Adam Fletcher
An open letter to the next Prime Minister from Adam Fletcher, chairman of the Electronic Components Supply Network (ECSN)
Dear next P.M.
As part of an organisation that supports and relies on successful technology companies in the UK, I hope that you will make reviving manufacturing, addressing skills shortages and reviewing the tax regime urgent priorities. Further, I hope that you will also take the opportunity to harmonise environmental legislation, and look at the costs of implementing it against the environmental impact it has.
A Balanced Economy…
As we entered the new millennium it was obvious that the UK economy had become destabilised – the manufacturing sector had been allowed to decline in favour of the service sector, which could not generate the added value or wealth creation needed to sustain growth and full employment.
In 2002, the Electronic Components Supply Network (ECSN) along with other leading UK electronics trade associations collaborated with the then DTI (now The Department for Business Innovation and Skills – BIS) to produce the Electronic Innovation and Growth Team (EGIT) Report.
This resulted in the government of the day funding the establishment of the Technology Strategy Board (now Innovate UK) and twelve Knowledge Transfer Networks (now Catapults) to operate alongside the regional development agencies and UKTI to improve the transition of innovation from academia into manufacturing and job creation.
The recognition by government and government departments of the need to rebalance the UK economy with a resurgent, strong and productive manufacturing sector should be recognised and supported. However this is a long-term commitment and it will take at least another two parliaments to create a strong foundation for the manufacturing sector’s long-term recovery and growth.
Direct Industry Investment…
Whilst the UK has to compete within a global economy and open market there is increasing concern that this is not providing a level playing field for investment in volume manufacturing in the electronics sector. There has been successful government support via direct and indirect investment to regenerate the automotive, military and aerospace sectors. This investment needs to continue and be increased in these areas of strength to develop a strong and stable ecosystem, which will benefit the electronic components and systems markets. Additional investment needs to be directed towards effective implementation of next generation manufacturing technologies such as ‘Industry 4.0’ to ensure UK organisations remain able to compete at the ‘leading edge’ of productivity and cost effectiveness.
Continuing Vocational and Academic Funding…
The move to extend vocational training via increased use of apprenticeships is broadly welcomed and supported by the electronics industry but needs to be funded correctly to ensure the outcome is well trained individuals with appropriate skills who are able to contribute positively to their employers’ organisations and who will be retained at the end of their apprenticeship.
Existing skills shortages within the engineering sector with respect to degree-qualified individuals needs to be addressed further to encourage greater participation at UK universities. I suggest that providing bursaries to pay university tuition fees for students in areas of agreed skill need should be considered.
It is imperative that the UK government continues to fund a wide and diverse range of academic research organised by peer group review. The greater involvement of UK organisations within the academic community will continue to help and support this research activity and provides a huge competitive advantage for the UK. We must however ensure that intellectual property developed by UK academic institutions is protected an where appropriate, revenue generated by the use of their IP is recognised and returned to the institutions either through joint development activities or licencing fees.
Appropriate Taxation Regime…
Local HMRC offices should be given greater powers to determine an organisation’s true status and apply benefits or sanctions based on its judgement. It is entirely appropriate that the UK and OECD establish a global corporate taxation system based on a corporation’s local sales revenue in each country of operation, rather than the “stateless” system that has been allowed to develop. The UK also needs to revise the oversight of its registered corporate structures, particularly the misuse of limited liability partnerships and limited companies. The current widespread misuse of “shell companies” to hide ownership, avoid taxation and divert funds should be stopped within this parliament.
Research and Development Tax Credits have been widely welcomed across UK industry and should be extended to encourage greater investment. It would also benefit from revision that recognises the long-term financial benefit of greater risk taking in research activities where the return is less certain.
The Uniform Business Rates are quite rightly currently under review. It makes no financial sense for organisations to invest more in capital equipment (particularly for manufacturing) only to be taxed again by local authorities as the rated value of their property increases. II hope the review will find a solution that encourages greater investment.
Environmental Legislation – Harmonising Penalties…
Whilst we all collectively wish to benefit from changes in environmental legislation some past legislation has been poorly drafted, probably as a result of too much influence by non-government organisations. Good examples in the wider electronics industry are RoHS, REACH, EUP etc., which have had a significant financial impact and resulted in a negligible positive effect on the environment. This is compounded by a wide range of “tariffs” (penalties) imposed for infringement within the area of the legislation. For some infringements the penalty in the UK is unlimited damages, the extent of which is determined by a judge). By contrast in Austria the maximum fine is just €2,500.
The UK Government (and EU legislators) needs to consider much more carefully the impact of new legislation on local organisations’ ability to compete in a global marketplace and how other countries or regions may respond to it.
Reducing Inequality…
There is a rising tide of sentiment that suggests the current economic system would benefit from greater management or control by government. The minimum wage at its current level is bad for the economy. I agree with Philip Kotler, Professor at the Kellogg School of Management, who said: “When companies pay low wages they in effect take money out of the system. This leads to a damping down of demand, declining investment and low rates of economic growth, which in turn lead to rising unemployment”.
Increasing the minimum wage to a living wage would transfer some of the burden from the state to organisations which may in the short term shed some labour. However the likely mid-term result in an overall increase in employment and a corresponding increase in living standards, which has to be a more equitable situation than the state continuing to subsidise employment via payment of “in work” benefits to the low paid.
It is our belief that the UK is a great place to do business in the electronic components market, has good scope for growth over the next decade and that the pace of growth will be determined by improving relations with government and across the entire supply network.
See also: Stem the tide of our worsening tech skills gap
An open letter to the next Prime Minister by Wendy Devolder, CEO of Skills Matter.
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