High Technology Industry In Lancashire
2006
February 2008
Introduction
Conventional wisdom holds that high technology industry is a "good thing". Industries that are technology-intensive tend to be more innovative and productive and pay higher wages and salaries to their employees. There is intense competition to encourage and to attract such industries under the assumption that they can be an engine for economic growth, serving by example and diffusion to raise performance levels across all sectors of industry. The share of high tech employment in the economy is used by the government as one of their "competitiveness" indicators and the creation of an environment in which high technology industry and companies can develop and prosper is an important national and regional economic development policy instrument.
A Definition
| Sector | SIC 2003 |
|---|---|
| (1) High Tech Industries | |
| Pharmaceuticals | 24.4 |
| Office Machinery and Computers | 30.0 |
| Electronics and Communications Equipment | 32.0 |
| Aerospace | 35.3 |
| (2) Medium High Tech Industries | |
| Chemicals | 24.0 (excluding 24.4) |
| Non-Electrical Machinery | 29.0 |
| Electrical Machinery | 31.0 |
| Scientific Instruments | 33.0 |
| Motor Vehicles | 34.0 |
| Other Transport Equipment | 35.2, 35.4, 35.5 |
There is no accepted and single definition of what is meant by high technology industry but the term is generally applied to those scientific fields and the industries based on them where there is a fast rate of innovation leading to the rapid introduction of new products and processes. One working definition of high technology used by the ONS in terms of the Standard Industrial Classification (SIC,2003) codes is derived from the OECD,1997. It is based on the research and development intensity of industry in relation to turnover, supported by indicators of the proportion of scientists, engineers and technicians employed. The definition is in two parts covering so-called "high tech" and "medium high tech" and encompasses those sectors shown in Table 1.
Whilst of value, it should however be recognised that this classification represents only a broad-brush indicator of high technology industries. Such sectors can contain "old economy" companies as well as those more obviously knowledge and technology-based. Equally, other sectors, not regarded as high tech in terms of their general characteristics can also include innovative and leading-edge individual companies of which there are numerous examples in Lancashire in such fields as nuclear fuels and advanced engineering services. The classification also excludes many service companies widely regarded as being of a high tech nature such as those conducting research and development or providing advanced design, computer and technical services and which have grown in importance as manufacturing companies have sought to out-source and buy-in such expertise. Also, the classification, being largely product-based, takes no account of the many (often low technology product) industries that embody sophisticated technology in their production processes (e.g. as in parts of the food processing industry). Finally, the employment measure as used in this analysis, is not necessarily an appropriate guide to the importance of such industry which is often capital or skill rather than purely labour intensive.
High and Medium High Technology Industry in Lancashire
Not withstanding the above reservations, in terms of the number of people employed in them, Lancashire may be seen to have a fair representation in both high and medium high tech industries (Table 2). In 2006 nearly 40,000 people or 6.5% of all Lancashire's employee jobs were within these sectors compared with 3.9% in Great Britain and 4.4% in the North West Region. The weighting towards Lancashire was even greater in terms of the high tech component alone with a local 3.1% share against 0.9% in GB.
Restricting the comparison to employment in manufacturing alone within which Lancashire has above-average representation, the high tech employee jobs comprised 19.1%, or nearly one in five of the sub-region's manufacturing workforce – more than double the 8.1% share in Great Britain at large or 9.8% in the North West Region. In these simple structural terms, Lancashire is probably one of the most important centres of high technology industry outside the south of England.
| Sector | Employee Jobs | |||||
|---|---|---|---|---|---|---|
| Lancashire | North West | Great Britain | ||||
| No. | % | No. | % | No. | % | |
| Pharmaceuticals | 800 | 0.1 | 12,100 | 0.4 | 59,300 | 0.2 |
| Office Machinery and Computers | 600 | 0.1 | 1,500 | 0.1 | 22,200 | 0.1 |
| Electronics and Communications | 700 | 0.1 | 3,800 | 0.1 | 58,600 | 0.2 |
| Aerospace | 16,700 | 2.7 | 19,700 | 0.7 | 92,100 | 0.4 |
| Total "High Tech" | 18,900 | 3.1 | 37,100 | 1.2 | 232,300 | 0.9 |
| Chemicals | 5,700 | 0.9 | 27,500 | 0.9 | 129,400 | 0.5 |
| Non-Electrical Machinery | 6,800 | 1.1 | 27,800 | 0.9 | 263,800 | 1.0 |
| Electrical Machinery | 2,200 | 0.4 | 11,500 | 0.4 | 111,900 | 0.4 |
| Scientific Instruments | 1,500 | 0.2 | 9,400 | 0.3 | 106,600 | 0.4 |
| Motor Vehicles | 4,400 | 0.7 | 18,800 | 0.6 | 161,100 | 0.6 |
| Other Transport Equipment | 200 | 0.1 | 1,100 | 0.1 | 14,800 | 0.1 |
| Total "Medium High Tech" | 20,800 | 3.4 | 96,200 | 3.2 | 787,600 | 3.0 |
| Total High and Medium High Tech | 39,700 | 6.5 | 133,300 | 4.4 | 1,019,900 | 3.9 |
| Source ONS - Annual Business Inquiry, 2006 | ||||||
As shown in Table 2, the above-average share of high tech employment is due to the dominating presence of aerospace manufacture in the sub-region. This industry accounts for 89% of all local high tech jobs (against 40% in GB at large) or 42% of the "high tech" and "medium high tech" jobs combined. In practice, the local importance of this particular sector in high tech industry is certainly even greater than these statistics imply. High levels of out-sourcing by both the aerospace primes and their first-tier suppliers supports a large "hidden aerospace" sector in the County of often sophisticated advanced engineering services, design and testing and information technologies not themselves officially classified to aerospace but which are effectively an integral part of the sector. High tech industries other than aerospace have a relatively modest presence in Lancashire compared to the nation. Amongst the medium high tech sectors above-average local representation is to be found in only chemicals and non-electrical machinery.
As shown in Table 2, the above-average share of high tech employment is due to the dominating presence of aerospace manufacture in the sub-region. This industry accounts for 88% of all local high tech jobs (against 38% in GB at large) or 40% of the "high tech" and "medium high tech" jobs combined. In practice, the local importance of this particular sector in high tech industry is certainly even greater than these statistics imply. High levels of out-sourcing by both the aerospace primes and their first-tier suppliers supports a large "hidden aerospace" sector in the County of often sophisticated advanced engineering services, design and testing and information technologies not themselves officially classified to aerospace but which are effectively an integral part of the sector. High tech industries other than aerospace have a relatively modest presence in Lancashire compared to the nation. Amongst the medium high tech sectors above-average local representation is to be found in only chemicals and motor vehicles.
High Technology Industry Employment by District
The distribution of employment in the high and medium high tech sectors across the sub-region expressed in terms of their shares of total employment in each area is illustrated in Figure 1 and Table 3. This spread ranges from less than 2% of employee jobs in Blackpool, Lancaster and Preston to 16% in Ribble Valley and nearly 28% in Fylde, the latter two areas being recognised centres of the UK aerospace industry. Aerospace is also largely responsible for the above-average concentration of the "high tech" component in Pendle and to a lesser extent in Burnley. The "high tech" component in Blackburn is largely attributable to the electronics/communications/computer equipment sectors.
| Employee Jobs | |||
| High Tech | Medium High Tech | Total High and Medium High Tech | |
| North Lancashire | 11,900 | 3,500 | 15,400 |
|---|---|---|---|
| Blackpool | 0 | 700 | 700 |
| Fylde | 11,800 | 900 | 12,700 |
| Lancaster | 100 | 800 | 900 |
| Wyre | 0 | 1,100 | 1,100 |
| Central Lancashire | 500 | 6,500 | 7,000 |
| Chorley | 400 | 800 | 1,300 |
| Preston | 0 | 1,100 | 1,100 |
| South Ribble | 0 | 2,400 | 2,400 |
| West Lancashire | 0 | 2,200 | 2,200 |
| Lancashire West | 12,400 | 9,900 | 22,400 |
| East Lancashire | 6,600 | 10,600 | 17,200 |
| Blackburn with Darwen | 1,000 | 3,100 | 4,000 |
| Burnley | 600 | 2,000 | 2,600 |
| Hyndburn | 200 | 1,700 | 1,800 |
| Pendle | 1,400 | 2,000 | 3,400 |
| Ribble Valley | 3,400 | 500 | 4,000 |
| Rossendale | 0 | 1,400 | 1,400 |
| Lancashire County | 17,900 | 17,100 | 35,000 |
| Lancashire NUTS-2 | 18,900 | 20,800 | 39,700 |
| North West | 37,100 | 96,200 | 133,300 |
| Great Britain | 232,300 | 787,600 | 1,019,900 |
| Source ONS - Annual Business Inquiry, 2006 | |||
Change in High Tech Industry Employment
Over the past couple of decades there has been a staggering growth in the amount of high technology introduced into all aspects of business and across all sectors of activity. Over the second half of the 1980s most high tech businesses enjoyed rapid output growth. However, this was achieved against a backdrop of even greater gains in efficiency and productivity such that total employment in established high technology companies actually fell - in Lancashire's case, at an even faster pace than in manufacturing industry generally. This trend continued over the early 1990s and locally was associated with the large drop in defence equipment/aerospace procurement and increased global competition leading to large-scale structural adjustment and substantial job cuts amongst many high tech defence industry contractors.
From the mid-1990s employment in the Lancashire "high tech" sectors enjoyed a degree of stability and some sectors generated new employment opportunities but over more recent years job numbers have continued to diminish steadily though at a slower pace than in manufacturing generally. The electronics-communications sector, never a large one in Lancashire has continued to shed jobs associated in some degree with restructuring in a handful of larger plant operations, particularly following the bursting of the dot com/telecommunications bubble. Between 1988 and 2006 local jobs in the sector have fallen by well over a half. Aerospace has enjoyed a fairly stable position over the same period steady on the back of a major up-turn in both the military and civil aircraft markets. Although the industry has made headline job loss announcements, it continued to recruit higher order technical skills and has benefited to a degree from consolidation resulting from restructuring elsewhere in the UK such that over recent years job numbers have actually seen a modest increase. Both pharmaceuticals and computer equipment have recorded reduced job losses and today are quite small players in Lancashire. Amongst the "medium high tech" sectors there was a general loss of jobs over the five-year period 1998-200 of well over a quarter, roughly on a par with the manufacturing average. Job losses were felt most severely in the machinery sector, including both electrical and non-electrical machinery and apparatus. However, employment has remained reasonably stable in both the chemical industry and in the medical, precision and optical instrumentation sector.
| Employee Jobs | |||
| High Tech | Medium High Tech | Total High and Medium High Tech | |
| 1998 | 21,800 | 30,200 | 52,000 |
|---|---|---|---|
| 1999 | 22,000 | 29,800 | 51,900 |
| 2000 | 22,700 | 26,900 | 49,600 |
| 2001 | 21,300 | 25,800 | 47,100 |
| 2002 | 20,500 | 25,200 | 45,800 |
| 2003 | 21,400 | 23,000 | 44,400 |
| 2004 | 19,000 | 23,000 | 42,000 |
| 2005 | 17,800 | 22,100 | 39,900 |
| 2006 | 18,900 | 20,800 | 39,700 |
| Source ONS - Annual Business Inquiry | |||
For further details, please contact:
Peter Kivell
Tel 01772 534157
Email Peter.Kivell@lancashire.gov.uk