Front End I Electronic Components Supply Network
Can the UK recover its ‘lost’ electronic
manufacturing output?
The latest figures showing an increase in UK manufacturing output are very welcome news but the UK still has a long way to go to get back to pre- recession levels, let alone the high point we enjoyed in the 1980s. Adam Fletcher, however, is optimistic that we’ll get there!
A
fter many years of neglect while our political leaders focused their attention on the UK’s service and
financial sector, UK manufacturing has enjoyed renewed government interest post the 2010 general election. It’d be great to think that politicians suddenly ‘saw the light’ and woke up to the fact that without the huge ‘added value’ provided by the UK manufacturing sector it would be difficult to achieve a successful UK economic outcome, but dream on!
It was the severe slowdown in the service and financial sector that started in June 2008 coupled with reduced investment and the need to radically downsize the direct government workforce (civil servants and council employees) that focused politicians’ attention. They urgently needed to find ways to encourage private and institutionally-owned organisations to increase their investment in manufacturing to approximately seven times the historical average. The fact that that the manufacturing sector is geographically dispersed across the UK and less biased towards London and the South East was seen as an additional political advantage. But as is often the case things didn’t go quite to plan: whilst there was some increase in direct investment in the manufacturing sector, stakeholders continued to put the larger proportion of their funds into the service sector, preferring to back companies that provided ‘contracted out’ services to government departments for profit, often using employees the government itself had made redundant. Employment in the UK therefore did not decline at the same rate as manufacturing output, which simply fell off a cliff! It didn’t rally until 2011, and then only slightly and has
8 October 2013
remained stuck at about two thirds below the 2008 peak.
After the ‘dot com bubble’ burst Whilst there is no doubt that manufacturers in the electronic systems markets have struggled in the current recession, the big shake out in our industry occurred in 2001 when the ‘dot com bubble’ burst, a situation exacerbated by a change in the primary market driver as global electronic markets transitioned from ‘data communications’ to ‘consumer’ products.
retrenchment). Some took advantage of generous subsidies offered as an incentive to relocate their production to other countries where lower corporate tax structures applied (Ireland). The UK did continue to be successful in some areas - ARM, Imagination Technologies and Dyson being great examples – but these companies didn’t employ anything like the number of people that were previously involved in electronics manufacturing. Some interesting projects - notably Plastic Logic – successfully made the transition from academia into production, but despite being highlighted as deserving state investment, were forced to seek funding from outside the UK. Unlike for instance the automotive,
aerospace and defence industries, the UK electronic systems industry is very diverse and had no single strong industry representation and as a result has for several decades, failed to influence
manufacturing base
with a wide skills range but global defence spending cuts have impacted their revenue and may force them to retrench. But it is not all bad news! Whilst many people involved in UK electronics manufacturing were displaced, the majority - particularly those with relevant skills – were able to find other employment opportunities as electronics became pervasive across so many other sectors. The much more balanced UK electronic systems market that emerged has few dominant players or markets but has a stronger base of industrial, medical, automotive, aerospace and defence employers who are supported by both a strong independent contract design community and a healthy contract electronic manufacturing (CEM) / electronic manufacturing services (EMS) base. This along with a strong academic engineering community and continual in-service training has enabled the UK to go a long way towards halting the decline and re-establish a strong, skilled employment position. Another benefit is that weak demand in Europe is forcing UK-based organisations to be more active in export markets, where the UK government agencies genuinely appear to be highly supportive.
Whilst the UK economy had a strong position in the data communications markets with Nortel/STC, GPT/Marconi etc. employing significant numbers of highly skilled staff, it was weak in the consumer segment, which then as now was dominated by Asian-based manufacturers. The UK lost many of its largest employers in the electronic systems markets. Some were acquired by competitors while others saw investment pulled back into the parent company’s home country (Japanese
Components in Electronics
government strategy. Beyond limited R&D Tax Credits and some large well funded EU framework projects there has been little strategic investment in electronic manufacturing in the UK. The significant loss of core functional skills allied to in- house manufacturing particularly in industrial engineering, test development and quality systems has never been made up. Defence equipment manufacturers whilst struggling to control costs have attempted to maintain a strong specialised
Making up for the ‘lost’ manufacturing output in the UK to pre 2009 levels is possible. The capacity is still there, but it needs the catalyst of more demand, particularly from European customers where demand remains weak. It took the UK well over two decades to lose its underlying manufacturing capability and it will probably take even longer to rebuild, re- skill, and reinvest in order to recover it. But I believe we do have the will and the infrastructure to achieve this.
ECSN |
www.ecsn-uk.org Adam Fletcher is Chairman of Afdec/ECSN
www.cieonline.co.uk
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