Electronics on the up?
18 May 2011
The Office of National Statistics (ONS) has recently confirmed the UK has avoided a double-dip recession with GDP increasing by 0.5% in the first quarter. GDP is estimated now to have returned to the level in the third quarter of 2010. And guess what? The largest contribution to the growth in this quarter was from manufacturing.
According to the CBI, orders from the UK’s small and medium sized factories grew at their fastest rate for 16 years in the three months to April with emerging signs of economic rebalancing.
So why has the purchasing managers’ index (PMI) dropped to 54.6 in May since January’s record high of 61.7 in the steepest fall over such a period for two and half years? Whether or not Britain is too reliant on the weak pound or the global recovery, exports do represent the key ingredient to a sustained growth, with strengthening demand coming from the BRIC nations as well as the US and Europe. As a matter of fact, foreign markets are helping to offset weak domestic consumer demand. On the other side of the Atlantic, for instance, a cheaper US dollar has already helped export industries and there are signs that producers are boosting investment in plants and equipment to benefit from it.
In light of these developments, what’s the picture like for electronics manufacturing? The UK, similar to other Western European countries, is a high labour cost economy and has lost much of its electronics production over the last 20 years. Those OEMs and their associated EMS providers that remain are mainly involved in high value, low volume production of high complexity electronic assembly and this trend will remain.
As a result of this and other factors, UK electronics manufacturing is now very dependent on the medical, industrial and communications sectors and much of the work concentrates upon the design and new production phase of the manufacturing value chain. Intellect is about to publish the State of the Sector report, which will discuss these issues and will offer forecasts from our partner analysts. Members will therefore discover before their competitors how well industry is performing and where growth will come from in 2011. If your company is not a member, watch this space for an update.
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