The arrival of the new £5 note in the UK marks a significant global opportunity for the Cumbrian company behind it
On 13 September, the new plastic £5 note comes into circulation in the UK. More secure, cleaner and capable of lasting 2.5 times longer than its paper counterpart, its introduction follows in the footsteps of the Australian and the Canadian dollar. But more significantly for the company that makes the polymer the notes are printed on – and has so far cornered the market in it – it is likely to lead to more countries following suit.
Innovia Group’s polymer has been used for 99.9 per cent of all the polymer banknotes ever made in the world, says the company’s chief executive Mark Robertshaw – and there are now approximately 50 billion of them. Yet that still only equates to 3 per cent of the world’s banknotes, and he believes the credibility and standing of the Bank of England worldwide will encourage more, inherently conservative, central banks to make the switch.
“This project has provided great profile for the business as we are the pioneers of polymer banknotes,” Robertshaw continues.
But for a company that relies significantly on exports, the contract to make the polymer for both the new £5 and £10 notes has also provided a big boost for its home town in Wigton, Cumbria.
As part of winning the business, the company committed to bringing the manufacturing capability for the polymer banknote to the UK. So it has invested in building a specialised plant – its third in the world, after Australia and Mexico – alongside its Wigton headquarters.
It took just 18 months to convert a greenfield site into a high security, high tech facility, on time and on budget – despite the wet winter that caused serious flooding elsewhere in the region. In doing so, it has created an additional 80 jobs.
Innovia has also expanded production in its films division to meet the extra demand.
“We’ve spent close to $100m investing in our banknote business in the past couple of years worldwide, and obviously the single biggest chunk of that is what we’ve put into Cumbria,” Robertshaw explains.
The innovation drive
Wigton is also home to a global research and development centre for Innovia’s Films division. It employs 60 scientists – “not a common skillset [to find] in a relatively small town,” says Robershaw.
“We draw most of our workforce from the local communities. We take a lot of apprentices every year from the local schools. We take graduates and sponsor those through university,” he continues. “But once you get into some of the more technical roles, there will be people who come in from a much broader base.”
As a result, he would like to see the UK’s education system turn out far more students with a really good grounding in STEM skills to help the company’s drive for innovation, which he terms as the “beating heart” of the business.
You've got to allow yourself some flexibility because it's an unpredictable world
Innovia was previously owned by Belgian pharmaceuticals company UCB, which Robertshaw says has influenced the environment at the R&D centre. “It’s very hi-tech, very equipment and capability rich, and so it gives us a really good platform to push the boundaries of polymer science and how you apply it in novel ways.”
Nevertheless, the company’s approach to innovation is relatively simple – guided by the importance of offering customers different options, because, as Robertshaw says, “you never know which of the products are going to get traction”. And that’s especially the case when Innovia sells into 100 different markets, with different dynamics and preferences. “You’ve got to allow yourself some flexibility because it’s an unpredictable world.”
But just as in pharmaceuticals, Robertshaw adds that the gestation period for developments is long term. “We generally find it probably takes a good five years for a new product coming into the market to start to hit that maturity curve,” he explains.
Patience is therefore a useful quality to have, he says – as is the ability to take bold strategic decisions about the direction of the company.
An eye on the future
Robertshaw joined Innovia 20 months ago, following its acquisition by Arle Capital, which has bought renewed focus on the areas the company thinks has the best long-term, job-creating potential. It has recently led to the sale of its cellophane division, which had been in slow, gradual decline. “It didn’t have the same deep degree of differentiation as our other businesses,” says the CEO.
Importantly for the firm, selling it to Japan’s Futamura Chemicals Co has protected local jobs – the company wants to keep the current manufacturing footprint and jobs in place.
But with the ambition to continue the double digit growth to the bottom line Innovia has seen over the past three years, the move clears the way for Robershaw to focus on fast-growth opportunities.
“We have a strong position in banknotes – we welcome competition, but the barriers to entry are high. It has exciting growth potential, and the nice thing about it is it also uses our film.
“Elsewhere in our speciality advanced polymer films business we see some good growth opportunities too. The majority of what we do is in speciality packaging and there is a drive towards lighter, more flexible packaging. We think we’re well-placed for that.”
Europe is an important market to us and we'd like to see that continue
But there are still challenges – or uncertainties – facing the business. The first, Robertshaw says, is the lack of clarity of energy policy in the UK, particularly around energy generation and capacity. The second is Europe.
In the short term, the UK’s vote to leave the EU has been beneficial for the business because of the devaluation of sterling – Innovia has a significant cost base in the UK, although it exports 90 per cent of what it produces. Robertshaw is also confident that sales to the US and Asia should remain unaffected.
“The unknown bit is what happens with the EU. We have a plant in Belgium, which helps. If there were to be higher trade barriers, we could do a little bit of rebalancing and serve more of our European customers from there. But we hope that the UK will continue to have a meaningful trade relationship with the rest of Europe, without fundamental barriers.
“Europe is an important market to us and we’d like to see that continue.”
In the meantime, and with the Bank of England also looking to move its £20 banknotes to polymer in the not too distant future, Innovia is focused on the job – and the opportunities – in hand, as it plays its own part in encouraging consumers to spend.