UK tech sectors battle component & skills shortages

According to a recent report, the UK electronics, telecoms, and electrical manufacturing sectors are struggling with component and skills shortages. The quarterly Manufacturing Health Index from Unleashed utilised analysis from over 2,500 firms to showcase the extent of these difficulties. The report found that electronics and telecommunications manufacturers were amongst the least successful sectors, obtaining an average index score of 38 out of 100. A score of 50 or more indicates a sector performing well.

The scores generated by Unleashed's Manufacturing Health Index are computed utilising a combination of sales, expenditure, and overall efficiency metrics. Small and medium-sized firms in the electronics and telecommunications categories, and electrical and electrical components industries specifically, scored worryingly low at 38 and 48 out of 100, respectively.

Surprisingly, while these sectors battled with shortages, the UK cosmetics and personal care industry and industrial machinery firms emerged among the highest-performing sectors. Both these sectors boasted near-perfect scores of 98 out of 100, showcasing their impressive performance towards the end of 2023. In contrast, office equipment, supplies, and food sectors faced stern troubles, registering the lowest scores at 18 and 30 out of 100, respectively.

Jarrod Adam, Head of Product at Unleashed, stated: "Manufacturers in every industry category were hit by challenges from all directions in 2023, including high inflation and rising borrowing costs. However, it seems that the electrics and electronics industries have struggled more than most possibly due to the recent component shortages and ongoing labour shortfalls."

"The appetite for digital technology and connectivity is ongoing going to grow, bringing new opportunities to become trusted suppliers to OEMs and telecoms providers," said Adam. 

Adam emphasised the need for ready deliverance at competitive prices to seize the growing opportunities brought by the relentless appetite for digital technology and connectivity. Further, he stressed the importance of full oversight of inventory management processes for manufacturers to proactively respond to market changes, improve internal efficiencies, reduce the impact of labour shortages, and ultimately drive sales and improve profitability.

Despite this, the UK manufacturing industry reported an overall rebound at the end of 2023, with 11 of the 16 categories studied scoring more than 50 health points in the Manufacturing Health Index. This led to an average of 77. Lead times were also notable, halving from the 43-day average of 2022 to just 20 by the end of 2023.

However, the effects of the pandemic were still apparent, with overstocking becoming a common practice among businesses. Excess inventory levels rose significantly to 141,397 in the latter part of 2023 compared to 119,183 for the same period in 2022. Retail and consumer-centric manufacturers managed their inventories better than heavier industries such as building and construction or metal and fabrication, where longer lead times are already typical.