28 October 2009

Outlook 2010: British electronics finding its niche

Where are the opportunities for UK electronics and what are the challenges associated with exploiting them?

The UK electronics industry has faced enormous upheaval in the recent past. It is a familiar story that high volume, low value work has largely moved offshore, but what is the current state of the UK's electronics industry? When we look at the sector, what do we see?

We cannot discuss the challenges that the UK electronics sector will face next year without reference to the recession. Economically, these have been, and will continue to be, extremely trying times. Although the industry has not been as badly hit as it might have been, it will nonetheless experience negative growth – and the first six months of 2009 were especially hard.

However, the future looks brighter and forecasts suggest the industry could see growth through 2011 and 2012. This, in itself, presents challenges. In the short term, it is difficult to predict what next year will look like. While the drop off is likely to be much smaller than this year, overall sector growth is unlikely.

We can see the strong areas of the sector at the moment – broadly speaking, defence and security, medical, industrial and wireless. But what impact are emerging technologies going to have? How can the UK electronics sector leverage the investment going into low carbon technologies, like wind turbines, to best effect? Not only do we need to identify the most fruitful opportunities within emerging technologies, but planning is also a major concern as demand begins to pick up.

With the economic pressures companies have been under this year, it is hard for them to spare the resource to identify potential new growth areas, especially as there are risks involved, but this is vital if the industry is to thrive in the long term.

Neither can we look at the challenges of the coming year without considering where we are starting from. The signs are there that the industry is growing in self awareness and galvanising its message to positive effect.

A constant concern of those within the electronics industry has been the fragmentation of its voice. But, in some ways, when an industry is evolving it is inevitably hard to articulate its needs and priorities coherently – and UK electronics has been through a lot of changes in recent times.

The latest State of the Sector report from Intellect shows that, from 2000 to 2008, the value of electronics equipment production declined by nearly 60%. Although the industry is still declining, with a drop of 11.8% forecast for this year, it will slowly become more settled; the decline will level off and predictions of moderate growth around 1.4% due as soon as 2011. This is likely to help facilitate the emergence of a greater unity and stability of message from the sector.

As a trade association, Intellect has found the key challenges the industry is facing can be confidently discerned – coping with the recession, leveraging existing growth areas and identifying new ones, tackling skills shortages, addressing an often negative brand within the media and schools, dealing with ever increasing regulation and articulating the benefits of using UK electronics companies.

The degree of unity amongst the voices representing the industry is an indication of how much agreement there is around these challenges. For example, the UK Electronics Alliance provides a forum for industry representatives to come together and address strategic priorities in a consistent way. Similarly, initiatives such as STEMNET and Manufacturing Insight, and the synergies between them relating to education and the media, are encouraging.

Perception is a big issue for British electronics. With the changing nature of the sector there are new opportunities. The high value products being developed and produced in the UK should have a fresh appeal, as the recent British Engineering Excellence Awards attest. These Awards have the potential to reinvigorate the public brand of electronics. And this makes it more important than ever that we communicate well as a sector, in order that people understand what electronics in the UK looks like.
This is true, both with regard to the way to the way in which electronics is discussed – or not – in the mainstream media, and with how electronics – and, more broadly, the school subjects which underpin it – is understood by those at school.

Electronics and technology underpin much of what our country actually does; it provides a vital infrastructure. There can be no doubt that this message is beginning to get through, even if it is still expressed in somewhat muted terms. Without getting into a discussion of the merits of the policy, that fact that the Conservative Party chose to announce its technical colleges' initiative on the first day of its recent annual conference speaks volumes about its understanding of the need to try and tackle this issue.

Comments by Microsoft's ceo Steve Ballmer at the CBI's annual lecture also indicate that the message is beginning to get through. He said: "Whether as a company, industry or society, we have to focus on developing the talent we're going to need. That probably means more investment in education, particularly in science, technology, engineering and maths. These are areas in which the UK, the US, the developed economies are not investing in the same ways as emerging economies."
And the Bloodhound programme, designed to engage school children in hands on science, is another example of the kind of approach increasingly being taken by innovative educators.

Although the voices are less disparate than they have been in the past, there is still a need to ensure they grow in influence. Politicians should not be able to get away with rhetoric; the UK has a world class electronics industry and it needs more recognition and support from Government.
As the largest technology trade association, Intellect will keep working to try and help businesses and the sector as a whole meet these challenges. As a sector, the more we galvanise our messages and priorities, the more strength we will have.

British electronics is increasingly finding its niche in the global electronics space. We are seeing this in the consistent messages coming from the sector and in some of the support being offered through the Department of Business, Innovation and Skills. The degree to which some of the key longer term priorities around skills are being taken up politically is also encouraging. But there are still challenges. Next year is difficult to forecast, but the way in which the industry has weathered 2009 should leave us hopeful that, whatever happens, we have the ability to meet the challenges ahead.


Intellect is the UK trade association for the IT, telecoms and electronics industries. Its members account, who account for more than 80% of these markets, include blue chip multinationals as well as early stage technology companies. Together, these industries generate around 10% of UK GDP and 15% of UK trade. Intellect provides a collective voice for its members and drives connections with government and business to create a commercial environment in which they can thrive. As the hub for this community, Intellect is able to draw upon a wealth of experience and expertise to ensure that our members are best placed to tackle challenges now and in the future.

Author
Ruth Porter, programme manager, Intellect

Supporting Information

Websites
http://www.intellectuk.org

Companies
Intellect

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