Front End I Electronic Components Supply Network
A solid performance for UK/Ireland electronic components markets
The dramatic political and economic events of recent weeks in the UK have been more reminiscent of an unfolding classical opera by Wagner or Mozart than the mundane business-as-usual scenarios we are all used to working within. However, as the dust begins to settle, organisations are starting to review their performance in the first half of the year, compare their performance with their peers in the market other industry players, and refocus their operations for growth accordingly as they progress into the second half of the year. Adam Fletcher, ecsn chairman, finds out more
I Overture
n December 2015 ecsn released its consolidated Authorised Distributor (afdec) members' Annual Forecast for the UK and Ireland Electronic Components Market. The forecast predicted a likely sales growth outcome in the range (2 per cent)-to-2 per cent for 2016, with a mid-point of 0 per cent i.e. a 'flat’ or very low growth year. Authorised distributors predicted that
sales revenues in the first half of the year would finish in the range (3 per cent)-to-0 per cent i.e. a flat or declining, but expressed some confidence that growth would return in H2 2016. In the event, the actual first half outcome of 1.8 per cent sales revenue growth was significantly better than expected. See graphic: DTAM by Quarter. Admittedly this growth is fairly low for the electronic components market but it should be remembered that it is significantly better than many other sectors in the UK economy.
Act 1: Forecasts
ecsn's afdec members have a good track record of accurately forecasting their market and have only once had to issue a forecast mid-year, and that was only because of a truly exceptional event. It's apparent that Authorised Distributors don’t believe the turmoil surrounding the Brexit referendum outcome will disrupt the UK and Ireland electronic components market sufficiently to warrant a revision of the 2016 forecast they delivered at the end of 2015. However, that doesn’t mean that they do not have some concerns about the way the market will react in the second half of this year, but on balance they don't believe the outcome will significantly impact the full year result. HM Treasury's post-Brexit poll of 26 eminent independent forecasting organisations conducted in July 2016 predicted UK GDP growth at an average of a little over 1.6 per cent, a sad decline of (0.6 per cent) from their January forecast. See graphic: GDP Growth (per
interesting to note the individual modelling of the UK economy by these independent forecasters has resulted in a wide spread or range of opinions. That said, it's apparent that the majority of these forecasting organisations do believe that the UK economy will continue to grow into 2017.
This table shows the percentage change in value by quarter of the UK and Ireland Distributor Total Available Market (DTAM) relative to the same quarter in the previous year. It shows a period of growth in 2011, moving to decline in 2012, recovering slightly in 2013 followed by a decline in 2014 and 2015 with a recovery in Q2 2016. The red columns shows ecsn’s forecast for the second half of the current year in the range of (2 per cent)-to-4 per cent in Q3 and 1 per cent-to-4 per cent in Q4.
14 September 2016 Components in Electronics
Act 2: UK Industrial Output The latest Industrial Output data released by the Office For National Statistics (OFNS) in Q2 2016 gives a better sense of the underlying trend in what is often volatile monthly data. OFNS figures show that UK industrial output surged by 2.1 per cent in the three months to June 2016, in line with the estimate included in the preliminary gross domestic product data the organisation issued last month. This is the biggest gain for a calendar quarter since Q3 1999. These figures suggest that the 1H
2016 results achieved by ecsn Authorised Distributor members are very much in-line with UK GDP and the
that there is very little they can do to offset this and will simply have to continue to intelligently work through the process.
Finale
My best 'guesstimate' based on my many conversations across the electronic components industry is that sales revenue growth for the UK and Ireland electronic components markets in the second half of 2016 will come out in the range 1 per cent-to-2 per cent, driven predominantly by the third quarter performance, as history shows that the market cools rapidly each year as we progress into the final quarter. But like all good operas we must not close the curtain on our 2016 performance ‘till the fat lady sings...” We will not know the outcome for the full year until the close of business on the 30th December, but can we at least prepare to deliver a standing ovation?
www.ecsn-uk.org www.cieonline.co.uk
cent) 2016. Contrast this information with the predictions the same forecasting organisations came up with for next year and published by HM Treasury at the same time. See graphic: GDP Growth (per cent) 2017.
This chart shows lower consensus GDP growth in 2017 of 0.8 per cent. But it’s
country's manufacturing output, both of which have actually been performing reasonably well of late. Whilst the current fluctuation in the exchange rate of £sterling to other important base currencies - particularly the US$ and the € - remains a cause for concern, ecsn members and their customers recognise
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