Manufacture of Electrical and Optical Equipment
September 2007
Introduction
The Electrical and Optical Equipment Industry, although having suffered from a significant cyclical downturn post 2000, has assumed a key role in the economy as a driver for technological change and development both in its own products and processes and though its impact on the wider economy. It is a highly diversified industrial grouping with a product spectrum that ranges from the production of basic electrical equipment (including electric motors, generators and transformers, electrical distribution and control apparatus, lighting, insulated wires and cables, vehicle electrical equipment etc.) through a huge range of electronic equipment (including valves, tubes and other components and accessories, television, radio and telecommunications transmitting and receiving equipment and other capital goods) to computers and office machinery together with a wide range of medical, surgical, precision and optical instruments and industrial process control equipment.
Employment
Comprising about 360 separate establishments the industry employs over 5,200 people in Lancashire or 5.1% of the manufacturing workforce. This is a much lower share than the 10.8% in Great Britain in part because of a lower representation locally in a number of the electronics/telecommunications related activities. Women now make up 30% of the industry's workforce, a share somewhat above the manufacturing average but most jobs (95%) remain full-time.
Blackburn provides the largest single concentration of the local industry providing more than a quarter of the industry's jobs (Figure 1). As a source of local manufacturing employment the industry provides nearly one in ten of all manufacturing jobs in Blackburn and Chorley but less than 2% in Fylde, Ribble Valley and South Ribble.
| Employment Status | Employees | |
|---|---|---|
| No. | % | |
| Male full-time workers | 3,600 | 69.4 |
| Male part-time workers | 0 | 0.6 |
| Female full-time workers | 1,300 | 25.3 |
| Female part-time workers | 200 | 4.7 |
| Male workers | 3,600 | 70.0 |
| Female workers | 1,600 | 30.0 |
| Full-time workers | 4,900 | 94.7 |
| Part-time workers | 300 | 5.3 |
| Total | 5,200 | 100.0 |
| Source ONS - Annual Business Inquiry | ||
Traditionally a large company dominated sector in Lancashire, the industry has undergone much restructuring and small firms now predominate: statistically the "average" company size is now just 15 employees. Nearly 90% of local establishments now employ fewer than 25 people and two-thirds employ fewer than five. Many of the smaller companies are highly specialised in a particular niche of activity. However, there is still a larger companies' presence, including a number that are subsidiaries of national or multi-national enterprises. There are a number of companies employing 100 or more people and these account for more than half of the industry's workforce. Larger companies operating within the sub-region include: AMS Neve, producing professional audio equipment; Alstom Transport, electrical traction equipment for railway stock; Asco Joucomatic,solenoid control valves; Crown Eyeglass, optical manufacturers and retailers; EDC Blackburn, mastering and replication of compact discs; Initial Electronic Security Systems, electronic security and communications; Invotec Circuit Boards Blackcburn Ltd, printed circuit boards; LG Philips Displays, quick heat cathodes; Promethean Ltd, interactive learning technology; Protec Fire Detection, fire detection products and services; Raven Manufacturing Ltd, antennas for satellite and automotive industries; and TRW Automotive, switch and electronic automotive controls.
| Employee Size Band | Establishments | Employees | ||
|---|---|---|---|---|
| No. | % | No. | % | |
| 1-4 | 240 | 67.4 | 400 | 8.1 |
| 5-10 | 41 | 11.5 | 300 | 5.3 |
| 11-24 | 39 | 11.0 | 700 | 12.6 |
| 25-99 | 22 | 6.2 | 1,100 | 21.6 |
| 100+ | 14 | 3.9 | 2,700 | 52.4 |
| Total | 356 | 100.0 | 5,200 | 100.0 |
| Source ONS - Annual Business Inquiry | ||||
Employment Trends
The electrical and optical equipment industry was a major post-war growth sector in Lancashire with employee numbers more than doubling between 1950 and 1969 when they peaked at more than 21,000 (Figure 3). However, this was followed by more than a decade of major contraction with the industry at the forefront of restructuring. Partly this was part of a national phenomenon that saw the likes of GEC emerge as national champions of the industry. This downsizing was further exacerbated by the recession of the early 1980s which resulted in a number of significant electrical company closures. The industry enjoyed a period of expansion over much of the 1980s before a further downturn post-1990 saw further rationalisation and job losses (particularly in the automotive electrical equipment sector), a process that has continued virtually uninterrupted subsequently.
Employment change by broad sector over the past decade or so is shown in Table 3. Changes in SIC coding associated with major company restructuring, including changes to product mix and the hiving off of peripheral activities make some of the sector trends uncertain but it appears that over the 1990s especially, the County failed to share fully in the potential of several sectors which nationally were noted for their high growth characteristics. These included computer equipment and the higher tech electronics and telecommunications equipment groups. It is notable, for example, that despite the remarkable strength of the aerospace industry in the County in the form of aero-structures and aero-engines, there is little stand alone activity of substance in the rapidly growing avionics sector of the industry. In Lancashire's case, some of the biggest jobs losses have been within the electronics side of the industry, particularly of components and sub-assemblies. Similar significant job losses have occurred in basic electrical equipment and transport electrical equipment and there are indications that in both these areas job losses have accelerated post 2001 in part due to off-shoring of production. Employment in some other parts of the local industry, including miscellaneous electrical equipment, lighting equipment and medical and surgical equipment have shown some modest jobs growth and some dynamic new company creation but in all cases this was from a low and under-represented base and such gains failed to offset other sectoral losses by a large margin. In spite of the overall employment downsizing in the local sector, it remains a relatively attractive one for new entrants. Between 1998 and 2005 there was a net increase of 20% in the number of establishments in Lancashire classified to the sector.
| Basic Electrical Equipment | Other Electrical Equipment | Electronic etc. Equipment | Instruments and Apparatus | |
|---|---|---|---|---|
| 1995 | 2,600 | 2,900 | 3,000 | 1,800 |
| 1996 | 2,200 | 3,000 | 3,000 | 1,700 |
| 1997 | 2,400 | 2,900 | 2,400 | 1,800 |
| 1998 | 2,100 | 2,700 | 2,500 | 1,400 |
| 1999 | 1,800 | 2,600 | 2,600 | 1,500 |
| 2000 | 1,600 | 2,000 | 2,900 | 1,400 |
| 2001 | 1,700 | 1,800 | 2,600 | 1,300 |
| 2002 | 1,600 | 2,100 | 2,300 | 1,400 |
| 2003 | 1,200 | 2,100 | 1,900 | 1,900 |
| 2004 | 800 | 2,000 | 1,400 | 2,000 |
| 2005 | 700 | 1,800 | 1,100 | 1,600 |
| Source ONS - Annual Employment Survey/Annual Business Inquiry | ||||
General Characteristics
The electrical and optical equipment industry is research intensive and has thrived on growth and innovation in high tech producer and consumer goods, contributing greatly to applications in other industrial sectors and in generally fostering technological development throughout the wider economy. It has itself becoming increasingly driven by product innovation. The electronics related sectors in particular, driven by both product development and by major inward investment into the UK, was a star performer over much of the 1990s and became widely regarded as strategically important for wider economic development. After 2000 the global dot com downturn exposed considerable over-capacity in many electronics sectors, most notably in telecommunications equipment such that national turnover with the industry fell 41% by 2005. By this date the national industry had total turnover of about £41bn and employing some 340,000 people, generated £15bn in gross value added.
Locally, the industry is under-represented in the higher growth/higher value added sectors of electronics, computers and precision and optical instruments. Whilst these sectors have clearly enjoyed strong growth their relatively small weighting has limited their economic contribution. The largest employing sectors in the sub-region continue to be basic electrical equipment, electrical equipment for vehicles and other miscellaneous electrical equipment whose demand depends on the investment activity of the private and public sectors as well as private households. This bias towards the more traditional activities was responsible for the rather slow and uncertain growth trends locally over the early 1980s and early 1990s, though to a degree acted as a negative benefit when the boom in telecommunications/dot com came to an abrupt end post-2000.
In terms of total turnover the industry locally has just about held up over the full decade to 2004. Total turnover in 2004 at nearly £610m was about 4% lower in real terms than in 1994 though was still £100m lower (-14%) than at its last peak in 2001 (Figure 4). However, a large part of this turnover was attributable to increased purchases, presumably reflecting an increased tendency to buy-in or out-source more activity. Gross value added, in consequence, fell back sharply and at £230m in 2004 was £32m or 12% lower than in 1994. Capital investment too has been on a general downward path over most of the decade and this trend accelerated after 2000 resulting in the largest fall in net capital expenditure over the decade of any of the major industrial groups in Lancashire. In spite of this, the industry has continued to improve its labour productivity with GVA per head rising by about 50% over the full decade 1994-2004, though such growth trailed off rapidly over the second half of the period compared to pattern experienced in the national sector.
Major structural changes are continuing apace across the industry both as a result of the rapid pace of technical development and in response to competition from lower cost countries in the production of both basic electrical equipment and apparatus and electronics. However, as new opportunities in electronics and automation systems continue to be offered it is widely anticipated that the industry's future growth rate will once again rise above the manufacturing industry average.
An important issue beginning to impact on much of the industry is the increasing volume of waste electrical and electronic equipment. The industry is being challenged to increase recycling and so to limit the amount of waste that is incinerated or discarded in landfill.
For further details, please contact:
Peter Kivell
Tel 01772 534157
Email Peter.Kivell@lancashire.gov.uk