On LFIG’s trip to West Cumbria we were given a glimpse of the interplay between the nuclear industry and local SMEs. The nuclear industry dominates the West Cumbrian economy, and has led to the development of an ecosystem of SMEs. These SMEs are predominantly engineering firms – firms that sell intelligent products and services into the massive decommissioning process at Sellafield.
Sellafield is an interesting example of public and private sector procurement in action. Sellafield Ltd. – the company paid by the Nuclear Decommissioning Authority (NDA) to manage the clean-up – is a private company whose sole customer is a public body – the NDA. Sellafield Ltd. in turn procures goods and services from a number of SMEs and larger corporates. Of those SMEs, many are local, and proximity of those SMEs to Sellafield is clearly important to their business.
There are a number of reasons why proximity matters in West Cumbria. Being close-by means you are more likely to know what is happening on the Sellafield site. Many of the SMEs’ products and services are designed to deal with the situation-specific needs of the engineers at Sellafield. Often the founders of those SMEs were once employed directly by Sellafield itself, as were many of their staff. They know the site, and they also know the people working on it. If devices manufactured by those SMEs need to be tested at Sellafield, and then slightly modified, it is that much easier and cheaper to do so if your factory is within a 30 mile radius of the site.
We heard from one company that makes robotic arms for handling, among other things, radioactive waste trapped in contaminated environments. And another company that has designed radiation-proof casing for cameras used to explore the myriad of contaminated “ponds” across the Sellafield site. The market for those devices is certainly not just Sellafield – demand comes from nuclear and non-nuclear industrial sites across the globe – but proximity to Sellafield, particularly in the product development stage, has clearly been important.
In many ways, the Sellafield-SME relationship is unique. The decommissioning process at Sellafield has to happen. It will last decades, and by definition it can only happen onsite at Sellafield. Public sector expenditure and private sector enterprise collaborate in an impressive manner. It is difficult to think of another industry that exhibits this dynamic. And this dynamic is potentially fantastic for SMEs who are thinking about investing locally.
Business models that are heavily dependent on the expenditure of a single customer, and to a meaningful extent dependent on proximity to that customer, are traditionally vulnerable ones. But these SMEs know that if they remain competitive on price, continue to deliver high quality products and services, and continue to innovate, their primary customer will be there, and spending. Investing on the ground, and for the long-term, is a strong proposition in West Cumbria.
I don’t want to suggest that SMEs in the region in any sense have it easy. But this is a market full of opportunity, and one where local SMEs can not only compete against bigger multi-national corporates, but can thrive.
Max Silver is a member of LFIG and a co-founder of Euston Capital