One of the greatest sectors in UK manufacturing, responsible for 7.6% of output in 2012, is also one of the hardest to describe: the machinery and equipment not elsewhere classifed sector (SIC 28).
Why is it so great?
Here's a couple of stats: Big exports - £28 billion in 2012 (10.9% of manufacturing exports); R&D spending - £970 million in 2011 (7.7% of manufacturing R&D spending).
Why is it so hard to describe?
If you look under the hood of SIC 28 you'll get a few labels chucked at you: the manufacture of 'general purpose machinery' (45% of SIC 28) and 'other general purpose machinery' (28% of SIC 28). Not very helpful.
So what does this sector cover? What doesn't it cover! We've got engines and turbines (except those used in aircraft, vehicles, and cycles), fluid power equipment, pumps, compressors, taps, valves, bearings, gears, ovens, furnaces, lifting equipment, office machinery, non-domestic cooling systems, agricultural and forestry machinery, metal forming machinery, and machines used in metallurgy, food processing, textile production, and paper production.
If I could sum up this sector in one word, that word would be: MACHINES.
How did this sector come through the recession?
The machinery and equipment n.e.c. sector has had a much more strongly cyclical performance than manufacturing as a whole through the recession and recovery cycle i.e. the dips were bigger (output down 26% during 2008/09) but the rebound has been much stronger - 2012 production was 33% above the recession low.
Let's talk about exports
Exporting is a big deal in this sector. The raw number of £28 billion above doesn't tell the full story; 40% of output from SIC 28 is exported and, for all those deficit spotters out there, this sector is in trade surplus! Further, unlike manufacturing as a whole, the sector is actually more concentrated on non-European markets with 62% of exports going outside the EU (up 78% in 2012 from 2000).
But what about the future?
Micro electro-mechanical systems, mechatronics, nanotechnology, friction stir-welding. Yes, those.
Basically we're talking about the intergration of mechanical, electrical, and software engineering, often at a tiny scale to introduce the new technologies of the future. This follows on from the introduction of micro-electronics into the sector in the 1980s revolutionising control systems that previously used moving gears, particularly in machine tools.
Market opportunities look set to build with global machinery output predicted to nearly double by 2025.
And the risks?
Every sector faces risks. The emergence of China as a major player in machinery manufacture, especially since 2000 has to a certain extent stolen some of Japan and the U.S.'s lunch in this sector.
We need to be careful the same doesn't happen to the UK as Chinese companies grow their global market share and move up the value chain into areas where UK companies are strong. SMEs in particular may be squeezed by OEMs seeking to pare back their supply chains to a more manageable number of companies.
Nevertheless, the outlook for the sector in the short term is good, with our current forecasts for over 4% growth in 2014 and 2015.