From David Davies
In 1989 the Institute of Physics (IOP) decided to sell the businesses and assets of Fulmer Limited. It seems likely that this course of action had been mooted some time earlier but there was no mention of it in the IOP’s Annual Report of Council for the year 1989, which speaks of Fulmer’s record turnover, record order book and return to to profitability, after substantial losses in 1988.
The reasons for the decision have been variously reported
FRI required more continual investment than the Institute [IOP] could provide
it was now less appropriate for a learned society such as the Institute of Physics to own its own research laboratories
Some felt that the ownership of Fulmer might be incompatible with IOP’s charitable status.
Sir Cyril Hilsum, who had taken over the presidency of the IOP in 1987, was advised that “we are probably trading illegally … we are trading at a loss and there is no plan for actually reducing and eliminating this loss”.
However the dominant reason was almost certainly that the sale of the Stoke Poges (SP) site would yield sufficient funds to transform the finances of the IOP. In the event, the IOP made about £1M net on the sale. IOP also made more than £1M from selling theYarsley side of the business to to the UK subsidiary of the Swiss company Societe Generale de Surveillance S.A. (SGS). IOP never looked back.
The assets and businesses of Fulmer Research at Stoke Poges and Slough were ‘sold’ to British Non-Ferrous Metals Research Centre (BNF) at Wantage but, in reality, IOP had to finance the merger to the extent of between £1M and £2M net. (Very approximate because we do not have all the relevant financial reports.)
On 30 July 1990, the date of the sale, staff were briefed on the arrangement and each member of staff received a letter. Most technical staff and a few administrative and support staff were offered the option of a transfer to Wantage, with a relocation allowance. Those who chose not to transfer and the remaining administrative staff were made redundant.
I received a further letter from Eric Duckworth on that day. It contained the following passage: “Ideally we would have preferred to locate this new organisation at Stoke Poges to save you the necessity of changing your place of work. Unfortunately this has not been possible due to the rezoning of this site as green belt and the very difficult attitude of the local planning authority to the necessary development.”.
I was one of about 45 staff who opted to transfer to Wantage.
In 1987 BNF had, with Wiggins Property Group PLC, set up Wantage Business Park Ltd (WBP) with the aim of developing their site, a disused wartime airfield, as a business park. In 1988 and 1989 WBP had built some new buildings on the Wantage site to offer as office space. Before the merger a few small office units had been leased and Honda had taken a short-term lease on a larger space but they later left to consolidate on their Swindon site.
Ken Brightman, Director of BNF, had included in the joint July 1990 cash forecast for the second half of the year an estimate of £700k from the sale of land at the Wantage site. I was never made aware of exactly what prospective sales led him to do so. There were no sales of land in 1990, the sales were pushed into the 1991 forecast and didn’t happen then either. In fact they never happened. The timing of the merger was certainly unfortunate; following the Lawson boom of the 1980s, the UK economy went into recession from the fourth quarter of 1990 to the third quarter of 1991, coinciding exactly with Fulmer’s move to Wantage.
As a consequence of the failure to sell land, BNF-Fulmer, throughout the two years of its existence, was chronically short of cash, to the tune of several hundred thousand pounds. We never had adequate resources to deal with the inevitable contingencies that arose during the merger. We were unable to convince the bank that we warranted an extension of the overdraft and we were unable to borrow elsewhere.
The merger of the two operations and consolidation on the Wantage site did not go smoothly.
Accommodation at Wantage for the Fulmer divisions took time to arrange and in some cases required BNF units to move, causing disruption to existing Wantage projects as well as the Stoke Poges ones. Building modifications and the laying of additional services were required. I sympathized with the SP divisional managers, who had to dismantle their equipment, arrange for its transport to Wantage and recommission it there, sometimes in unsuitable accommodation. In my own case I had to deal with the SP Library and filing (900 shelf-feet of journals, 400 feet of books – not counting those in offices – and 520 feet of reports and correspondence). This all had to be drastically pruned. I remember agonizing over each R number, throwing away most of the interim reports.
Organizationally there were overlaps and conflicts. Having learned who did what, who reported to whom, and why, we set up a new reporting structure, some BNF staff were made redundant and some took early retirement. Ken Brightman, who had been Director of Research at BNF, and Bill Bowyer from Fulmer became joint managing directors. This arrangement did not work. It was finally resolved when, under the continuing cash constraints in early 1991, Ken leased a photocopier for his secretary at a cost commitment of several thousand pounds without consulting Bill. Bill called Ian Watson, the chairman. Ken was asked to clear his desk and left the same day. Bill took sole charge.
Fulmer and BNF had incompatible accounting systems. Fulmer produced accounts on a four-weekly reporting system worked out manually but fed by a detailed costing system, custom written in house and run on PCs. BNF reported accounts monthly. They used a proprietary computer system from Kerridge CS Ltd, who had written additional custom modules specifically for BNF. The Kerridge system could not accommodate the changes needed to incorporate Fulmer’s projects and no-one at BNF knew how it worked. Kerridge were paid to maintain it and had to be further paid for any modifications. At Fulmer we worked out our own payroll; at BNF they contracted out the payroll. Cash flow forecasting remained very uncertain and I had no confidence in the profit and loss statements and balance sheets which, despite our inability to resolve major discrepancies in the Kerridge reports, emerged as if by magic at the last minute from the office of Paul Frances, the company secretary.
The BNF and Fulmer cultures were different. As a Research Association, BNF answered to a council of its members and derived about a fifth of its income from its membership subscriptions. The Department of Trade and Industry (DTI) provided matching support although this was now framed as approved contract research programme funding. Fulmer, on the other hand, had always derived all its income from contract research and the sale of services and products. Overall, DTI was much more important to the merged company than it had been to Fulmer.
Terms and conditions of employment were different for ex-Fulmer staff and BNF staff. BNF recognized the MSF Union; Fulmer was not unionised. We introduced monthly management briefing as it had been practised at Fulmer. The union had an agreement that their officers would be briefed before the staff so, to ensure that staff obtained their information unmediated. we briefed the union just five minutes before the full staff meeting. Time-clocks, which had been used at Wantage, were abolished flexi-time on a trust basis was introduced as at Fulmer. Minor issues such as holidays, overtime and sickness procedures turned out to be perceived as large and took time to resolve.
In March 1991 we continued to be in serious cash difficulties; the bank had declined to increase our overdraft and were pressurising us to find others to share the burden. They sent a representative to work through the cash forecasts with us.
We were concerned about possible insolvency. Price-Waterhouse accountants expressed the view that we still had a business but that we were over-borrowed.
In a meeting at Manches (solicitors) at Oxford, Ian Watson set out four possible ways out of our cash crisis:
1. Sell freehold land or a stake in Wantage Business Park
2. Sell the site and lease it back
3. Merge with other RAs – ERA? RAPRA?
4. ERA might lend us £200k
In a subsequent meeting at ERA; we suggested that they give us a loan secured on Wantage Business Park. They decided against this but wished us to work together towards a merger in the long term.
The managing director of ERA (Mike Withers) happened to live near Bill and they were friends. They had many informal chats about problems and opportunities. Bill had an optimistic view of the possible merger. The ERA finance director (Keith Sedgwick) was known to me. I believed him to be hard headed. I thought that, rather than merge, he would wait for us to go under and then make the receivers a bid for certain assets.
Meanwhile, time and effort had to be expended getting our site and procedures compliant with recent health and safety regulations, notably Control of Substances Hazardous to Health (COSHH), which had come into effect in 1989 but which had barely been addressed at Wantage. A Health and Safety Executive (HSE) inspection found that electrical and mechanical safety issues they had raised in 1985 had not been resolved. They gave us two months to make serious progress.
Pressure continued to build. We delayed payments to creditors. In some cases we were threatened with writs. In one case we owed money to the father of one of my computer staff and we had to persuade him not to press for it.
Beginning in May 1991 10% of gross salaries were withheld ‘temporarily’ for all staff .
The relocation allowances due to ex-Fulmer staff under the terms of their transfer agreements were deferred until beyond 1993 and, in the event, were never paid.
Bill was able to negotiate with DTI the acceptance of monthly rather than quarterly invoices. In return, they imposed stricter rules for the authorization of payment.
In August 1991 it became known that the Fulmer Pension Scheme was in serious deficit and that this would substantially reduce the service credit that would be allowed on transfer of each individual into the BNF scheme. Independent advice was that, while there was a remote possibility that IOP might be held responsible for making good a portion of this, expensive litigation would be required to try to enforce payment from them.
Aside from administration, my time was taken managing the maintenance and development of the existing BNF software business. The most important of our three main products was STRIDE, a system used for constructing and maintaining controlled vocabularies for searching text databases. Income came from the sale of STRIDE and also from continuing software maintenance contracts with users. In those days, before free text search became feasible for everyone, we had major contracts from Department of Health, Ministry of Agriculture Fisheries and Food, Royal Institute of British Architects, several police forces, charities etc.
On 29 September 1992 the bank finally appointed receivers from Price Waterhouse. The last straw seems to have been the failure of EEC to make prompt payment of an invoice of about £20000. Peter Spratt, Jonathan Phillips and two other young men arrived in the morning. Bill told them that he had arranged an afternoon meeting of all staff and needed to discuss what to say to the staff. The receivers made clear to Bill that this was no longer his concern. They were now in charge and they would talk to the staff. In the end we did have the opportunity to say a few words at the meeting. Almost all staff were made redundant with payments limited to the statutory minimum and with pay in lieu of notice.
Throughout the two years of difficulties I have described, staff had continued to contribute some excellent and valuable work for members and clients.
When receivership came, it ended the working lives of some staff but many others went on to develop successful careers. ERA did indeed offer employment to some people and purchased some assets from the receiver. Members of staff launched about half a dozen start-up companies to take forward specialized areas of expertise.
Looking back now, it seems hard to imagine how anyone having carried out due diligence on BNF Metals Technology Centre in 1989 or 1990 could have planned a move of Fulmer Research staff and equipment to join BNF at Wantage with any real prospect of success.
However, many of us learned a lot in those two years.