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Key 1998 UK 1998 2001 UK 2001

300

HIGH-TECHNOLOGY INDUSTRY: AN UPDATE H


IGH-TECHNOLOGY INDUSTRY in the UK has been a major growth industry in recent decades. There is strong competition in Europe to encourage and to attract such industries. It is believed that they can stimulate economic growth by helping to raise performance levels across all sectors of industry. The share of high-technology employment in the economy is used by the government as one of their competitiveness indicators. The creation of an environment in which high-technology industry and companies can develop and grow is important in national and regional economic development. In this unit we look at the main changes that have occurred recently in this industry.
% of all jobs 12 10 8 6 4 2 0

by Paul Warburton

North West

West Midlands

South West

East Midlands

Yorkshire and Humbersids

South East

North East

West

Region/Country

Figure 1: Jobs in the high and medium-high-technology manufacturing sectors, 19982001


Source: Annual Business Inquiry, Short-term Employment Survey, ONS and the NI Census of Employment

Change in the nature of hightechnology industry


The number and variety of hightechnology companies has grown to the extent that it is difficult to reach a single definition. The term is generally applied to those scientific fields and the industries based on them which have the following characteristics:
They are complex products based on advanced technology including micro-electronics. The raw materials are often electrical components. There is a fast rate of innovation leading to the rapid introduction of new products and processes. There is an emphasis on research and development.

(including telecommunications), aerospace and military equipment. It should be recognised too that many service (tertiary) companies are widely regarded as being of a high-tech nature, such as those conducting research and development or providing advanced design. Also, as the definition is largely product-based, it takes no account of the many (often low-technology product) industries that involve sophisticated technology in their production processes (eg as in parts of the food-processing industry). High-technology industries are also footloose industries. These are industries that do not have to locate close to raw materials or near markets, and which use electricity that is widely available as a source of energy. Footloose industries locate in pleasant environments near good transport

routes in order to reach a number of markets. Footloose industries often locate close to research centres like universities. They are also usually non-polluting and can locate close to residential areas.

Change in the distribution of high-technology industry in the UK


Figure 1 reflects the distribution of high-technology industry in the UK. You should be able to describe and suggest reasons for these regional variations (you may wish to complete activity 1 at this stage). It is worth noting that, despite the success of footloose industries, the percentage of employees dropped between 1998 and 2001. High-technology companies often locate on the outskirts of towns and cities for several reasons:
1 To be close to where employees live generally in the suburbs.

Examples of high-technology industries include computer hardware and software, electrical/electronic engineering

Series 15 Spring issue Unit 300 High-technology Industry: an Update 2004 Nelson Thornes This page may be photocopied for use within the purchasing institution only.

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Northern Ireland

Scotland

2 To be in clean and attractive rural fringe locations. 3 Suburban locations are often accessible to airports. 4 To be near motorways for employees and customers. 5 Land values are lower on the edge of an urban area. 6 There is plenty of open space for expansion.

Sector

Lancashire No. %

North West No. 10,300 2,000 9,100 25,300 46,700 37,500 36,300 21,100 10,800 25,900 2,100 133,800 180,400

Great Britain No. % 60,200 50,800 125,600 110,400 347,000 173,800 351,900 169,500 131,800 216,400 23,100 1,066,600 1,413,500

Pharmaceuticals 1,300 Office machinery and computers 600 Electronics/communications 2,200 Aerospace 13,400 Total high-tech 17,600 Chemicals Non-electrical machinery Electrical machinery Scientific instruments Motor vehicles Other transport equipment Total medium-high-tech TOTAL high-tech 6,000 9,300 3,500 1,400 6,500 200 26,900 44,500

Science parks are usually located on the edge of cities in greenfield locations. Many of the firms located in science parks are connected with information, hightechnology and electronics industries. Science parks have direct links with universities for research. They have attractive layouts with grassy areas, ornamental gardens, lakes, etc. An example is the Cambridge Science Park. One feature of the distribution of high-technology firms for some time has been their concentration in particular areas, notably the South East and the high-tech corridor to the west of London. However, a more recent trend has been the increase in the number of companies locating in rural and semi-rural areas and peripheral parts of the UK. These locations sometimes reflect the choices made by founders of companies. Local people may be recruited and trained while skilled labour is brought in from outside an area.

Figure 2: Employment in high and medium-high-technology industries in 2000


Source: Annual Business Inquiry 2000, ONS

to employment in manufacturing alone, the high-technology employee jobs comprised 14.1% of the countys manufacturing workforce compared with 9.1% in Great Britain. In these simple terms, the county is probably one of the most important centres of high-technology outside the south of England. As shown in Figure 2, the aboveaverage share of high-technology employment is due to the dominating presence of aerospace manufacture in the county. This industry accounts for 76% of local high-technology jobs (against 32% in Great Britain), or 30% of the high-tech and medium-high-tech jobs combined. In practice, the local importance of this particular sector in high-technology industry is certainly much greater than these statistics imply. Many smaller businesses support the major aerospace companies. They supply advanced engineering services, design and testing and information technologies not classified to aerospace but which are effectively a part of the sector. The other hightechnology industries have a relatively modest presence in Lancashire. Amongst the mediumhigh-technology sectors, aboveaverage local representation is to be found in motor vehicles, chemicals and non-electrical machinery.

Change in high-technology industry employment


Over the past fifteen years or so 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-technology businesses enjoyed rapid growth. This was achieved alongside even greater gains in efficiency and productivity, so total employment in established high-technology companies actually fell. This explains the trend observed in Figure 1.

High-technology industry employment in Lancashire


In Lancashire, the fall in employment in the hightechnology sector (Figure 3) occurred at an even faster pace than in manufacturing industry generally. This trend continued during the early 1990s and locally was associated with the large drop in orders for defence equipment/ aerospace. This drop and increased global competition led to largescale adjustment in the industry and substantial job cuts amongst many high-technology defence industry contractors. Figure 3 shows that since the mid1990s employment in high-tech

Case Study
High-technology industry in Lancashire
In the year 2000 nearly 44,500 people, or 7.7% of Lancashires employee jobs, were within the high and medium-high-technology sector, compared with 5.6% in Great Britain and 6.4% 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 1.4% in Great Britain. Restricting the comparison

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Series 15 Spring issue Unit 300 High-technology Industry: an Update 2004 Nelson Thornes This page may be photocopied for use within the purchasing institution only.

Year 1984 1987 1989 1991 1993 1995 1996 1997 1998 1999 2000

High-tech 25,800 24,800 25,500 23,500 18,600 16,600 17,200 17,400 17,600 17,300 17,600

Medium-high-tech 40,300 38,900 40,400 33,600 29,000 31,900 30,900 30,800 30,200 30,300 26,900

Total high-tech 66,100 63,700 65,800 57,000 47,700 48,600 48,100 48,200 47,800 47,600 44,500

output to start growing again by 2003. Over the long term, many economists predict that there will be a shift into more high-tech manufacturing which is less labour intensive. This is because the UK will find it increasingly difficult to compete with other countries that can pay workers lower wages. Views are mixed on whether high levels of investment in technology have changed the structure of the UK economy. High levels of investment in information and communications technology have not yet been reflected in productivity figures but we know it takes time for the impact of technology to take effect: it is difficult to measure, and requires widespread consumer use to have full impact. Although US investment in computer hardware has been high since the 1970s, it was only when more users became adept at technology and when use of the internet grew and brought hundreds of millions of users online that productivity skyrocketed (Figure 4). The current crop of new technologies notably faster information processing combined with the internet have all the characteristics of the type of general-purpose technology which will in time reorganise the way the UK economy operates.

Figure 3 Change in high-technology employment in Lancashire, 19842000


Source: Annual Employment Survey/Annual Business Inquiry, ONS

sectors has shown much greater stability and some sectors have generated new employment opportunities. The electronics sector, never a large one in Lancashire, has continued to shed jobs associated in some degree to restructuring in a handful of large plant operations, though recently this trend appears to have been reversed. Aerospace has enjoyed a steady jobs increase partly due to a major up-turn in both the military and civil aircraft markets. Although the industry has made large headline job loss announcements, it continues to recruit higher-order technical skills. Both pharmaceuticals (medicines and drugs) and computer equipment have also generated increased numbers of jobs, though this growth has taken place from a relatively small base. Amongst the medium-high-tech sectors the dominant trend during the late 1990s was one of employment stability, in sharp contrast to the heavy losses in jobs in the 1980s and early 1990s. Recently, though, the downward tendency has resumed, most notably in both the electrical and non-electrical machinery industries.

industries and to some extent car production. One of the largest manufacturing sectors is the production of food, beverages and tobacco. However, many of the traditional heavy industries in the UK, such as shipbuilding and metals, have seen their fortunes decline. Since January 2001, the overall manufacturing sector has been in recession, with output declining from month to month. Because of its importance in international trade, hightechnology has suffered more than most from the global economic slowdown. Its problems have also been made worse by the strong pound, which has made British exports that much more expensive than other international goods. Reduced investment and a generally poor image have also robbed manufacturing of the ability to modernise and attract new blood. In addition, cheaper labour costs abroad have persuaded some companies to move their production operations to Eastern Europe or Asia. The recent collapse of the telecom and technology sector further dragged down the performance of manufacturing industry because it has been argued that hightechnology industries have kept manufacturing afloat in recent years.

...the industry faces some significant challenges from market saturation. Gartner Dataquest analysts said the US PC market is nearly saturated, and Canada and Western Europe are not that far behind. Unless the industry is able to stimulate faster replacement cycles, shipment growth will undoubtedly slow in these markets. Given that these markets constitute 55% of the global PC market over the foreseeable future, that will put a significant damper on industry growth. Figure 4: Future of the PC market
Source: From the internet

Change in the role of hightechnology industry in the UK economy


The British manufacturing sector is fairly diversified, but its key strengths lie in the aerospace, hightechnology and pharmaceutical

What does the future hold?


No one knows for sure, but the Confederation of British Industry (CBI) expected manufacturing

Series 15 Spring issue Unit 300 High-technology Industry: an Update 2004 Nelson Thornes This page may be photocopied for use within the purchasing institution only.

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Activities
1 Study Figure 1. Describe the distribution of employment in high-technology industry in 2001 in the UK. 2 (a) What is a science park? (b) Use the following website to carry out some research on the Cambridge Science Park: www.cambridgesciencepark.co.uk/ home.htm Write an account using the following as subheadings: History Typical companies on the science park Location Facilities Layout of the science park. 3 (a) Use a copy of Figure 6 to complete a compound line graph based on the high-technology and medium-high-technology data for Lancashire in Figure 3. (b) Shade in two colours the hightechnology and medium-hightechnology sections of your graph. (c) Using your completed compound line graph, outline how and why employment in high and medium-high-technology industry in Lancashire changed between 1984 and 2000. 4 This activity can either be done with a calculator or using a spreadsheet. (a) Make a copy of Figure 2, then calculate and fill in the percentages for Lancashire, the North West and Great Britain. (b) Complete the Totals row at the bottom of the table. NB If you use a spreadsheet, (a) and (b) should be entered as formulas and the software should calculate these for you. Print out for your teacher two versions of the spreadsheet. One should show all the data with the complete column titles. The other should show the formulas. When you print out your two spreadsheets, make sure that you print them with column and row headers and grid lines this is good ICT practice! (c) Which type of manufacturing

Figure 5: Do we need computers?

100,000 90,000 80,000 70,000 Total high-technology Numbers employed 60,000 50,000 Medium high-technology 40,000 30,000 High-technology 20,000 10,000 1984 1987 1989 1991 1993 1995 1996 1997 1998 1999 2000 0

Year

Figure 6: Trends in employment in high and medium-high-technology industry in Lancashire, 19842000

industry accounts for: (i) the highest percentage of hightechnology jobs in Great Britain? (ii) the top two highest percentages of medium-high-technology jobs in Great Britain? (d) Which type of manufacturing industry accounts for the highest percentage of high-technology jobs in Lancashire? 5 What does Figure 4 suggest will influence the growth rates of parts of high-technology industry in the near future?

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Series 15 Spring issue Unit 300 High-technology Industry: an Update 2004 Nelson Thornes This page may be photocopied for use within the purchasing institution only.

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