galvanised tubes lying on their sides. Near them lie a row of very odd-looking steel cages. “Those are cabs for forklift trucks,” says Peter. “About 25% of all our production goes to Combi-Lift, just down the road.” McAree are not unduly concerned about tariffs which are generally low in the field. “We are more concerned about the border itself. Some of our biggest customers are in and aroundDungannon, particularly suppliers of machinery to the quarrying trade. Our products are high-volume,heavy and low-margin. It takes 40 minutes for us to get a truck up to Dungannon now and we send at leasttwo a day. If there were constant delays or problems with customs clearance that could damage ourcompetitive position. We are competing with companies sitting just on the other side of the border, someas close to us as Ballygawley.” Despite its natural hedge, the company is sharply aware of the way that currency movements play directly into its competitive position. “We’re really selling on quality and customer service. We manufacture to the relevant EU standards including EN1090, Class 2. We are providing products of a high standard to world-class end-users and we would not be concerned about competitors with lower standards. When sterling was at 80p to the Euro we were doing pretty OK. At 85p or a bit above, where we are now, we can absorb it. At 90p our Northern Ireland counterparts have a very definite competitive edge over us. If we started moving towards 95p we could definitely not absorb it.” InterTradeIreland – Brexit Case Studies P a g e | 6 InterTradeIreland – Brexit Case Studies If some combination of currency movement, tariffs and non-tariff barriers such as border delays make it necessary, the company is quite prepared to make the necessary business decision. “We’ll go where our business is, where our customers are,” says Peter Richardson. “We’re not making any concrete plans, but if necessary we will set up production north of the border, no question about it. We wouldn’t even have to go too far – just about anywhere between Enniskillen and Dungannon. Incidentally, it’s said that 85% of the world’s quarrying and screening equipment is made within about a 15-mile radius of Dungannon, where global brands like Terex, Sandvik, McCloskey International and a myriad of others have manufacturing bases.” Such a business decision would be reinforced by broad overall competitive differences between north and south. “On average our operating costs are about 15% higher on this side of the border, reflecting higher business costs and higher wages on this side of the border. We aim to be competitive through our efficiencies in our production methods.” McAree has long-term plans for expansion in Britain. “None of our investment plans has been put on hold due to Brexit. In fact, we are expanding the Ballinode site, moving silo production onto adjacent land to free up room in the production sheds. Demand in the UK died of after the referendum vote but it has picked up again and now manufacturing is flat out there, so there will be demand for our products. We set up a sales office in Bristol towards the end of last year.” Most of the McAree workforce lives within a 10-minute radius of the plant and only a handful commute across the border. 60% of the staff originally came from Eastern Europe. “The labour market is actually very tight: I could start ten welders in the morning if you could find them for me. We spent a lot of money on newspaper ads without result, and now we are trying to find skilled labour in Lithuania.” Richardson reckons we are paying the price now for letting the apprenticeship system crumble during the recession. “I think this is going to be a big impediment to growth at national level. Judging by the responses to recruitment drives we must be close to some natural level of what is really full employment. We have got our own apprenticeship programme but obviously you need the skilled operatives to absorb the apprenticeships within the plant.” McAree went on a three-day week during the recession and Richardson reckons that having survived that, nothing Brexit can throw at them will stop them now. “We’ve been here 70 years from very small beginnings. There are things we can do that others can’t, not things the public can see but important things. We have our own design capacity – manufacturers come in here with an idea and leave with new elements for their production system. That sort of demand is not going to go away.”