Short circuiting: the Government is failing to recognise the importance of the electronics industry

Civitas' Stephen Clarke argues that the days of British manufacturing are unfairly consigned to the past.

Last week, in response to higher than expected borrowing figures, George Osborne launched a "coordinated push for growth" across Whitehall. In this push the Chancellor and the Government would do well to take a broader look at the British economy.

Before the financial crisis a political view that we do not make things in Britain any more had become disturbingly common. The official line was that we, as an advanced nation, had become a "knowledge economy" where we conceived and designed things that less intelligent people (and countries) would make.

This dangerous fallacy has now been exposed and there is an acceptance that Britain does and should produce and manufacture things. The Government has trumpeted success in a few manufacturing sectors; aerospace, the automotive industry and the pharmaceutical sector are all ministerial darlings. However Britain’s prowess goes beyond these.

The British electronics industry does not have a very large media profile yet it employs more people, pays those people more and produces more British profits than the aerospace or automotive sectors. According to official statistics, in 2010 the electronics industry employed over 200,000 people, generated a gross value added (GVA) of £13.8bn and a GVA per worker of £68,000. In contrast the automotive sector employed around 120,000 people in manufacturing and generated a GVA per worker of £45,000. The aerospace sector generated a GVA per employee of £54,000.

GVA is an important measure because it indicates how much value has been created by an industry and strips out the value of goods that an industry has consumed or transformed. GVA embodies the adage: "revenue is vanity. . . margin is sanity. . . cash is king". Profit is generated by the value a firm or an industry creates not the value it simply passes on.

The electronics industry creates a lot of value because it produces complex products for niche markets with relatively high margins. The UK stopped producing consumer electronics en masse over a decade ago and since then the industry has transformed itself. The UK is the 5th largest producer of control & instrumentation electronics, the 9th largest producer of medical electronics and the 8th largest producer of radio communication electronics. In addition, Britain is the leading designer of microchips in Europe.

Given such success one could be forgiven for thinking that it is best for the Government to continue to leave the sector to it. Unfortunately the industry faces some serious challenges, with its ability to respond to them hamstrung thanks to years of governmental neglect.

Electronics is an immensely competitive industry. Along with the technology leaders, Japan and America, countries previously specialising in low value, high volume goods, such as China, are increasingly entering the high-value markets in which the UK currently operates. As a result the British industry’s future is unclear; leading industry analysts Reed Electronics Research predict growth of only 5 per cent in the next three years.

The Government cannot afford to sit idly by and let another important British manufacturing sector slide into mediocrity. More needs to be done to stimulate Britain’s venture capital market and the current myriad of public venture capital funds should be replaced with a handful of larger public-private investment funds. More British youngsters need to be encouraged to study Electronic and Electrical Engineering and should be able to afford to do so. Most importantly the Government needs to be ready to support manufacturing: Britain may have world-class electronics designers but without greater investment in manufacturing design jobs will continue to relocate to be near production.

Britain’s politicians were almost alone in swallowing the "knowledge economy" myth. Other countries were far less blasé about the loss of productive capacity. In 2004 the President’s Council of Advisors on Science and Technology advised President George Bush on the future of the American electronics industry. They told him that "design, product development and process evolution all benefit from proximity to manufacturing". Clearly he and other American politicians were listening; the US Government has continued to support advanced microchip production, recently investing $1.4bn in a new microchip plant near New York.

Osborne and his colleagues can learn from this. Specifically: electronics form the basis of a successful industrial economy and should be supported. More generally: the idea of the "knowledge economy" has been partially jettisoned, what is now needed is a broader understanding of what makes a "productive economy".

Selling Circuits Short: Improving the prospects of the British electronics industry by Stephen L. Clarke and Georgia Plank was released yesterday by Civitas. It is available on PDF and Amazon Kindle.

A Sony PSP, the wireless chip for which comes from ARM in Cambridge. Photograph: Getty Images

Selling Circuits Short: Improving the prospects of the British electronics industry by Stephen L. Clarke and Georgia Plank was released yesterday by Civitas. It is available on PDF and Amazon Kindle

Photo: Getty
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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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