Electronics Business in the UK Economy
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Electronics Business in the UK Economy

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A description of a Worker-Based economic contribution model, and an attempt to quantify the size and contribution of the UK Electronic Sector to the UK Economy.

A description of a Worker-Based economic contribution model, and an attempt to quantify the size and contribution of the UK Electronic Sector to the UK Economy.

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Electronics Business in the UK Economy Electronics Business in the UK Economy Presentation Transcript

  • 1v2 Electronics BusinessProf. Ian Phillips Principal Staff Eng’r, in h i the ARM Ltdian.phillips@arm.comian phillips@arm com UK Economy Visiting Prof. Uo Liverpool UK Liverpool,Contribution to Industry UKEA Award 2008 London 7sep11 •This is not Electronic Systems work, y , but should be extended to be so. •Based on my work from 2004-8 •I am not an Economist 1
  • Engineering in 2011 ...Details of Electronics, SW, etc ... Are Well Beyond Public Understanding 2
  • EIGT Report (2004) UK Electronics ...  Unknown Invisible Unknown,  Uncoordinated, Unfocused  Unquantified ... But Internationally Respected Source: “Electronics 2015”. 3 Published: DTI (HMG)
  • EIGT Report Low?UK Electronics ... 9,400 enterprises Employing 250-500k people Contributing 2% of GDP ... Believed Conservative Estimates! Source: “Electronics 2015”. 4 Published: DTI (HMG)
  • Engineering in the UK (2009) Better! 60%! ...The Same Story across All Engineering Source: Engineering UK 2009/10. 5 Published: EngineeringUK (pka: ETB)
  • 101: Macro Economics ... Economics is an Art not a Science Gross Domestic Product (GDP)  The sum of all known financial transactions in the UK  The source of the (greater-part of) the UK Budget  From which All Government Activities are paid for. p  There is no Buffer ... All is spent as it is Received. GDP figures obtained from ...  Actual GDP from Tax Revenue  GDP = Tax Income / 38% ... Up to 1yr after the tax-year  Running GDP from several Economic Indicators ...  Gross Value Add (∑GVA => GDP) (GVA) = Value of Output - Cost of Input  Corporate Revenue (∑Revenue => GDP)  Other business indicators ...These are Relationships, not Mathematic Equations! Source: Engineering UK 2009/10. 6 Published: EngineeringUK (pka: ETB)
  • Undervalued Communities Research Groups Service Providers ...  Inc Installation and Maintenance  Inc IP and Know-How Providers National Operations of International Businesses Educators SMEs & Start-ups p If the stats are correct, these represent more than 90% of the Operations and 50% of the employment. % f Probably represent more than 50% of the total GDP contribution from ‘this sector sector’ Probably represent the division with greatest growth potential. 7
  • 101: Tax Receipts ... In 2006, GDP for 2005-6 was projected as £1.2T C3: Government Receipts By Function 2005-2006 (Projections) Total Revenue ~£450B  73% is Direct Tax on the Person (~38% of GDP)  13% is Tax on Business  14% ‘Other’ ... I maintain: 100% is attributable to UK-Workers (It would be Zero without!) Source: HM Treasury. 8 Published: http://www.hm-treasury.gov.uk/media/415/DC/psfmarch2006.xls
  • 101: Government Spending... B4: Government Spending By Function 2005-06 (Projections) Total Spend ~£490B ( (~£40B Loans)) No Current Account Spend above Tax Revenue is Deferred Tax ... justified by a 8%pa Economy Growth Source: HM Treasury. 9 Published: http://www.hm-treasury.gov.uk/media/415/DC/psfmarch2006.xls
  • GDP/Working Population From this I argue : UK-GDP is the Working Population ...  Doing its work (Including Sustaining Business) 27%  Being Paid ...  ... And Spending that Money 73% GDP/Working Head GDP/Working-Head (2006) ...  GDP = £1.2T  Working Heads = 29.1M1  Average Salary = £23,0802 ... = 1.79 x Average Salary  Sanity Check, shows this to be about right ... about right...  “1” as Paid: “+1” as Spent (30% Income Tax, 70% Fund the Family) = 2  +ve Var: Exports, Loans (esp for Houses and Cars) (Deferred Earnings)  -ve Var: Imports, Spending outside of the UK, Savings (Deferred Tax) Summary:  Workers are the Engine of a Nations Economy! (Needs Businesses to Employ them)  UK-Worker contributes 2x Salary to UK-Economy! (Simple Message) 1,2: Source: HM Treasury. 10 Published: http://www.hm-treasury.gov.uk/media/415/DC/psfmarch2006.xls
  • Analysis: UK Electronic Business What is one? (eg: Incl. of Electronics within Retail?) How Many are there? How much do they Contribute to the UK-Economy? Are the figures realistic/justifiable? What d th d ? (Wh t V l P Wh t do they do? (What Value Prospect) t)Note:  This work was done in 2008, and focuses on UK businesses actively in Electronics ... Ignoring those involved in the wider Systems aspects.  So th S these quantifications are f a S b S t of th UK O tifi ti for Sub-Set f the Operations active i ti ti in the life-cycle of Electronic Systems! ... ...These figures are Conservative 11
  • What is an Electronic-Enterprise? No clean definition ... Electronics is a Service, not a Sector. I negotiated access to the 2008 EKTN Database  Findlays Data-Base (Advertising, UK, Electronic bias)  EKTN Membership (Electronics bias)  No input from other KTNs (Mathematics, ICT, Digital Coms etc) (Mathematics ICT Coms, I created an SQL query and applied it to the Database  SICCode search ...  30010, 30020, 31200, 31620, 32100, 32200, 32201, 32202, 32300, ‘33201, 51701, 52702, 52704, 52707, 52720, 64200, 72100, 72200, 72300, 74202, 72600  Key Words search in CompanyName or CompanyDescription ...  electro, semiconductor, semi-conductor, telecom, embedded, radio, audio, telephone, membrane, pcb, LED , communication, loud speaker, avionic, receiver, recording, network, terminal, alarm, emergency, circuit, digital, automation, instrumentation, X- Ray, lcd, micro, silicon, wafer, transducer, emc, asic, chip, data, compute, software  Note: Although software key words are included, only those enterprises with an ‘electronic angle are likely to be in the DB at all! ... 12
  • How Many E-Enterprises? Of the 13,184 EKTN (2008) unique records I identified 5,219 as Electronic-Enterprises (With addresses etc)  I visually checked the result and found ~1% false counts ... 1% I put this into a spreadsheet and played with the numbers ...  Reasoning: Whilst most of Large companies had been caught many of the g g p g y Smaller and Micro-enterprises will have been missed....25k Enterprises; 500k UK-Employees (Half in biz. <100) Source: EKTN 2008 DataBase 13 Published: Provided in confidence
  • The Contribution to UK GDP Playing with the same spreadsheet.  The Direct Economic Contribution is ...  GDP 2.55% (In line with EIGT expectation >2%)  No of Enterprises 25,000 (in line with EIGT expectation >>10k)  50% of Employees, and GDP Contribution in Operations <100 heads. p y p  Contribution is independent of Nationality of a Parent Company !... The Indirect Contribution is more difficult to quantify, but it is easy to believe that UK Electronics Enables 10-20x this! Source: EKTN 2008 DataBase 14 Published: Provided in confidence
  • Importance of Worker Accounting HMG/ONS tends to ‘invert’ the GVA equation (Thus GVA => GDP)  GVA is not the source of the Tax Revenue, so is not GDP.  Leads to initiatives to stimulate GVA  Difficult to identify the part of the GVA which is ‘in the UK’ ... This favours t ad t o a factory-based bus esses a d d sad a tages s a ou s traditional acto y based businesses and disadvantages knowledge-based enterprises. Worker Accounting  V l Values E l Employment i th UK i t in the UK, irrespective of role (R ti f l (Research, d i h design, manufacturing, instrumentation, distribution, support, etc.) or ownership.  Recognises the value of Higher Paid (Higher Skilled) jobs  Recognises the value of Total Employment (not just in large businesses)  Supports Globalisation and the UK operations that make business throughout their life-cycles. life cycles.  Is easy to count for all businesses (~2x Salary or ~1x Payroll Costs) ... Will lead to stimuli to grow these 20C business models.... I expect opposition from some ‘traditional’ businesses! 15
  • Reliability of these Figures The limited Scope of the EKTN Database  No Research, SW, Mec’tronic, Inst’n, Tools, Methods, Support, IT, etc  Can be improved by getting access to other databases  Other KTNs, Industry Associations, Government databases ... I believe t e results a e pess st c ... Maybe 100% so be e e the esu ts are pessimistic aybe 00% The estimates of the % of businesses that are in the EKTN Database  Can be improved by ‘fish counting’ methods (Statistics)  Can be improved by bigger/better databases. ... I believe they are about right (and they are not very sensitive) The Economic Validity of linking GDP to Workers Salary  Was a lot less happy about this than I am now ...  Economics is an art not a science (Economists say-so)  E Economic E i Equations are I di t ti Indicators and not algebraically manipulable. d t l b i ll i l bl  I have presented this to credible institutions/profs and nobody has turned a hair! ... I think that this may be difficult politically, but is justifiable... Far more rigorous that anything I have been able to find for other sectors! 16
  • What do Electronic Enterprises do? Lots more analysis of available data to do on this ... If.. 80% of E-Enterprises are 4 people or less ..&.. they are stable ..Then.. they must be doing Something Right ! y g g g I speculate..  All are Delivering a Valued Service to a remote customer (or Larger Enterprise); which may or may-not share a Corporate Identity  This may be based on Advanced Knowledge  Or may be based on Excellence of Delivery  To be stable, they are supplying that Service Competitively ..vs.. the global alternatives available to their Customer. Customer .  And they are adapting their role and delivery mechanisms continually in line with evolutions in the Technical, Delivery, Legal and Business environments in which they work work. 17
  • How do they work? Deliver Valued Functionality/Service to a (remote) Customer, against global competition ... ... I believe the UK roles are Frequently as Technical-Leaders Technical Leaders The Value of the Function/Service (Fd) as delivered Includes the Costs ( ) incurred in the Delivery Channel. Fd = Fa+Cd  E t bli h a W ld C Establish World-Competitive Functionality (F ) titi F ti lit (Fa)  Reduce the Cost of Delivery toward Zero (Cd) For stability the Delivered Functionality/Service (Fd) must be...  Appropriately valued (Not under-valued)  Demonstrably better than an alternative ... sourced globally... All Businesses work by maintaining their Delivered Value! 18
  • Conclusions (UK Electronic Enterprises) Employed People are the Engine of the Economy  Contributing ~2x their salary ~25k E-Enterprises employ ~500k people. They Contribute ~2.5% to the Economy, with Indirect value ~10-20x this.  50% o Employment and Contribution; from the 95% Ents <100 head. of p oy e t a d Co t but o ; o t e t s 00 ead  80% of Enterprises are <5 heads.  This is NOT the traditional model of Business. Most UK E-Enterprises are Delivering Knowledge Services  Developing Knowledge is important (Relationships and Partnerships)  Delivering Knowledge is important (Pre-Competitive Infrastructure) (Pre Competitive Everybody is in Competition Globally  UK Divisions are no less vulnerable to this Electronic Systems would be a better domain for this study  More Inclusive and more easily Defined  More easily Comprehended by ordinary folk (and Politicians) 19