Sunday, June 01, 2008

Globalisation and free trade creating jobs

In the Daily Telegraph on Saturday was a report that Hornby Group, manufacturer of model trains, Scalextric slot car sets, Corgi model cars and Airfix model planes, has enjoyed substantial growth thanks to outsourcing much production to China.

Yes I can hear the moans from the left "our jobs gone to foreign folk in China". In fact when current CEO Frank Martin joined it employed 120 people in its UK premises in Margate, now it employs 150 - and that is following shifting manufacturing to China. Why?

When he joined it had sales of £24m p.a. with pre-tax profits of an abysmal £1.4m. Now sales are £56m with profits of £8m. Part of it is the combination of Thomas the Tank Engine and Harry Potter reviving interest in model trains, but more importantly outsourcing allowed production costs to be lowered substantially - so more could be invested in new products.

"Before the move to China, there might have been one new model locomotive every three years. We are now introducing to the UK on average four new locos every year and the same applies to Scalextric, where there might have been one new car introduced each year and we are now introducing between 12 and 15 new cars each year."

So you see design staff have trebled, and more products mean more sales. In addition, lower production costs allow for more detailed and authentic designs to be produced at prices consumers are willing to buy.

So better products, jobs in a poor country and more (better paying) jobs in the UK. Isn't the free market oppressive? Read the full story here.

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