Loan refusal letters and retailers’ rejections frame the walls of the Brompton Bicycle factory, a reminder of the obstacles the firm has overcome to establish itself as the UK’s top bicycle maker, selling 45,000 a year around the world.

Brompton’s success lies partly in the “Made in Britain” tag, and the fact that its bikes fold up lends the label a geeky chic as well as popular practicality.

But beneath the image lies a carefully-constructed business strategy that reveals not only the level of innovation required for UK manufacturers to succeed, but also the number of bumps in the road many of them still face.

Britain’s 1.5-trillion-pound (US$2.5 trillion) economy is among the developed world’s fastest-growing thanks to a recovery in consumer spending last year. But its manufacturing sector, a 10th of gross domestic output, has been hollowed out since its post-war boom. From the world’s No. 2 exporter in 1948, the UK fell to No. 8 in 2007 before the financial crisis and fierce competition from other countries bumped it down further to 11th position in 2012.

The crisis in the eurozone, destination for around half of Britain’s exports, has held back growth in recent years. But homegrown problems such as a lack of innovation on the factory floor and a shortage of staff are longer-term factors at the core of the country’s manufacturing malaise.

“The problem is you can’t get the brains,” Brompton’s Managing Director Will Butler-Adams said. “That’s the problem for the UK. We have the capability — we don’t have the engineers.”

Time-consuming work

When he joined Brompton in 2002, the firm founded by inventor Andrew Ritchie was selling just 6,000 bikes a year, held back by a lack of skilled craftsmen, a disorganized production line and a reluctance to outsource non-essential and time-consuming work.

For the forthright engineering graduate — talked into the job by Brompton Chairman Tim Guinness during a coach journey when they met as strangers — it was clear Brompton’s promise could only be met by tapping overseas markets, restructuring its factory floor and training more specialized staff.

The difficulties experienced by Brompton in finding the right staff — filling one design engineer post took three years and concluded in a protracted visa wrangle to hire a Chinese national — illustrate how a very basic need has become a major headache for UK firms.

A 2013 survey by the Confederation of British Industry found that almost 41 percent of firms were forecasting a shortage of UK workers with requisite science and engineering skills for the next three years.

The sector suffers an image problem, said Verity O’Keefe, policy adviser at manufacturers lobby group EEF.

“There’s a perception issue. Young people perceive it to be about blue overalls, working on greasy engines and actually it’s a lot more than that,” she said, adding that students are also rejecting engineering apprenticeships in favor of careers in higher-paid sectors such as financial services.

The shortage has been exacerbated by a government drive to cut net migration to below 100,000 per year by 2015.

This tightening of visa rules — including scrapping a scheme allowing British-educated foreign students to work in the country for up to two years without a sponsor — has reduced the number of non-EU migrants entering Britain.

While Brompton has solved some visa problems by appealing directly to the government, it has also worked around the issue by investing in staff training — building a workforce of homegrown specialist engineering craftspeople.

“Foreign students are a good thing, but it can’t be the only thing. We need committed British talent, people who are going to be here for their entire career to support seismic change in the British economy,” Butler-Adams said.

Hugh Jackman a fan

Brompton’s search for staff has got less difficult as its brand has got trendier, attracting fans such as director Guy Ritchie and actor Hugh Jackman.

“The majority of small engineering businesses are doing small, clever, innovative things but they are not glamorous, not in the public eye. They won’t have the same advantages that we have,” Butler-Adams said.

Brompton assembles each of its bikes — retail from about 800 pounds — from 1,200 parts in a tiny west London factory.

It’s a scene of organization and efficiency where uniformed staff work alongside machines in areas designed for optimum production. Tasks include soldering frames and assembling bike parts, using state-of-the-art, bespoke robotics that are also designed to help guard Brompton’s design from copycats.

“We’ve been investing heavily in ... really producing good, efficient manufacturing processes,” says the 39-year-old. “We outsourced the stuff that was non-core, but the stuff that was core, we lavish love and attention and engineering on.”

That investment, he says, is now helping the firm compete with rivals that have not developed their production processes but farmed work out to manufacturers in India and China in order to save money, only to be hit by a rise in staff and production costs as those countries’ economic growth took off.

Brompton, which makes more than 70 percent of its sales from 43 overseas markets, is now looking to win customers from California-based Dahon and Taiwan-headquartered Tern, which make their folding bikes in Asia on a mass scale. It is also chasing export sales in many other new markets.

The British government gives companies help to boost exports, providing market research and hosting events at embassies to meet potential partners.

But British politicians think it could do more. A recent report by the Public Accounts Committee found the UK was not performing as well as Germany, France and Italy, and could miss its target of doubling the value of exports to an annual 1 trillion pounds by 2020.

However, manufacturers could do more themselves, and shouldn’t underestimate the potential for their product, says Butler-Adams, who spent four days cycling around Shanghai to test how bike-friendly the city was before setting up a new store there. He also plans to fly to Turkey and the UAE this year to find new distributors.

“If you can just get businesses to take time out and think, the market’s there. People love British brands.”

In Japan, Brompton’s biggest market outside the UK, Koji Uezawa, a bikeshop worker in downtown Tokyo, agrees.

Brompton is a big hit with middle-aged commuters there, Uezawa says. “There are other folding bikes, but this one has a nice squarish shape... They fold up the smallest and people think they’re kind of cute.”