Struggling plane and car engineers targeted by £15m fund
Taken from original article in the Telegraph, written by Kate Palmer:
Struggling British start-ups that make the ejector seats for fighter jets, parts for helicopters and reinforced steel doors for high-security hangars are being targeted by a new £15m investment fund.
Cyrus Investment Management, an SME investment outfit, said it would buy stakes in tiny “precision engineering” firms that may otherwise go bust and create one company that combines these specialist businesses into one.
There are an estimated 1,500 precision engineering companies in Britain and the industry has grown by 10pc over the past two years, but most are small or medium-sized enterprises and vulnerable to volatile markets.
It comes as British industry is reeling from the effect of cheap imports from Asia, with more than 5,000 steelworkers’ jobs being axed at Tata Steel plants across the country.
Cyrus claims it saved almost 100 jobs last year when it bought Dorset-based plant FGP Precision Engineering, which makes parts for aircraft and nuclear power stations, after it went into administration last year.
The investment was made as part of its first £5m fund, which closed in April, and has grown in value by 9pc in its first six months, Cyrus Investment said. It also bought defence and security firm Rhino, which makes huge steel doors for aircraft hangars.
Peter Schwabach, Cyrus Investment’s managing director, said the fund could compete with imports from abroad because it only invests in “high-quality, ultra-specialised firms”.
He said: “We’re not interested in mass-produced products – but companies which make high-end components or offer a highly skilled service.”
The newly merged company it creates will provide high-quality gear, research and manufacturing expertise for big aircraft brands, including the likes of Airbus and Boeing, he added.
“We’re also not randomly investing in businesses and hoping that they grow, but merging companies into one,” Mr Schwabach, who formerly worked at Goldman Sachs, said.
“Jobs will be safe when we merge the firms. We want to acquire businesses and help them grow.”
The latest fund is backed by the enterprise investment scheme, which gives investors tax relief if they lose money on their investments, in a bid to boost funding for riskier start-ups.
This means that, for every £100 they lose in an EIS investment, investors can claim back £30 from their income tax, with earnings free from capital gains tax.
Meanwhile British engineering jobs are being increasingly “reshored” from places such as China and India. This has added £600m to the UK economy over the past two years and created approximately 10,000 new jobs, according to industry body Engineering UK.
It said 15pc of British manufacturers brought production back from overseas in 2015, or began the process of doing so.
There are thought to be 10,000 jobs in precision instrument making and repairing in the UK.