The Manufacturing Agenda
Richard sees a clear funding gap between secured bank debt and expensive PE or VC money. He argues there is a missed opportunity for pension funds or public investors to fill that gap with longer- term, regionally focused capital. SST raised £1.625m of equity to fund the Q-Laser acquisition, trading dilution for strategic progress. Richard is pragmatic about the balance between equity and debt, but he is clear that limited access to reasonably priced growth finance slows the group’s acquisition ambitions. Skills, capability and leadership Skills and talent are a critical constraint. SST employs welders, fabricators, machinists, painters and a wide range of support roles across health and safety, logistics, quality, commercial and finance. Richard sees a shrinking pool of skilled trades, particularly welders, driven by decades of under-investment in vocational training. High day rates on major defence projects exacerbate the problem by drawing skilled people out of SMEs into short-term, highly paid contracts that smaller businesses cannot match. SST has chosen to tackle this challenge directly. The group has run its own apprenticeship scheme for around 15 years and recently revamped it with a local college partner. It now operates an in- college academy focused initially on welding, with machining to follow, and is designed to create a pipeline of well-trained tradespeople for the wider region, not just SST. The apprenticeship levy has been used constructively to fund this investment in people. Looking ahead, Richard sees the importance of pairing experienced tradespeople with younger recruits over time, so knowledge is transferred before retirement.
Volatility and operating conditions
Expert voices CEO outlook
On the demand side, SST is in a relatively buoyant phase. The group has a strong presence in defence and renewables, both of which are seeing strong investment. Geopolitical instability and the push for remote and low-carbon power generation are driving demand for the kind of complex metal components SST produces. Supply chain conditions, by contrast, have stabilised after a turbulent period. Three years ago, the war in Ukraine disrupted mild steel availability, however, steel supply has largely normalised and is no longer a live constraint. At a UK level, regulatory changes are a more direct pressure point. Increases in national insurance and the National Minimum Wage negatively impacted SST’s profitability in a single year. Government policy on tax, labour and regulation is a material driver of cash and investment headroom. Funding, cashflow and financial resilience Cash remains a live issue, despite strong demand, due to the working capital requirements of the business. On funding, there is a sharp distinction between asset-backed finance and other lending options. For machinery and equipment, hire purchase and asset finance work well at sensible rates a few percentage points over base. For working capital or growth without collateral, mainstream bank debt is, in Richard’s view, of very limited availability. This pushes mid-market manufacturers towards private equity, venture capital and specialist funds, where the cost of capital is higher and return expectations more aggressive.
Richard Bradley CEO at SST Group Connect on LinkedIn
Background
SST Group is a £22m turnover engineering group headquartered in the North East, formed around Dyer Engineering and the recently acquired Q-Laser. Dyer specialises in machining and fabrication, while Q-Laser focuses on cutting metal. Together they are building a regional group, capable of bringing the fragmented world of metal engineering back under one roof, with a long-term ambition to create the UK’s engineering hub of excellence based in the NE. For Richard Bradley, CEO, the core challenges always come back to people, machinery and facilities, underpinned by the ability to generate enough profit and / or access cash to keep investing in all three. Subcontract manufacturing, he argues, is one of the toughest corners of industry; each machine is a major investment, facilities need constant improvement, skilled people are difficult to find and retain - and the business must reinvest to stay competitive in a crowded market.
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