George Thompson, managing director of the Tewkesbury-based sub-contract machinist Helander Precision Engineering, has reduced his component prices by 48% over the past five years. He says that overseas competition, particularly from the Far East, continues to exert strong downward pressure on what he charges his customers, which is why he has adopted a policy of buying affordable high-technology production equipment; this is the only way he can make sufficient profit on his offshore and aerospace work to expand his business. The problem of reduced margins has been exacerbated over the past 12 months by soaring raw-material prices. For example, stainless steel costs 60% more now than a year ago, and the price of nickel is well over ￡7,000 per tonne. Mr Thompson uses a lot of both materials, but his customers will not allow the extra cost to be passed on in higher prices. At the same time, the aerospace industry is continuing to ask for top quality and year-on-year 'cost down'. Ever higher quality is also being demanded by oil and gas companies, especially those involved in directional drilling of part-exhausted fields, where component failure would be catastrophically expensive.
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