Tuesday, August 4, 2020

Booming electronics sector fuelling UK manufacturing growth

The UK electronics sector experienced the fastest growth of any manufacturing sector in 2018, according to a new report by Santander and Make UK, the manufacturers’ organisation.

Despite representing less than 5% of UK manufacturing output, the sector generated £19.4 billion in turnover and £8.4 billion in gross value added (GVA) in 2017.

After a period of decline that started in the early 2000s, the sector experienced a major rebound in growth in 2017 and 2018: up 4.4% and 12.4% respectively.

Paul Brooks, Head of UK Manufacturing at Santander UK, said: “The UK electronics sector continues to punch above its weight and, with the fast growth in technology, is well placed to cement itself as a core manufacturing sector.

“Increased automation and new technologies are linked to the success, but the sector needs to remain focused on growth, being agile and developing cutting-edge products to drive increasingly powerful and smart digital technologies.

“Santander is committed to supporting UK electronics firms as they look to invest for growth and capitalise on export opportunities in markets such as Asia.”

The report warns that despite its strengthening fundamentals, there is sustained competition from overseas firms, particularly from China.

The sector also continues to import much more than it exports: the sector imports 50% of supply and exports over a quarter (26%) of output, making it the most import intensive in UK manufacturing. In 2017, the electronics trade deficit stood at £22.6 billion.

To counter market risks, UK electronics firms should target opportunities such as 5G and digital medicines as well as latent export demand from Asia and the Middle East.

The UK will roll out 5G in major cities in 2019, for instance, with full implementation by the end of 2020. It is estimated that download speeds will move from the 300 Mbit/s to 10Gbit/s – a 33 times improvement.

In terms of exports, while market penetration in “technology rich” Europe and North America is high for consumer electronics, developing countries represent a relatively untapped market for UK manufacturers. Asia now accounts for 20% of UK electronics exports, up from 14% of 2007, and the top 10 high-growth export markets are all located in the region.

Seamus Nevin, Chief Economist at Make UK, said: “Competition for global high-tech supremacy is increasing but these results show that UK manufacturers are among the world leaders.

“The sector has experienced the fastest growth of any manufacturing sector in 2018 and contributed a disproportionately large amount to UK GDP.

“This great British success story is well poised to continue to prosper with even bigger opportunities for growth coming from the burgeoning market for smarter devices, the rise of digital medicines and the roll-out of 5G.

“But the sector will need support from Government and finance if it is to capitalise on the export opportunities coming from Asia and elsewhere.”

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