On the income trail

On the income trail

One of Scotland's most prolific business figures is still working hard to encourage and support business. Nick Kuenssberg talks to BQ Scotland editor Kenny Kemp and reflects on an illustrious career that has taken him around the globe - and then back to Scotland.

Nick Kuenssberg pulls a copy of the Herald newspaper from his leather satchel. He grins as he opens it out to reveal a front-page picture story about his daughter, Laura, the business editor of ITV News, becoming the new face of BBC2’s Newsnight.

Asked how he enjoys her media achievements, he nods. “I’m proud of all of my children,” he says. “I’m proud of Laura and her sister Joanna, and my son David. They are great kids.”
A number of years ago it was Nick Kuenssberg himself who made the front pages after the high profile falling out at Dawson International. Today, he is more content to allow others take the limelight.

The word ‘industrialist’ has disappeared from vogue in Scotland. In its place, the ‘entrepreneur’ has become much more feted and fashionable. But Nick Kuenssberg can best be described as a ‘Scottish industrialist with a calling’.

As one of Scotland’s most prominent business figures, his career path has wend its way from international manager with Coats Patons, the iconic Paisley textile giant, through to a portfolio life as a major plc company director, business adviser, angel investor and chairman of a host of public, private and arts organisations, including the Citizens Theatre and Glasgow College of Art. His calling is to help businesses and not-for-profit organisations define their strengths and maximise their capabilities – and he is making his mark as the chairman of Social Investment Scotland.

Over six feet tall, with striking grey-blond hair, and a ready grin, Kuenssberg is an unmissable personality. But underneath his bonhomie is a steel-trap brain and pin-sharp memory that has helped Scottish businesses, including Iomart, Hall’s of Broxburn and now Scott & Fyfe, a Tayport textile technology business that is now employee-owned, and mLED, a high growth photonics spin-out.

He learned about the practicalities of business during his 26 years with Coats Patons, where he rose to become the finance director. Nick’s father, the son of an aristocratic German family, escaped the Nazis in the 1930s, arriving in Edinburgh to study medicine. He remained in the city, married a fellow doctor and became one of the founding general practitioners in the National Health Service. Nick Kuenssberg was born in October 1942 and with his German-sounding surname, became well used to handling himself in any playground scraps and later on the rugby field. He flourished at sports including cricket and squash, playing regularly until he was 57.

J&P Patons is stitched into Scotland’s economic history. With its roots in 1750s Paisley, James Coats set up a weaving business in 1802 which bloomed because of the French blockades during the Napoleonic Wars. He opened a thread mill in 1826 and the firms expanded around the world, listing on the London Stock Exchange in 1890. It was one of Scotland’s most successful and renowned businesses merging with Patons in 1961 to create Coats Patons plc. Today the company is part of the Guinness Peat Group and still employs 20,000 people in 70 countries.

Nick Kuenssberg has sat on the board of ScottishPower and Standard Life at dramatic points in their transitions, one from a public utility as the South of Scotland Electricity Board to private, the other moving from mutual to private, both later listed on the London Stock Exchange. He has seen various boards with many shades of ability and characters. He remains passionate about the importance of good governance and expresses concern at the onerous regulatory expectations now being placed on non-executive directors in major financial institutions, which he says may deter talented individuals from taking up such thankless tasks.

Earlier in 2013, he became chairman of Social Investment Scotland, taking over from journalist Alf Young. He has selected a new board on unpaid directors who he hopes will take the organisation to a new level of lending to social enterprises and charities. With such a portfolio of business interests, his business approach has been indelibly influenced by his time as a young managing director working in Peru and then Italy.

“I was unbelievably lucky. I had a wonderful time at Coats, 26 fantastic years then one year that wasn’t so great! It was a terrific company and one where there was trust in people. There were small management teams around the world who were given almost free rein: the downside was if they stayed too long they became ‘local’. The upside was the tremendous integrity, industry and determination to take things on.”

This led to innovative thinking and problem solving with great team work in local markets. The clear instruction from the Glasgow head office was, ‘Get on with it, you know best. You’ve been appointed to run it. Go and run it.’

Coats were world leaders in making cotton and synthetic threads and yarns for domestic and industrial use, while Patons had a strong position in hand-knitting wools. However, as other textile multi-nationals, such as UK rivals Courtaulds, were consolidating and snapping up complementary businesses, Coats joined the game too by buying Jaeger, Pasolds, West Riding and a host of knitwear companies.

In 1971, Nick Kuenssberg was a fresh-faced, newly married and sporty manager who had been an accountancy trainee in Germany. He was posted to South America, although he would be deeply involved with Coats’ non-core companies when he returned to the UK in 1978. For Nick, a graduate in PPE from Oxford University, working overseas gave him the kind of full-blooded, factory-floor economic and labour relations education that was the stuff of Marxist-theory pamphlets.

“We were into integrated manufacturing in our factory north west of Lima. We had a fantastic business. What was most satisfying was that when I first came to work some people arrived bare-footed or with shoes made from rubber tyres, five years later they came in plastic shoes, then after that leather shoes.  You could see the benefits on this community of the economic activity,” he says.

“We bought cotton yarn and twisted, dyed and finished it. We started a joint venture with a Peruvian company, which made synthetic zip fasteners, and were into hand knitting, buying yarn, dyeing and finishing it. We also bought our nearest local competitor, which has gone bust. So we ended up spinning. We were serving the Peruvian market although within two years we were exporting to Brazil, Japan and Argentina,” he recalls.

As a fluent Spanish-speaking manager, he toured the plant every lunch-time building a rapport with the workers. This paid dividends, helping him steer the company through national unrest sparked by Marxist revolutionaries bent on power at the expense of international business.

“We had the industrial community legislation which meant that technically we had to give our shares away in line with our profits. The more profits we made the faster we gave it away to the community, up to a maximum of 50%. This community was governed by trade unions,” he says.

Aged 29, when contemporaries were still in junior roles in the UK, he was involved with trade negotiations in Peru and rebuilding another factory in Santiago in Chile. As a local textile sector member of the Sociedad Nacional de Industrias, Peru’s national business forum, he was asked to negotiate on behalf of Peru in the Andean Pact talks.

“We were making profits and we were foreign-owned, so we were a target for Chinese Maoist Communists who wanted to win over our staff. We had the Moscovite communists, whom we had a good relationship. Then the Maoists arrived and they were not remotely interested in the company’s success; only in gaining political power.”

With over 450 factory workers, the Maoists managed to seized control of the union. Kuenssberg and his managers were not keen on such revolutionaries running the show for their own end. When a union leader was fired, it sparked a bitter three-week strike in 1974.
Looking back, was this the wrong decision to sack the leader?

“It was absolutely the right decision. I was going between Chile and Peru. It was a very bad strike and there was no production. It was a complete stasis. Most of the employees stayed but there was no production,” he says.

A union official made a plea for his members who were without food requesting an advance from the industrial community fund’s dividend. When it was explained that without making money, there was no local funds, the realisation dawned.

“I explained that if we didn’t produce, we didn’t sell and therefore there was no profits. We could not possibly pay a dividend when we were losing lots of money,” he says.

The solution was to get everyone back to work. It was a tense time and even the mill engineer, Hugo Galarza, a former union leader who lived on site, checked on the safety of his wife Sally and their young family each evening.

“I talked to the owners of other indigenous companies and said this was a risk to the whole industry, and they were hugely supportive and that we should not give way to the militants. We were an easy target because we were foreign,” he remembers.

The whole episode was a foretaste of the rise of the Sendero Luminoso, the Shining Path, which started armed conflict against the military forces of the state. As a postscript, Nick and Sally returned in 2002 to a more prosperous Peru for his 60th birthday and were tearfully re-united with a delighted Hugo Galarza and other Coats factory workers who were still employed.
After six years in Peru, he became Latin America director from 1982 and continued his travels around the continents, during the Falklands war. Coats Patons was the first UK companies to extend a hand of reconciliation to Argentina after the war. However, textile technology was changing, making factories more efficient, requiring fewer people and new threads, such as polyester, were gaining ground. His time in Latin America was coming to an end. Robert Laidlaw, the managing director of Coats, wanted Kuenssberg to go to Italy, where he made finance director of the business which included Milan, Luca, where 4,000 people were employed, and southern plants including Foggia, Fraioli and Rieti.

“I was very lucky because I was given the job as finance director but was also responsible for all the subsidiaries. These were various joint ventures with the Italian government’s promotion of industry in the south. It was a top class Italian product.”

The work ethic of the Milanese was fantastic – as good as anywhere across the Coats Patons group – but down south it was a different story where farm labourers and peasants growing their own food were now working in air-conditioned factories.

“These were people who had come out of the olive grove and vineyards into an industrial society. In Foggia, we had a 100% polyester spinning wheel that was going efficient. We had quotas of workers from each village and they were straight off the land. It was a big investment, but when we turned our back the people would open the huge sliding doors to see the fields, causing all the threads started to break because the proper atmospheric conditions were disrupted.”

After the oil shock in 1976, inflation ballooned, sales slumped, so he was forced to cut the work force: a tough call when persuasive local politicians insisted that more locals should be taken on. The Coats Patons’ way was, ‘let the local boss to sort this out’ and Kuenssberg did just that. He returned to Glasgow as the overseas finance director, under Charles Wallace, but desperately wanted to run a business. He feared he might lose his job after speaking his mind at a meeting with the Coats’ threads managing director. Instead, he was given the responsibility for managing the growing portfolio of non-core textile assets. Not one, but multiple businesses.

This industrial portfolio was varied and impressive and included Dynacast, a very clever engineering process that originally produced zips but diversified to make complex zinc, aluminium and magnesium diecast components, with 37 plants in 19 countries; a plastic bottle blowing business for hair products in Hungerford;  Vascutek, a world leader in vascular and cardiovascular technologies, using knitted grafts, based at Inchinnan, and now part of the Terumo group; a seaweed company called Sorbsan, which used calcium alginate for treating wounds and sores, and the needle industries, including knitting pins, and surgical needles for stitching wounds; and a scalpel business in Sheffield.

“This was just fantastic for me. From this bag of bits, I developed what we called the precision engineering division and parts of it did very well. Dynacast was really a fantastic business. Vascutek was amazing too but we couldn’t get passed the FDA in the United States. We sold it to Sulzer for £33 million. Today it’s still a wonderful business.”

In the mid 1980s, Coats Patons was bringing home £20 million a year from its South American businesses and looking to develop companies in the UK making bigger profits, so  marginal businesses were ripe for sell off. Kuenssberg remained with Dynacast as chairman from 1978 until 1991.

“When I left in 1991, Dynacast was doing £125m of sales, with £20m profit, and a 45% return on assets. In April 1999 Coats sold Dynacast to Cinven for £315m. It was then sold to Melrose Resources. I bid for it with Hambros but fell out when the price came to £287m,” he says, and reveals he turned down the offer by the winning bidder to become executive chairman.

“I was a good company man – the corporate workaholic.”

In December 1985, Nick Kuenssberg was elevated to the board of Coats Patons, and a year later it merged to become Coats Viyella, but City investors were confused about the company’s strategy, especially with tougher times in South America. In the wings, was suitor Dawson International.

“We were well-run, much bigger but undervalued by the City. There was this crazy idea that Dawson could run Coats which was complete nonsense.” Nevertheless, it happened and Kuenssberg made the front pages of the Herald and the FT as he was unceremoniously dumped. It still hurts and rankles.

However, many senior business figures in Scotland, softened his blow, placing a lot of faith in his reputation and abilities. The chairman of ScottishPower and Standard Life wanted him to stay on, while the headhunter Douglas Kinnaird suggested he might pursue a portfolio career. Another supporter was Ewan Brown, then working with Sir Angus Grossart at Noble Grossart. It was the boom time of management buy-outs and buy-ins, and Kuenssberg, at 52, spent 12 months working with the like of Hambros, HSBC, Royal Bank of Scotland to find some suitable investment opportunities. Each time he missed out by a million or half a million. Then Ewan Brown phoned to say there was a job to do in the food industry.
"But I don't know anything about that industry,” he protested.

"That doesn't matter, you do know about running successful businesses," replied Brown.

The target was Hall's of Broxburn, the meat producer that hit the news this year as it closed. This was 1996 and the Royal Bank of Scotland wanted to put the loss-making firm into receivership. Around 1,300 jobs were at risk. Kuenssberg’s diligence suggested the business was sound but badly run, and he asked the RBS directors for three weeks to prepare a recovery plan. The bank agreed but insisted he jettison the whole board. Yet Kuenssberg could see there were some talented people, including the sales director who had strong connections with key clients. RBS was steadfast, the whole board would have to go. Kuenssberg went to see rivals Bank of Scotland and found another solution within 24 hours.

“I went to see Gavin Masterton and Ian Robertson at Bank of Scotland. They listened to me and could see my vision. In May 1996, we re-banked with them, looking back this was the halcyon days for the bank. We shocked RBS but with the money we built a £1 million modern slaughterhouse to deliver to customers such as Marks & Spencer.  The big stores were moving to seven-day operations and we had to move to this with a sensible deal with the warehouse workforce. We actually kept 1,300 jobs going from 1996 through to 2013. "

The butchers’ union resisted the changes, so the STUC general-secretary Campbell Christie was called in to help negotiate better terms and keep the peace. Within two years, Hall's was turned around and sold to Freddie Duncan's Grampian Country Food Group, who owned it until 2009 when it was sold to Vion, who ended up closing it down in 2012

“This was important to me because it was my first real job being totally in charge. Ewan was an outstanding observer and friend throughout the whole time," recalls Kuenssberg.

Throughout, he remained on the board of ScottishPower and Standard Life and became an angel investor with the Braveheart syndicate, where he was one of the earliest investors.

In 2000, he became chairman of Iomart, an emerging telecoms company and internet service provider, set up in 1998. He had met the founders, Bill Dobbie and Angus MacSween, through ScottishPower connections, and its spin-out Scottish Telecom. Iomart’s non-executive director Fred Shedden, a lawyer with McGrigor’s, suggested Iomart required a chairman as it proceeded to an AIM flotation, and Kuenssberg took on the role, one which continued until the end of 2008, when Ian Ritchie took over. This gave him an insight into how the Alternative Investment Market could help emerging technology firms, and he steered Amino Technologies, based in Cambridge, onto the market in June 2004.

"Iomart are doing phenomenally well now with their cloud data centres across the UK. I'm still a shareholder, which means a great deal to me," he says.

More recently, he has directed Scott & Fyfe, set up in 1864 as a linen and jute works and part of the Tough family since 1938. The firm is recognised as innovators in glass-fibre reinforced products including its trademark Polymat.

"I took over from the 75-year-old executive chairman, Hamish Tough, who was family, and in 2010 we brought in John Lupton, as chief executive, who has been making a huge difference. We are working with the Glasgow School of Art and with some excellent design graduates from Duncan of Jordanstone in Dundee.”

Meantime, in January 2013, the firm’s 100 employees moved the business into employee ownership, supported by Co-operative Development Scotland, helped by Euan Hall and the specialist consultants, the Baxi Partnership, another of Kuenssberg’s former business interests.

“I think this development is exciting for the company and the employees and allows them to share in the future success. For me, this underscores the values and the opportunity.”

Kuenssberg still packs a great deal into life and while he relished his academic involvement as a visiting professor at Glasgow University, he is an admirer of Jim McDonald, the principal of Strathclyde University, who is focusing his institution on research in science, technological and ties with industry. This has produced some scintillating partnerships, including the introduction of the UK branch of the Fraunhofer, Europe’s largest applied research organisation, in Glasgow. This tallies well for another of Kuenssberg’s interests. He is chairman of mLED, a photonics spin-out from Strathclyde University, that has made three rounds of funding from Braveheart and the Scottish Co-investment Fund, backed by the Scottish Investment Bank. The company is looking for £5 million more in the new year, having raised £1.2 million. This is no novice start-up: it has a team of seasoned opto-electronic experts, including Martin Dawson, of Strathclyde’s Institute of Photonics, and an instrumental figure in persuading the Fraunhofer to come to Scotland, where Dawson is the director. The mLED board includes Dr Richard Laming and Dr Jim Bonar, who both founded Kymata, one of Scotland’s leading opto-electronic companies, while Seonaidh MacDonald, a bigger hitter and ex IBM and Babcock Marine manager, has come as the chief executive.

"We've got something very significant here. Our relationship with the university and the likes of the Fraunhofer is terrific. I would hope that in the case of mLED because there are some very good people in Scotland and the relationships with the institute that if we were to end up being bought as strategic acquisition that the links would remain," he says.

Nick Kuenssberg has plenty to keep him occupied – including an e-learning digital company called Klik2Learn and developed by Ann Attridge - and there is no sign of him slowing down, although he is hankering after a return to Peru to see if he can catch up with some of his factory friends.

Connecting Capital with Communities:

How does Nick Kuenssberg, who took over as chairman in Febraury 2013, plan to change Social Investment Scotland?

“I knew nothing about Social Investment Scotland when I was approached in November last year. People were aware I was doing the employee ownership at Scott & Fyfe. I talked to Alastair Davis, the chief executive, and was very impressed. I liked what I heard and we got on well.”

Since then the board has been refreshed with new appointments in the wings.
“We are taking the whole level of activity up by two divisions. We are moving from the third division to the first division and in the premier league next year.”

He is determined to change the face of social investment in Scotland and persuade pension funds and investment managers that it is indeed a worthwhile asset class that ticks the ethical boxes. In 2012/13, SIS made investments of £5.9 million in nearly 200 projects.  In total, £43 million has been lent with a target of £100 million within next three to five years.

“There is an awful Calvinistic thing in Scotland that if you are working with charities and volunteer, you are OK. If you are using money that might be paying interest, then that’s bad, because interest means super-profit to somebody.”

SIS does loan capital to not-for-profit projects, where the money is paid back up to a ten year period. The bad debt rate is below 5% over a ten-year period.

They are looking at a child care opportunities, community investment projects, such as cafes, and the creation of social investment bonds.

“We want to change the face of lending in social enterprises in Scotland and we are very ambitious. We pay no corporation tax and all our board – who are experienced business people - do it for nothing.”

SIS employs ten people and aims to have 14 by the end of 2014.

“Our motto is connecting capital with communities. The capital is financial, human, social and intellectual,” he says.