...On July 14 of this year, Beaver Engineering Group of Norwich, the biggest family-owned machine tool builder in Britain, went into receivership. Some 80 jobs disappeared at a stroke, with all the knock-on effects which that implies for families and communities. The remaining 50 or so employees were kept on until early October when the company was sold to the Swiss machine tool manufacturer Mikron. Then most of them, too, lost their jobs. For chairman and founder Victor Balding, 77, and particularly for Anthony Balding, his son and successor as managing director, it was a tragedy of a deeper kind: a personal humiliation which threatened to sweep away the savings of more than one working lifetime.
The company's collapse was a grievous blow for Norwich as well. The city's manufacturing base is fairly small and of comparatively recent date. Beaver, which at its height employed fewer than 300, was never the biggest industrial undertaking in the vicinity. Yet over a period of 40 years it had acquired an importance that belied its size. It made sophisticated tools with a reputation for quality, it was a worldwide exporter, and a reservoir of high level engineering skills. It thus helped to balance a regional economy, heavily dependent on agriculture.
The simple truth of the matter was that the bank pulled the plug. As usually happens in these cases the company was operating at a loss and the bank, being unable to see the prospect of an immediate return to profits, called in the overdraft. The directors then had no alternative but to invite the bank, the NatWest, to appoint receivers.
The figures suggest that Beaver had been on the slippery slope ever since 1987. In the 12 months to end-April that year the company (then called Balding Engineering) had reached a peak: turnover climbed to nigh on £11 million, and operating profit edged past the £1 million-mark, which translated into well over £700,000 before tax. The following year's turnover was more than £1 million lower and profit before tax crashed to £65,000. But 1987-88 might have been no more than a slight hiccup while management was preoccupied with a scheme for rejigging the capital structure of the company. It was this, incidentally, which brought about the change of name to Beaver.
At the time expansion was still very much in the air. In 1987-88 the overdraft doubled. In addition the company took out a bank loan to finance construction of a new branch factory in Peterborough. The next year it elected to sell its main factory in Sweet Briar Road, Norwich, and build anew on a greenfield site at Bowthorpe, on the edge of the city. Although turnover recovered slightly, 1988-89 proved to be the first of several years of mounting losses at the trading level. Inflated by interest charges, a £100,000 operating loss became a pre-tax loss of nearly £640,000. And the recession was not yet under way.
For Beaver that came immediately after the year-end. "We saw a significant decline in May '89," recalls Tony Balding, "which fell to 50% of normal by September, and never ever got back above that level." In 1990 losses were more than made good by the profit on the sale of the old Norwich factory. But the following year the loss on trading had reached £1 million. After exceptional write-offs and reorganisation costs relating to the move into its new home, Beaver's bottom line was £2.8 million to the bad. A little under 15 months later NatWest blew the whistle.
...Where we went wrong was to build assets. It would have been more beneficial to have gone for leasehold land, which would have freed up capital to go back into the business." But the decision to relocate within Norwich was not a mistake, he insists. A scheme to develop a retail park in the city created a unique opportunity to sell the relatively inefficient Sweet Briar Road works at a fat price, and roll the money over into a superb, purpose-built facility with ample cranage, wide gangways and a logical workflow. The new factory was omitted from the sale to Mikron, incidentally, and remains with the receivers.
...the 15 months preceding the receivership saw a lot of retrenchment. The Peterborough works (which built lathes, to set alongside the machining centres manufactured in Norwich) and a small sub-assembly plant at Halesworth, Suffolk, both closed down and their operations were absorbed into the main factory. There were redundancies in Norwich, too, and sales of surplus plant in addition to the write-offs which helped swell the losses of 1990-91.
During the next year the company struggled hard to get on terms, and not without success. With the virtual disappearance of the home market, exports were the only hope of salvation. In the late '80s these had fallen to around 20% of sales. In 1991-92 they climbed to 60%, Balding claims. And at the year-end - according to management's draft accounts - the company broke-even on trading. It remained heavily indebted to the bank, of course, to the tune of just under £2 million. But the greater part of this sum consisted of a building loan, and the overdraft had never been fully utilised.
...Yet it's transparent that Balding does blame the bank. "We should have been given longer," he complains. The company had two brand new CNC machining centres that had just been put on show - at Dusseldorf and Birmingham - and had attracted a lot of interest. "We'd taken £400,000 of orders." There were plans for "condensing" further, for selling plant and sub-contracting certain operations to eastern Europe, or maybe China, but that would have required a further £3-400,000 which the bank was not prepared to advance. Shortly before the axe fell Mikron (which used to sell Beaver machines under its own name in the German-speaking lands of central Europe), offered to put up £300,000 secured against the stock. Coopers rejected the suggestion.
There is, however, a more oppressive fiend in Balding's demonology and that's the Government. Beaver didn't want crutches, its former managers protest, almost in unison. "No way was the company a lame duck," cries one-time technical director Tony Jackson, now employed by Mikron as head of the surviving design team. The ex-Beaver executives all blame the Government for creating conditions that made survival impossible.
In times past, certainly, Balding/Beaver had shown itself fully capable of standing on its own feet. Much of its early development was driven by exports. The business was founded in Norwich back in 1951, as a jobbing engineering shop. Three or four years later, in order to even-out the work load - and although he had no experience of the machine tool industry - Victor Balding built a turret milling machine which found a ready market in the US. Through the 1960s and '70s the company joined in the industry's long march towards sophistication, via NC and CNC controls, automatic tool changing, etc. But in the late '70s, when it was a small but established producer of state-of-the-art tools, there came a crunch.
In 1978 the Baldings, father and son, visited the machine tool fair in Chicago to discover, as Tony Balding recalls, a "plethora" of Japanese bed-type machining centres on offer at the same price as the half-dozen inferior British knee-type products. "We were obsolete overnight." The company had a choice, either to compete or get out of the business. It chose the former, which meant new designs with more electronics, new cranes to lift components weighing 1.5 tons rather than 6 cwt, and higher quality. The challenge was met, so successfully that the business sailed through the 1979-82 period of recession. Indeed, 1980's profit of £600,000 before tax implied a return on capital employed in excess of 30%. Not until 1987 did ROCE struggle back to double figures...