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

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Are there “tens of thousands” who still don't have their Labour leadership ballot paper?

Word has it that swathes of eligible voters have yet to receive their ballot papers, suggesting there is still all to play for in the Labour leadership contest. But is it true?

Is there still all to play for in the Labour leadership contest?

Some party insiders believe there is, having heard whispers following the bank holiday weekend that “tens of thousands” of eligible voters have yet to receive their ballot papers.

The voting process closes next Thursday (10 September), and today (1 September) is the day the Labour party suggests you get in touch if you haven’t yet been given a chance to vote.

The impression here is that most people allowed to vote – members, registered supporters, and affiliated supporters – should have received their voting code over email, or their election pack in the post, by now, and that it begins to boil down to individual administrative problems if they’ve received neither by this point.

But many are still reporting that they haven’t yet been given a chance to vote. Even Shabana Mahmood MP, shadow chief secretary to the Treasury, still hasn’t received her voting pack, as she writes on the Staggers, warning us not to assume Jeremy Corbyn will win. What’s more, Mahmood and her team have heard anecdotally that there are still “tens of thousands” who have been approved to vote who have yet to receive their ballot papers.

It’s important to remember that Mahmood is an Yvette Cooper supporter, and is using this figure in her piece to argue that there is still all to play for in the leadership race. Also, “tens of thousands” is sufficiently vague; it doesn’t give away whether or not these mystery ballot-lacking voters would really make a difference in an election in which around half a million will be voting.

But there are others in the party who have heard similar figures.

“I know people who haven’t received [their voting details] either,” one Labour political adviser tells me. “That figure [tens of thousands] is probably accurate, but the party is being far from open with us.”

“That’s the number we’ve heard, as of Friday, the bank holiday, and today – apparently it is still that many,” says another.

A source at Labour HQ does not deny that such a high number of people are still unable to vote. They say it’s difficult to work out the exact figures of ballot papers that have yet to be sent out, but reveal that they are still likely to be, “going out in batches over the next two weeks”.

A Labour press office spokesperson confirms that papers are still being sent out, but does not give me a figure: “The process of sending out ballot papers is still under way, and people can vote online right up to the deadline on September 10th.”

The Electoral Reform Services is the independent body administrating the ballot for Labour. They are more sceptical about the “tens of thousands” figure. “Tens of thousands? Nah,” an official at the organisation tells me.

“The vast majority will have been sent an email allowing them to vote, or a pack in one or two days after that. The idea that as many as tens of thousands haven’t seems a little bit strange,” they add. “There were some last-minute membership applications, and there might be a few late postal votes, or a few individuals late to register. [But] everybody should have definitely been sent an email.”

Considering Labour’s own information to voters suggests today (1 September) is the day to begin worrying if you haven’t received your ballot yet, and the body in charge of sending out the ballots denies the figure, these “tens of thousands” are likely to be wishful thinking on the part of those in the party dreading a Corbyn victory.

Anoosh Chakelian is deputy web editor at the New Statesman.