Reasons to be cheerful
26 January 2010
Is the road ahead now clear of obstacles for the UK’s electronics industry?
The road is never clear of obstacles! There is always some reason, political or economic, that means that life is never going to be straightforward. Visibility has been one of the major problems for so many companies over the past 18 months – those obstacles are so much easier to deal with when they can be predicted, but companies frequently have found themselves not knowing whether the next month is going to be dreadful or excellent.
The first bit of good news of course is that we in the UK are catching up with all of the rest of the leading economies by coming out of recession. It might only be growth of 0.1% (covering the last three months of last year), but it a symbolic boost to the UK’s businesses. This growth is so slender that when figures are revised in a month’s time it could easily return to zero growth or below, but it could just as easily be revised upwards to show stronger growth. The initial figure (like the one brought out this week) is based on reports from around 40% of the UK’s businesses. The two subsequent revisions include more companies, but the initial report has been within 0.1% of the final figure around 80% of the time over recent years.
We can assume then that we are on the road to recovery. Other indicators, like increased mortgage approvals, a slight reduction in unemployment and even a surge in inflation (for a host of different reasons), all suggest that the economy is on the move, even if it is still a rather reluctant and lumbering move!
There have also been further indications that some manufacturing companies are wearying of having outsourced operations abroad and particularly in China. I have always believed that the strength of both design and manufacturing sides of the electronics industry to some extent goes hand in hand. The gradual draining away of the UK’s electronics manufacturing base over the last decade has therefore, in my opinion, had a detrimental effect on the UK’s electronics industry, while benefiting the countries that it went to, China being the obvious one. Now, however, China’s increasingly skilled workforce is becoming more expensive and so manufacturing there is not as cheap as it once was. Also I think that a global recovery is going to spark the appetites of the hyenas in the financial sector who will be looking to gamble more of our money on the markets. One traditional consequence of this is more movement in the exchange rate and, at a time when the pound is growing steadily weaker, electronics companies are beginning to see an advantage of domestic manufacturing in that it removes some of the instability in product costs.
Add in the potential of some of our national areas of expertise – medical, automotive, military, aerospace, broadcast and others – which will start to be realised as the economy takes an upward turn, and the future for the electronics industry in the UK is starting to look rosier than it has probably felt for some time. No question that individuals, companies and the country will still find obstacles to walk into, but on the whole the outlook is for a clearing road ahead.
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