Theme 3
Industrial performance – UK electronics and electrical equipment manufacturing sectors
Policy questions and key messages
- How are UK electronics and electrical equipment (E&E) sectors performing in terms of productivity, value added, and employment?
- Are UK E&E sectors becoming more or less competitive internationally?
- How have R&D investments in UK E&E sectors evolved over time?
A highly productive UK electronics and electrical equipment (E&E) sector, shaped by specialisation rather than scale:
- Crucial for digitalisation and the net zero transition, the UK’s E&E sectors together represent 10% of UK manufacturing value added and 13% of UK manufacturing exports. While small compared to other G7 countries and China, they consistently perform strongly on labour productivity.
- This reflects a long-term shift away from price-based competition in high-volume manufacturing towards high-value, specialised, and regulated niches.
Diverging growth paths: electronics expands through niches while electrical equipment faces growth challenges:
- The electronics sector has grown rapidly (5.8% CAGR) in value added since 2000, significantly outperforming UK manufacturing as a whole (1.6% CAGR), driven by sub-sectors such as metrology, photonics, and medical technologies. This growth has occurred alongside major global shifts in electronics manufacturing towards Asia, followed more recently by tariff-driven trade diversion, partial reshoring, and supplier consolidation.
- By contrast, electrical equipment has experienced slower and more volatile growth (0.4% CAGR) since 2000. Recent momentum given by the decarbonisation trend in batteries, grid-related equipment, and energy-efficient equipment has been offset by unmet policy expectations and supply chain constraints.
Productivity gains with employment reductions, persistent trade deficits, and a more contested global market:
- Both sectors have experienced a 50% reduction in employment since 2000, despite rising value added in electronics. This reflects automation and digitalisation of processes, offshoring, consolidation of global suppliers, and acute domestic skills shortages.
- The UK runs large trade deficits – £29 billion for electronics, and £16 billion in electrical equipment – underscoring a limited domestic manufacturing footprint within increasingly competitive international markets.
- While global electronics export shares have begun to rebalance since the mid-2010s, the UK’s challenge remains translating R&D strength and emerging investments into domestic scale, resilience, and export competitiveness.
Electronics and electrical equipment (E&E) manufacturing sectors– statistical definition by the Office for National Statistics (ONS) UK SIC 2007
UK electronics and electrical equipment (E&E) manufacturing sectors – contribution to the UK economy
Electronics and electrical equipment (E&E) manufacturing sectors – value added, employment, and productivity
Electronics
- In 2022 the UK ranked fifth among G7 countries and China in terms of value added (US$18 billion), behind the USA (US$352 billion), China (US$394 billion), Japan (US$70 billion), and Germany (US$52 billion).
- But UK labour productivity in the electronics sector (at US$154,000 per employee) was higher than that of Japan (US$118,400) and Germany (US$139,400). These were all dwarfed by the USA’s productivity in the sector (US$959,900).
- China is well known as the largest manufacturer of electronics in the world, which explains its leading value-added position in 2022. The USA has a leading position in R&D, design, and manufacturing process technology in electronics. Its semiconductor leadership (50% global market share) is driven by large-scale fabs, which are extremely capital-intensive, explaining its very high value added per worker in 2022.[1]
Electrical equipment
- The UK had the second-smallest electrical equipment sector in the G7 in terms of value added (US$7 billion), ahead of Canada alone (4 billion).
- China dominated the sector in value-added terms, with US$262 billion, followed by the USA with US$77 billion.
- But in terms of productivity, the UK performed second best of the G7 countries, with US$108,100 per employee, behind only Canada (US$111,100 per employee).
[1] Source: Semiconductor Industry Association, 2024 State of the U.S. Semiconductor Industry.
UK electronics and electrical equipment (E&E) manufacturing sectors – value added
Electronics
- From 2000 to 2024, the electronics sector grew at an annual average of 5.8% (CAGR), quadrupling in size from £4.1 billion to £16.1 billion.
- This was higher than the UK manufacturing sector as a whole, which grew at an annual average (CAGR) of 1.6%.
- This sector’s growth was driven by an increased global demand for these products, and a restructuring of the sector from price-sensitive, high-volume electronics manufacturing (e.g. consumer electronics, computers) to niches of knowledge-intensive, specialist, low-volume, regulated markets, such as compound semiconductors and photonics.[1]
Electrical equipment
- The electrical equipment sector, on the other hand, grew at a slower pace than the UK manufacturing sector, at an annual average (CAGR) of 0.4% from 2000 to 2024.
- The sector was relatively stable from 2000 to 2018, and grew significantly from 2018 to 2020, going from £5.5 billion to £8.1 billion. But the COVID-19 pandemic halted this growth spurt, and the sector has been shrinking ever since.
- Competition from China,[2] policy uncertainty, skills shortages,[3] and global equipment supply constraints[4] are among the reasons highlighted for this stagnation.
[1] Source: House of Commons (2017). Electronics and Machinery Sector Report.
[2] Source: Bank of England (2024). A portrait of the UK’s global supply chain exposure.
[3] Source: BEAMA (2022). BEAMA – Written evidence – UK energy supply and investment.
[4] Source: Financial Times (2025). How years of waiting for parts is holding up the UK’s energy transition.
UK electronics manufacturing sector – value added
- The observed growth in the electronics sector was mainly driven by the growth of the instruments and appliances for measuring, testing, and navigation sub-sector, whose value added grew by £2.9 billion (5.0% CAGR) between 2010 and 2023.
- This was driven by competitive UK manufacturing firms, such as Renishaw and Oxford Instruments. In 2022 Renishaw announced a £50 million investment in two new manufacturing halls at its Miskin (South Wales) site to increase manufacturing capacity.[1]
- Other sub-sectors with significant growth were irradiation, electromedical, and electrotherapeutic equipment (4.1% CAGR), communication equipment (1.2% CAGR), and optical instruments and photographic equipment (5.7% CAGR)
- The decline of the UK computers and peripheral equipment sector can be explained by the shift towards specialist contract manufacturers, which concentrated production in large-scale facilities, alongside the global relocation of electronics manufacturing to Asia. Together, these changes intensified cost-based price competition in mass-market hardware, undermining the viability of UK-based manufacturing.[2],[3]
[1] Source: Renishaw (2022). Renishaw announces investment of over £50 million for UK manufacturing site.
[2] Source: Kawakami (2011). Inter-firm Dynamics in Notebook PC Value Chains and the Rise of Taiwanese Original Design Manufacturing Firms.
[3] Source: UK Parliament (2017). Electronics and Machinery Sector Report.
UK electrical equipment manufacturing sector – value added
- All sub-sectors in the electrical equipment sector experienced an increase in value added between 2010 and 2023, despite modest aggregate growth (0.4% CAGR).
- The most significant gainers in absolute terms were electricity distribution and control apparatus (3.5% CAGR), electric lighting equipment (3.6% CAGR), and other electrical equipment (3.8% CAGR).
- The growth in electricity distribution and control apparatus was driven by rising demand from the energy transition and electric vehicle market. For example, in 2023 Schneider Electric announced a £7.2 million expansion investment of its switchgear production facility in Leeds to accommodate increased demand.[1]
- But the sector with the highest growth rate in the period was batteries and accumulators (8.5% CAGR). There have been many recent big-ticket battery gigafactory announcements: Agratas £4 billion gigafactory in Somerset, AESC building a second Sunderland plant, and West Midlands Gigafactory plans.[2] In addition, the UK Battery Innovation Programme – a manufacturing scaleup and skills platform – has supported more than 140 UK battery developers and raised more than £1 billion in VC investments since 2018.[3]
[1] Source: Schneider Electric (2023). Schneider Electric Announces Expansion in Leeds.
[2] Source: The Faraday Institution (2024). UK gigafactory outlook (September 2024).
[3] Source: The Faraday Institution (n.d.). The Battery Innovation Programme.
UK electronics and electrical equipment (E&E) manufacturing sectors – employment
- Both the electronics and electrical equipment sectors lost roughly half of their employees between 2000 and 2024.
- This sharp decrease was steeper than the reduction that occurred in the manufacturing sector as a whole, which saw a 30% reduction in workers in the same period.
- In electronics this reduction in employment, despite a growth in value added, can be explained by the fact that a large part of the sector’s growth is in very high productivity activities, while there has been a reduction in more labour-intensive electronic manufacturing activities. Also, this sector is increasingly automated, adding to the negative employment trend.[1]
- In electrical equipment the more modest growth rates of value added in the period, allied with the outsourcing/ offshoring trend of the sector, help to explain the employment reduction.
- Finally, stakeholders in both sectors have been very vocal about the serious skills gaps in the UK workforce,[2],[3] which makes recruitment difficult and increases automation efforts.
[1] Source: UK Parliament (2017). Electronics and Machinery Sector Report.
[2] Source: BEAMA (2022). BEAMA – Written evidence – UK energy supply and investment.
[3] Source: MTC (2022). The UK semiconductor industry: current landscape and future opportunities.
UK electronics manufacturing sector – employment
- In terms of employment in the electronics sector, the biggest increase in absolute terms was in instruments and appliances for measuring, testing, and navigation; watches and clocks, in which employment grew by 9,600 between 2011 and 2023.
- Other sub-sectors also had significant employment growth, such as irradiation, electromedical, and electrotherapeutic equipment and optical instruments and photographic equipment.
- Four sub-sectors reduced their employment in absolute terms from 2011 to 2023: communication equipment, computers and peripheral equipment, electronic components and boards, and consumer electronics.
- These employment trends mirror the value-added trends and can therefore be explained by the business dynamics of each sub-sector.
- The only exception was communication equipment, in which, despite significant value-added growth, there was the largest reduction in employment in absolute terms. In this period there was a consolidation of 5G equipment suppliers (from 10 to 2 – Nokia and Ericsson), which could have been accompanied by increased imported content of domestic UK manufacturing, leading to growth without domestic employment.[1]
[1] Source: UK Parliament (2021). The 5G supply chain diversification strategy.
UK electrical equipment manufacturing sector – employment
- For employment in the electrical equipment sector, the picture is less positive across sub-sectors.
- The only two positive performers were other electrical equipment and batteries and accumulators.
- Other sub-sectors had significant reductions, such as electric motors, generators, transformers, and electricity distribution and control apparatus (8,800 reduction), domestic appliances (4,500), and electric lighting equipment (3,600).
- This declining employment trend reflects the modest growth performance of the sector in the period, combined with automation and digitalisation of processes. Skills shortages and difficulties filling vacancies (which can take 6–12 months) contribute to this push towards the rationalisation of production.
UK electronics and electrical equipment (E&E) manufacturing sectors – labour productivity
- The evolution of labour productivity in the E&E sector has been heterogenous.
- The electronics sector had an excellent performance, with 8.7% annual average growth (CAGR) between 2000 and 2024, but with a negative trend after the COVID-19 pandemic.
- The electrical equipment sector had a more volatile trajectory: growth on par with the UK manufacturing sector from 2000 to 2008; sub-par performance from the 2009 global financial crisis until 2018; a growth spurt from 2018 until the COVID-19 pandemic; and a sharp decrease after 2021.
- The reduction in productivity after the pandemic was driven by a significant increase in employment without an equivalent increase in value added. This can be related to new projects (e.g. new semiconductor or battery fabs) being developed but not reaching their potential in terms of value added. Some anticipation of growth in future demand due to the digitalisation and electrification trends may also be evident, as companies seek to secure the workforce in advance to allow for fast ramp-up.
Electronics and electrical equipment (E&E) manufacturing sectors – trade balance
- The UK has a significant trade deficit in both the electronics and electrical equipment sectors, according to UN Comtrade data.
- By international comparison, this means the UK had the third-largest deficit in electronics in 2023, smaller only than that of the USA and India.
- In electrical equipment, the UK had the second-largest trade deficit in the world in 2023, smaller only than that of the USA.
- The sectoral trade deficits of the USA can be explained by the sheer size of its domestic market, as imports trump exports despite a high sectoral value added. In the UK the negative trade balance reflects its reliance on imported consumer electronics (e.g. smartphones and computers) and electronic components (e.g. microchips).
UK electronics and electrical equipment (E&E) manufacturing sectors – trade balance
- According to ONS data, the UK’s trade deficits in both electronics and electrical equipment have been increasing since 2010.
- Exports have increased in both sectors, but at a faster rate in electrical equipment (3.7% CAGR) than electronics (1.4% CAGR).
- But imports in both sectors have risen at a faster pace (6.0% CAGR in electrical equipment and 2.1% CAGR in electronics), increasing the gap over time.
Electronics manufacturing sector – global export market share
- The UK global export market in electronics went from 5% in 2000 to 1.1% in 2023.
- Globally, the export market in 2023 was dominated by China (22.2%), Taiwan (8.6%), the USA (7.3%), Korea (5.4%), Germany (5.2%), and Japan (3.2%).
- But there have been important changes in the market since 2000. From 2000 to 2015, many leading countries, including Japan, the USA, the UK, Germany, France, Canada, and Italy lost market shares to China – and to a lesser extent to Taiwan and Korea.
- Since 2015, however, there has been a slight reversal of this trend, with the USA, Germany, France, the UK, Italy, and Canada (and other non-G7 countries) recovering market shares from China and Korea.
- The exceptions are Taiwan, which continuously gained market shares from 2005, and Japan, which continuously lost market share from 2000, albeit stabilising after 2015.
- A meaningful part of China’s loss of market share can be explained by trade diversion after the USA began imposing tariffs and restrictions (from 2018 onwards). Since then, market shares increased in the USA, EU countries, and Taiwan.[1],[2] China’s increasing wages might also explain some of the reduction in exports as companies seek to relocate to other countries.[3]
[1] Source: UNCTAD (2019). Trade and trade diversion effects of United States tariffs on China.
[2] Source: Federal Reserve (2024). Global trade patterns in the wake of the 2018-2019 U.S.-China tariff hikes.
[3] Source: Xing (2018). Rising wages, yuan’s appreciation and China’s processing exports.
Electrical equipment manufacturing sector – global export market share
- The UK has a small share of the global electrical equipment export market (1.4% in 2023).
- China dominates global exports in this sector, with a 27.3% export share in 2023. Other globally dominant countries include Germany, the USA, and, to a lesser extent, Japan, Italy, Korea, and France.
- The trend for this sector was less convoluted than that of electronics. The general trend was a loss of market share to China. While in the early 2000s Chinese companies were competing mostly on lower prices, since then they have caught up on quality. Sector experts explained that as many key patents in the sector expired, Chinese companies were able to legally produce electrical equipment with state-of-the-art technology.
- From 2020 there was a slight recovery from some countries, such as Germany, the USA, Italy, France, and Canada. This could have been driven by the higher demands of clients and more stringent regulations on the sustainability of products, clean power, and energy efficiency, such as the Ecodesign for Sustainable Products Regulation (ESPR)[1] implemented by the EU and UK.
[1] Source: European Commission (2024). Ecodesign for Sustainable Products Regulation.
UK electronics and electrical equipment (E&E) manufacturing sectors – business spending on R&D (BERD)
- The R&D expenditure of the electronics sector fell between 2000 and 2010 (the global financial crisis) but has been on a growth trend since then.
- This growth in R&D investments after 2010[1] may be explained by the more generous (or heightened awareness of) R&D incentives with the transformation of the Technology Strategy Board into Innovate UK in 2007 and the consolidation of the Catapult Centres in 2011.
- The electrical equipment sector, on the other hand, remained relatively stable between 2000 and 2019. But since the COVID-19 pandemic, R&D investments in the sector have grown.
[1] Source: DSIT (2023). 2023 Update to the ‘Catapult Network Review’.
