Entrepreneurs Forum

Washday wishes

Friday 3 August 2012 9:00

Brian Nicholls

Pamela Petty tells Brian Nicholls how the UK’s failure to build its own washing machines, fridges and freezers may be reversed.

Remarkably and regrettably, you can't buy a British-made washing machine. Pamela Petty, her entrepreneurial spirit rising, hopes to change this. And the newsy firm of which she’s group managing director may be the one that does it.

Ebac hit headlines recently when her father, John Elliott, put this family firm he founded into a community trust, instead of passing it down to group managing director Pamela and her sister Amanda Hird, the operations director.

nresentfully Pamela, who’s also finance director, insists in her lovely lilting Weardale accent that the family are unanimous over this.

And far from ambition being dampened, Pamela’s driving a new product launch this September – disclosing also that the firm, already Britain’s only one making water coolers, is well on with planning a British made washing machine. Its renaissance at Newton Aycliffe in County Durham would be appropriate.

Near Ebac’s factory on the same industrial estate, Tallent Automotive has a washing machine in reception. It’s a public reminder that, prior to car parts, it made bits for John Bloom’s 1960s washing machines, of which he sold 200,000 a year before becoming a bankrupt in 1969.

Pamela’s done the details, including a study of the existing makes’ design deficits. She’s convinced there’s a market for British made white-goods appliances.

“It’s long been there,” she says. “Washing machine sales have hardly changed over 10 years. Some 3m will be sold in the UK this year, every one foreign made, mostly in Italy. Italians have a fantastic reputation, fantastic products.

“But they’re not a low cost base manufacturer. It costs £15 to ship a machine here – more than my projected labour cost. So it’s not that they can’t be made here. I’m confident. We’ve been to Italy, meeting people who equip the factories. It’s highly automated now.”

Pamela, 44, is as fired with enthusiasm to manufacture as her father has been, convinced of its importance of getting Britain back on its financial feet.

“I wouldn’t last in business more than two years if I spent more than I bring in, but that’s what we’re doing as a country. Making washing machines might have employed 1,000 people once. Maybe now, with automation and innovation, it will employ 500. That’s still 500 cost effective jobs here.”

She’s also eyeing 4m refrigerators and fridge freezers the UK imports yearly. “Again, I don’t think Britain makes any now. We could compete. Four years ago, we imported 1,000 fridges with Ebac badges on, to trial-sell through independent stores.

“Feedback was that an ‘Ebac’ fridge would sell as many alongside a Hotpoint or a Bosch because our name’s recognised through established products. People who know Ebac love us. Fridge technology, heat exchange, is what we do.”

Even for a company making £3m profit on annual turnover of £15m attracting capital investment can be a challenge now. Pamela estimates perhaps a £7m requirement to make the first washing machine.

“Then,” she says, “they get a lot cheaper as they come off the line. Existing factories tend to make about a million of them a year. That’s how the industry has moved.

“We couldn’t make them hands on like we make coolers and dehumidifiers. But, with automation, running costs don’t vary greatly whether you produce in China, Italy, Poland or Britain. A big cost of setting up, however, is plant, the development and bits you put in. Variables – power, labour and things – are small in the equation. We’re confident we can make it work – and with improved designs.”

Meanwhile, the September launch nears: air source heat pumps, environmentally friendly technology. Whereas an application has been made for government funds to achieve “real growth” making washing machines, Ebac is producing the new pumps on existing resources.

“It’s technology long used in our air coolers and dehumidifiers,” she explains. “It wasn’t commercially viable while gas was cheap. Now gas prices may get closer to electricity. An air source heat pump becomes commercially viable if gas is even half electricity’s price.

“Air sourced pumps with 1kw of electricity can take heat from the air, and from 1kw of electricity you can get 2kw to 7kw of heat. Installation tends to be dearer, and workings are different to gas combi boilers in heating homes. But they’re much cheaper to run than electric, and people who are dependent on oil have seen oil prices rise over the past two winters and have sometimes had difficulty even in getting deliveries.

“About 20% of homes are gas heated. For any home not, an air source heat pump is financially viable for home heating. It offers a payback of maybe four or five years on a system lasting perhaps 10.”

The Government’s Renewable Heating Incentive (RHI), which has already popularised solar panels, has air source heating as a consideration towards reducing carbon footprint, but this has been postponed several times. Pamela suggests RHI could even make air source heating viable vis a vis gas on current prices.

“We’ve made the technology much more efficient over 20 years. The market’s established in other European countries. For our market we have now a very good offer.”

Ebac’s a 50% exporter. Indeed, almost all of its 1m uniquely British water coolers made yearly go abroad.

"They’re uncomplicated to operate and service. And like everything we make they’re reliable. Water coolers originated in the USA, where our main competition is - that and now the Far East. But the value we give cancels extra costs.”

A patented water trailer, advantageously hygienic, make them different. After making bottled coolers initially, Ebac for five years has made them for plumbed in, treated water. At one point bottled coolers seemed indomitable.

Now in the UK, with running costs differing little, the split is nearer 50/50. Ebac opened 2012 by launching its plumbedin Fleet cooler, which is totally different to bottled coolers. It includes a counter-top version and, soon, a carbonated version, slightly dearer carbonated water being favoured by maybe 80% in Germany, against 5 to 10% here.

While dehumidifier and cooler markets should hold up for years yet, washing machines, fridges and freezers could prove logical successors. “The air source heat pumps should give reasonable growth now,” Pamela says.

“If we get the products right and export them we could double this business, assuming the market’s there. “It’s not here yet in the UK. But France has a massive market, the French government having given lots of financial incentive already - part of the European drive on carbon emission, I assume.

The market will come in the UK.” Ebac’s owning foundation took effect last October and was publicised last April. Alternatives such as employee ownership and management buyouts were considered.

But MBOs often change a business beyond recognition; the foundation guarantees Ebac as a local manufacturer. It came across in some media as rivalling the national lottery. But Pamela stresses the priority is job creation for South Durham through manufacturing, not purely to fund community causes.

“But employing 200 people supports the community. And contributing taxes and rates supports the community. We’ve always run like that.”

Yet patronage is there, as Durham and Bishop Auckland cricket clubs, West Auckland football team and Durham’s Olympic rowing hopeful Nathaniel Reilly-O’Donnell know, despite cautionary financial advice sometimes offered.

The paramount passion to make things pleases 200 employees, all but two of whom go the extra mile or few with the firm’s latest relocation. Offered subsidised travel for a year, few availed of it.

“Ebac isn’t about the Elliott family; it’s about the Ebac family,” Pamela declares. “Many staff have worked here years. Amanda jokes that if you cut ‘em in half you’d find Ebac printed through!

“We do our own injection moulding, fabrication, electronics assembly, and some wiring and tagging. I can’t see Ebac ever a business importing things to sell. We love figuring how to make something work, then how to produce it. We’ve a design team, and a test house and workshop. We’ve a structured design process,” she adds.

Once her father, at 68, decided the future structure, there could be no selling the business for personal profit – “I don’t think this company’s ever paid a dividend” - and gains go towards upholding manufacturing.

Pamela recognised she couldn’t have stopped it. “I can’t say: ‘Let’s move to Poland and make another five quid’ you do the sums and think: ‘I’m giving that up’. Then I thought: ‘you know what, Pamela? If you want a £30m company to your name, go and do it.” So she leads the business, reporting monthly to the four-member trust that includes John Elliott and two former employees. The fourth member will oversee the distribution of community benefit.

“They’re all close to the business,” Pamela says. “But all decisions are with us running it daily. “Sometimes they may think: ‘Maybe I wouldn’t have done it that way or whatever.’ But you have to assess all decisions made in considering whether the company is still in the right direction. The change is not huge, and it was right to do.”

She draws a director’s salary with bonuses coming through two schemes the employees share in, graduates or not. A shipments bonus earns everyone £40 each for every £1m of product shipped. So everyone could benefit by up to £500 a year.

Then there’s a hangover from the now defunct state PRP scheme, once tax free and NI free. Ebac kept its principle in place. So annually, above a certain profit, a percentage is distributed, based on salary. Pamela, like her father, agrees with the Government’s aim of innovation but feels too much focus is on invention, too little on innovation within processes existing.

“Only so many Dyson vacuum cleaners can happen in a decade, let alone a year,” she says. “We can bring back the manufacture of some things we were bloody good at and make a change. But that needs government influence, and the Regional Growth Fund.”