Welcome to Sector Friday! The featuring industry of this week includes all of the following:
- Electricity distribution and control apparatus
- Insulated electric cable
- Wiring devices
Yes, that's right, it is the ELECTRICAL EQUIPMENT! In simple terms, this sector is all about machines powered by or generating electricity. Expanding on the list above, this sector covers electric motors, generators and transformers (33%), electric lighting equipment (22%), other electrical equipment (21%), as well as domestic appliances (10%).
Life is, of course, full of surprises. The vast spectrum of equipment that it covers can be easily confused with the Electronics and Machinery sectors. Some such examples are:
- Lead acid batteries
- Optical fibres and cables
- Ultrasonic cleaning machines
- Turbine (for electricity generation)
This sector really is the core of our everyday life!
A quick glance of some key stats:
- The UK produces approximately 2.1% of world production of electrical equipment, with significant production in the North East, Wales and the South West.
- Output growth was 11.1% in 2012, the highest in manufatcuring.
- Around 48% of output goes back into the electric power generation sector, electrical equipment manufacturers, and computer, electronic and optical manufacturers as intermediate consumption or investment goods.
- A big R&D spender: £509mn in 2011, equivalent to 4.1% of total manufacturing R&D spending.
- It currently employs over 89,000 people across 2951 firms, and there was 9.54% growth in employment in 2011.
- Capital spend accounts for 2.1% of manufacturing, but big annual growth in number of enterprises between 2010-2011: 42%.
What about trade and exports?
In 2012, the sector contributed 3.9% of manufacturing exports (approx. £10bn). 26% of output is exported, and the popular destinations are EU (Germany, France and Italy), Asia (Singapore, Hong Kong and Japan), and North America (Canada and US).
However, the sector is in prolonged trade deficit. Over the years, UK lost market share to China and North America, now the two strongest performers in the industry. In 2011, the sectoral deficit was 0.1% of UK GDP. In the electrical power generation sector, UK is lagging behind France and significantly behind Germany. The UK has a low market share in the BRICs, and its export levels are far behind both Germany and Japan which also export electrical equipment to these economies.
So, where is our battlefield?
The sector is heavily regulated by environmental and safety regulations and European Commission Directives, such as WEEE and ATEX. In complying with WEEE, the EU directive governing disposal of electrical and electronic equipment, UK became the world's first nation to recycle any electrical products in 2009. At present, both components and casing are being recycled into new electrical products. Recycling is an important opportunity for the UK electrical equipment sector and an important export for the UK.
Environmental regulations also pave the way for innovative solutions. At present, the sector encompasses a large range of products and industry players tend to focus on either specific products (e.g. generators) or specific market segments (e.g. the oil and gas market). Take lighting equipment as an example- to save energy and improve quality and in power generation to develop “cleaner and more sustainable” energy sources and to reduce carbon emissions.
However don't overlook……
The sector is capital intensive and investments tend to be very large and, therefore, influenced by economic uncertainty. Good news is the UK economy seems to be picking up in 2013, with growth in the first two quarters.
It is relatively high cost compared with manufacturers located in countries where labour and material costs are lower, and persistent strong competition from imports in most market segments.
The ageing workforce in the sector is a key concern for many employers and there is a need to replace skilled and experienced workers approaching retirement age.