Memorandum submitted by Dennis Eagle Ltd
1. CURRENT POSITION
2000 will be a record year for Dennis Eagle
in terms of volume output and gross profit levels. This has been
achieved on the back of a strong UK market (in which we enjoy
a share of 40 per cent in our specialist niche) and a recovery
from 1999 where customers deferred orders due to uncertainty over
Export business has declined to less than 10
per cent of turnover as a result of the loss of competitiveness
in Europe due to the relative strength of sterling.
Market pricing in the UK has declined by 13
per cent in 18 months due to products imported from the Eurozone.
In spite of aggressive action on controlling costs, unit margins
have declined substantially.
2. FUTURE PLANS
Future prosperity is linked to being able to
grow export volumes and profitability. This requires significant
reductions in material cost and productivity to achieve acceptable
profit margins in the current economic climate.
Considerable investment is being made in new
product development that will reduce labour hours per unit substantially.
Unless increases in volume are achievable it is inevitable that
we will be forced to shed labour in the second half of 2001.
We have exhausted the capacity of our UK suppliers
to improve productivity and cost. In addition, we are facing a
serious shortage of potential suppliers, especially in the area
of high quality fabrications. 2001 will see the implementation
of an international sourcing strategy starting with India, Czech
Republic and Turkey. We are satisfied that we can achieve substantial
cost savings from quality suppliers in these and other overseas
markets. Inevitably this is exporting engineering jobs abroad
and exacerbating the position in terms of the shortage of quality
3. BUSINESS ISSUES
As a niche market supplier, we are often less
affected by more economic factors than volume manufacturers since
there is less competition. However, the long period of high sterling
has led to a permanent reduction in prices.
A lack of engineering skills to work on the
shop floor is a real barrier to expansion. We rely on a highly
skilled workforce, but the calibre of individual who previously
opted for a career in an engineering organisation is, increasingly,
opting to continue in further education as university places have
been expanded. If we, as a country, are unable to attract your
people into craft engineering positions then the consequence will
be in continued export of jobs to other countries and an increase
in the importation of finished engineered goods.
11 September 2000