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1、Institute for Manufacturing,University of CambridgeMarch 2024UK INNOVATION REPORT 2024Benchmarking the UKs industrial and innovation performance in a global context2Table of contentsList of charts3What makes the report different?4Introduction5Contributors and acknowledgments7Executive summary8Theme

2、1:Structure and performance of the UK economy15Theme 2:Investment in innovation23Theme 3:Industrial performance focus on the UK machinery and equipment(M&E)manufacturing sector31Theme 4:Science and engineering workforce52Theme 5:Net-zero innovation593Theme 1:Structure and performance of the UK econo

3、myChart 1.1.Structure of the UK economy,2022Chart 1.2.Labour productivity growth in selected economies,20132021Chart 1.3.Sectoral labour productivity growth in selected economies,20192021Chart 1.4.Growth in value added and employment in selected sectors and economies,20192021Chart 1.5.Growth in valu

4、e added and employment in selected sectors and economies,20212022Appendix 1.1.Sector classification and statistical codesTheme 2:Investment in innovationChart 2.1.The UKs performance in research,development,scale-up and industrial value added comparedChart 2.2.R&D intensity:international comparison

5、Chart 2.3.Government-funded expenditure on R&DChart 2.4.Top R&D-investing companies in the worldChart 2.5.Patent applications in key technologiesAppendix 2.1.Correspondence table between the International Patent Classification(IPC)codes and the five technology fieldsTheme 5:Net zero innovationChart

6、5.1.UK carbon emissions against gross domestic product(GDP)Chart 5.2.UK carbon emissions by industryChart 5.3.UK low-carbon and renewable energy economy(LCREE)sector performanceChart 5.4.Employment and number of businesses in the low-carbon and renewable energy economy(LCREE)Chart 5.5.Public R&D spe

7、nding on low-carbon and renewable energy technologies total budgets Chart 5.6.Public R&D spending on low-carbon and renewable energy technologies by technologyAppendix 5.1.Sectoral breakdown for ONS(2023)atmospheric emissions:greenhouse gases by industry and gasAppendix 5.2.Key definitions low-carbo

8、n and renewable energy economy(LCREE)Theme 3:Industrial performance focus on the UK machinery and equipment(M&E)manufacturing sectorChart 3.1.Machinery and equipment(M&E)manufacturing contribution to the UK economyChart 3.2.Machinery and equipment(M&E)manufacturing value added,employment and labour

9、productivity Chart 3.3.UK machinery and equipment(M&E)manufacturing value added(1/2)Chart 3.4.UK machinery and equipment(M&E)manufacturing value added(2/2)Chart 3.5.UK machinery and equipment(M&E)manufacturing employment(1/2)Chart 3.6.UK machinery and equipment(M&E)manufacturing employment(2/2)Chart

10、 3.7.UK machinery and equipment(M&E)manufacturing labour productivityChart 3.8.Machinery and equipment(M&E)manufacturing trade balance Chart 3.9.Machinery and equipment(M&E)manufacturing global export market shareChart 3.10.UK machinery and equipment(M&E)manufacturing exports and importsChart 3.11.U

11、K machinery and equipment(M&E)manufacturing business spending on R&DAppendix 3.1.Mapping between SIC 2007 code and HS codeAppendix 3.2.References and consultations List of chartsTheme 4:Science and engineering workforceChart 4.1.STEM degree production intensityChart 4.2.STEM graduates in the UKChart

12、 4.3.Where do UK STEM graduates work?Chart 4.4.Skills needs:international comparisonChart 4.5.Engineering profession salaries4What makes the report different?The aim of the UK Innovation Report is to facilitate policy discussions on innovation and industrial performance and the interplay between the

13、m.While numerous sources of data on the topic of innovation exist,the aim of the UK Innovation Report is to make a contribution by bringing together,in a single place,innovation and value-added indicators in a concise and accessible format.Instead of structuring the report according to traditional i

14、nput and output indicators,the intention with the report is to include data that provides rich quantitative representations of the vitality of both the UKs innovation activity and its industrial performance in an international context.An important theme throughout the report is the analysis of secto

15、ral and regional data to better understand the drivers of national performance and provide more granular policy insights.While the report does not make specific policy recommendations,it does highlight areas where additional evidence and policy action may be required.MotivationTo review the UKs inno

16、vation and industrial performance and compare it with that of other selected countries;To facilitate discussions on the relation between innovation and sectoral competitiveness;andTo contribute to the evidence base that is available to inform industrial and innovation policy.Please reference this re

17、port as:Cambridge Industrial Innovation Policy(2024).UK Innovation Report 2024.IfM Engage.Institute for Manufacturing,the University of Cambridge.5IntroductionThe UK Innovation Report remains a crucial guide to navigating the evolving landscape of innovation and technological progress in the UK.Last

18、 years report highlighted the establishment of two pivotal new departments:the Department for Business and Trade(DBT)and the Department for Science,Innovation and Technology(DSIT).In November 2023,DBT released its Advanced Manufacturing Plan,the aim of which is to support the sectors long-term succe

19、ss.The plan includes 4.5 billion of funding over 5 years(starting from 2025)to strategic manufacturing sectors such as automotive,aerospace,life sciences and clean energy,all of which have been analysed in previous editions of the UK Innovation Report.In February 2024,DSIT published an update on pro

20、gress of its Science&Technology Framework,which confirms the commitment to progress towards total government investment in R&D reaching 20 billion per annum by the financial year 2024/25.The latest update emphasises the delivery,development and deployment of five critical technologies:AI,engineering

21、 biology,future telecommunications,semiconductors and quantum technologies.Section 2 of this years report analyses the countrys position in international patenting activity for these essential technologies.It is unclear what strategic direction the government will take after 2024.With the prospect o

22、f an impending election,the dynamics of political leadership may soon transform,potentially ushering in alterations to policy directions,funding priorities and the administrative landscape of UK innovation.This underlines the importance of policy frameworks that can adapt to evolving political clima

23、tes while ensuring continuity in the support and growth of critical technology sectors.In an ever-changing landscape,the UK Innovation Report remains steadfast in its commitment to provide timely updates on the implications for the UKs innovation ecosystem.56What is new in the 2024 edition of the UK

24、 Innovation Report?The UK Innovation Report 2024 maintains last years core policy-guiding questions but uses new indicators and longer time series and integrates additional data sources.It presents a deep dive into a different sector:the machinery and equipment manufacturing sector.The report is org

25、anised as follows:Section 1 reviews the UKs sectoral productivity and economic restructuring during the COVID-19 pandemic and its aftermath.Section 2 examines the latest data on UK research and development(R&D)expenditure and reviews the countrys performance across various stages of innovation.Secti

26、on 3 delves into the performance of the UKs machinery and equipment manufacturing sector,incorporating insights from industry expert consultations.Section 4 analyses the UKs production of science,technology,engineering and mathematics(STEM)graduates and their job opportunities.Section 5 reviews the

27、UKs low-carbon and renewable energy economy(LCREE)and examines the decoupling of the UKs economic growth from its greenhouse-gas emissions.7Contributors and acknowledgementsContributorsThe contributors to this report are:Jennifer Castaneda-Navarrete,Zongshuai Fan,Mateus Labrunie,David Leal-Ayala,Car

28、los Lpez-Gmez and Michele Palladino.Design by Ella Whellams.Copy-editing by Elizabeth TofarisandAmandaGeorge.Cover image:Adobe Stock.AcknowledgementsThe authors would like to thank Tim Minshall and Eoin OSullivan,who provided comments and suggestions and reviewed earlier versions of this report.We w

29、ould also like to thank all of theorganisationsfrom the private andpublic sectorswho provided valuabletime andinsights during the interviews andworkshops carried out to inform the report.DisclaimerNames of countries and territories follow widely accepted conventions and do not imply the expression o

30、f any opinion whatsoever on the part of the authors or their affiliated institutionsconcerningthe legalstatusof anycountry,territory,city orarea,or of its authorities.Any mention of firm namesor commercialproductsdoes notconstituteanendorsementby the authors or theiraffiliated institutions.For furth

31、er details,please contact:ifm-policy-linkseng.cam.ac.ukPlease reference this report as:Cambridge Industrial Innovation Policy(2024).UK Innovation Report 2024.IfM Engage.Institute for Manufacturing,the University of Cambridge.CambridgeIndustrialInnovation PolicyCambridgeIndustrialInnovationPolicy(CII

32、P)is aglobal,not-for-profitpolicygroupbased atthe Institute for Manufacturing(IfM),theUniversity of Cambridge.CIIPworks with governmentsandglobal organisations to promote industrial competitiveness and technological innovation.We offer new evidence,insights and tools based on the latest academic thi

33、nking and internationalbestpractice.This report wasdelivered through IfMEngage,the knowledge-transferarmof the Institute for Manufacturing(IfM),the University of Cambridge.IfMEngage,17 Charles BabbageRoad,Cambridge,CB3 0FS,the UKwww.ciip.group.cam.ac.uk8Executive summaryUK INNOVATION REPORT 2024UK p

34、roductivity rebounded quickly after the COVID-19 pandemic.Among the five economies examined,the UK experienced the most pronounced decline in labour productivity(-9.2%)in 2020.France followed with a decline of 7.3%,while Germany experienced a decline of 3.3%.However,in 2021 the UK displayed the fast

35、est growth rate(8.8%),closing the gap on pre-pandemic levels.Switzerland followed with a growth rate of 5%,and Germany with 3.3%.Knowledge-intensive services and manufacturing have led the COVID-19 recovery.Between 2019 and 2021,knowledge-intensive services and manufacturing saw some of the fastest

36、productivity growth among the economies analysed.In the UK,for instance,labour productivity in manufacturing increased by 9.7%,while in information and communication it rose by 12.2%.This positive trajectory persisted to some degree in 2022.For example,Switzerland stands out for the rapid growth of

37、its manufacturing industry,largely driven by its chemical and pharmaceutical industries.In contrast,the UK experienced a setback,with a decline of-3.3%in manufacturing value added in 2022.Knowledge-intensive services are expanding their contribution to the economy.Between 2019 and 2021,knowledge-int

38、ensive services,such as information and communication and professional,scientific and technical activities,significantly increased their contributions to the economies analysed.In the UK,these sectors together accounted for an increase of 0.4 percentage points in employment shares and 1.8 percentage

39、 points invalue added shares.Although their growth moderated in 2022,rapid expansions are expected to continue in the future.KEY FINDINGSTheme 1:Structure and performance of the UK economy9The UK is considered to be a leading global hub for scientific knowledge.The UK produces more academic publicat

40、ions than any other country,except China and the US,but 57%more than the US and six times more than China in per capita terms.The UK is the world leader in field-weighted citation impact(FWCI),a common benchmark for research quality.However,the UK falls behind in converting scientific knowledge into

41、 commercial success.Compared to the US,the UK lags behind in development and scale-up metrics.The proportion of the workforce employed in medium and high value added manufacturing is lower than in competitor nations,and the value added per worker in these sectors is less than half of that in the US.

42、The UKs spending on R&D is higher than the average of the OECD countries,but it is still below that of leading nations.The UKs gross domestic expenditure on research and development(GERD)as a share of GDP was 2.91%in 2021,above the OECDaverage of 2.72%.However,the UK still lags behind countries such

43、 as Korea,the US,Japan and Germany.In 2021,UK government-funded R&D amounted to 0.57%of GDP,below the OECD average of 0.63%.Among the top 100 R&D-investing companies in the world,only three have headquarters in the UK.This is quite low,considering that in 2022 the UK was home to a total of 95 of the

44、 worlds top 2,500 R&D-investing companies.The UK ranks fifth behind the US,which has 827;China,which has 679;Japan,which has 229;and Germany,which has 113 such companies.KEY FINDINGSTheme 2:Investment in innovation10The UK machinery and equipment(M&E)sector is a major global player,but some sub-sect

45、ors have contracted significantly.According to OECD data,the UK ranked among the top players in the world by value added in 2021,behind Japan,the US,Germany and Italy but ahead of the Netherlands,France and Switzerland.Between 2008 and 2021,value added in some M&E sub-sectors experienced substantial

46、 expansion,with other general-purpose machinery and lifting and handling equipment growing by 41%and 36%,respectively.Conversely,some sub-sectors have experienced a significant contraction,particularly other engines and machinery for plastic and rubber,which declined by 50%and 90%,respectively.Overa

47、ll,value added in the M&E sector contracted from 13.1 billion in 2008 to 12.5 billion in 2021.However,the productivity of the M&E sector remains 37%higher than the average productivity of the whole manufacturing sector and 60%higher than the whole economy.A decline in employment across 17 out of 21

48、UK M&E sub-sectors resulted in a loss of 28,000 jobs between 2011 and 2021.The UK M&E sector ranked sixth in terms of employment among OECDcountries in 2021,employing 162,000 people.This represents a loss of 28,000 jobs compared to 2011,amounting to a 15%reduction over the course of 10 years.Among M

49、&E sub-sectors,the most significant job losses between 2011 and 2021 were reported in machinery for mining,quarrying and construction(-5,300),machinery for plastics and rubber(-4,000),office machinery(-3,200)and pumps and compressors(-3,200).While the UK is the 10th largest M&E exporter in the world

50、,the country has one of the largest trade deficits.The UKs trade deficit in the M&E sector more than tripled between 2011 and 2022,ranking 176th out of 188 countries in trade balance.The largest UK M&E sub-sectors by trade value in 2022 were other engines and machinery for mining,quarrying and const

51、ruction.China,the largest M&E exporter,has been gradually gaining market share at the expense of other competitor countries.Growth of business expenditure on R&D(BERD)in the UK M&E sector has been slower than in the manufacturing sector as a whole.Business expenditure on R&D(BERD)in the M&E sector r

52、epresented 5.9%of total BERD in the UK manufacturing sector in 2022.BERD in the UK M&E sector rose from 0.7 billion in 2000 to 1 billion in 2020,with a compound annual growth rate(CAGR)of 1.9%.This is lower than the compound annual growth rate observed for overall UK manufacturing(2.9%)during the sa

53、me period.KEY TRENDSTheme 3:Machinery and equipment manufacturing sector11The M&E market depends on demand from other sectors and is typically sensitive to economic cycles.The UK M&E sector aggregates many sub-sectors,which are quite distinct from each other and which respond differently to economic

54、 cycles.Sales orders in the M&E sector are usually tied to the long-term investment plans of other sectors.In periods of economic uncertainty,these plans are often postponed.High production costs,political uncertainty and foreign ownership are among the factors influencing offshoring decisions in so

55、me sub-sectors.Reasons for offshoring appear to be the loss of key suppliers and high production costs in the UK.For example,the fluid power equipment and the valves and actuators sub-sectors are affected by the high cost and low availability of steel in the UK.As a result,many products are designed

56、 in the UK but manufactured in China.The UKs exit from the EU has contributed to the consolidation in Europe of manufacturing in the pumps and compressors sub-sector,which is dominated by European firms.Changes in regulations,intra-industry trade and policy changes in export markets may have impacte

57、d UK imports and exports.New trade rules with the EU have impacted the ability of SMEs to export to Europe.The decision to move away from the European CE conformity assessment marking,and to create a UK-specific UKCA marking,followed by a reversal of this decision,has also affected some sub-sectors.

58、New regulations require certain valves to be tested within China by a local inspector,adding costs to qualify for the Chinese market.Labour shortages have impacted growth and incentivised automation across sub-sectors.The consulted firms reported difficulties hiring younger and more diverse workers

59、for the sector.These difficulties cut across sub-sectors and functions,affecting both engineering and technician positions.New skills are also needed,for example,cyber-security,robotics,IoT,advanced manufacturing,cloud and big data.Investments in automation and factory optimisation have been occurri

60、ng in the sector and partly explain the reduction in employment.R&D investment decisions in the UK M&E sector are often made abroad.There is a dominant presence of foreign-owned original equipment manufacturers(OEMs)and distributors across UK M&E sub-sectors.The consulted stakeholders perceive UK M&

61、E companies to be less R&D-intensive than foreign ones,except for some large internationally competitive firms.The UK M&E sector is dominated by SMEs,which might have fewer resources available for R&D and fewer advisory and support options from the broader innovation ecosystem than large firms.Susta

62、inability,digitalisation and materials research trends have shaped the direction of innovation efforts in recent years.Emissions regulations,such as those for non-road mobile machinery,and net-zero targets make it imperative to develop more energy-efficient and environmentally sustainable machines a

63、nd equipment.KEY DRIVERSTheme 3:Machinery and equipment manufacturing sector12The UK has a relatively high proportion of science,technology,engineering and mathematics(STEM)graduates.During the academic year 2021/22,42%of all graduates in the UK completed STEM disciplines.The UK produces more STEM g

64、raduates per capita in the 2034-year-old population than comparator countries.In 2020 the UK awarded 1,393 first university degrees per 100,000 individuals in STEM fields,compared to 1,317 in the US,and 690 and 650 in India and China,respectively.However,the UK is producing fewer graduates in engine

65、ering,manufacturing and construction.In 2022 more than half(52%)of the UKs STEM graduates pursued health-related disciplines.In 2021 the percentage of graduates in engineering,manufacturing and construction in the UK was only 9.1%,which is significantly lower than Italy,Switzerland,Japan,Korea and G

66、ermany.In these countries,the percentage of graduates in these disciplines ranged from 14.4%to 22.1%.Despite the high proportion of STEM graduates,there are significant STEM-related skills gaps in the UK labour market.In the UK 934,000 vacancies were recorded towards the end of 2023,46%of which were

67、 in fields related to STEM disciplines.At the beginning of 2024,12%of UK firms in manufacturing and 6.9%in information and communication said they were experiencing a shortage of workers.For UK employers,it is difficult to find individuals with skills related to medical knowledge,scientific knowledg

68、e,production and technology knowledge and digital skills compared to the OECD average and the EU.KEY FINDINGSTheme 4:Science and engineering workforce13The UK has successfully decoupled GDP growth from greenhouse-gas(GHG)emissions.While the UKs GDP doubled between 1990 and 2021,the country achieved

69、a 40%reduction in GHG emissions during this period.However,further work is required to achieve the target set by the Climate Change Act,which commits the UK government to reducing GHG emissions by at least 100%of the 1990 levels(net zero)by 2050.Only five industries failed to reduce emissions from 1

70、990 to 2021:wholesale and retail trade and repair of motor vehicles;construction;accommodation and food services;administrative and support service activities;and real estate activities.The UK low-carbon and renewable energy economy(LCREE)has performed strongly since 2019.The LCREE economy reported

71、a 54.4 billion turnover in 2021,compared to 45.8 billion in 2019,and over 27,000 and 42,000 more businesses and employees,respectively,in 2021 than in 2019.The sectors with the highest turnover in 2021 were:energy-efficient products(14.01 billion);low-emission vehicles and infrastructure(8.52 billio

72、n);and offshore wind(8.42 billion).The UK consistently ranked among the top six countries in public R&D expenditure on low-carbon renewable energy technologies from 2010 to 2022.At$1.6 billion,the UKs public R&D budget in low-carbon and renewable energy technologies in 2022 was lower than Germany($2

73、 billion),Japan($3.4 billion),France($4.9 billion)and the US($9.6 billion)but higher than Canada($1.2 billion).Among low-carbon technologies,the highest public R&D expenditure in the UK in 2022 was on nuclear power technologies,followed by energy efficiency and renewables.KEY FINDINGSTheme 5:Net zer

74、o innovation14THEME ONEStructure and performance of the UK economyHow did UK sectoral productivity perform during and in the aftermath of the COVID-19 pandemic?How do these trends and patterns compare with those of other countries?How did the structure of the UK economy change over this period?15UK

75、productivity rebounded quickly after the COVID-19 pandemic.Among the five economies examined,the UK experienced the most pronounced decline in labour productivity(-9.2%)in 2020.France followed with a decline of 7.3%,while Germany experienced a decline of 3.3%.However,in 2021 the UK displayed the fas

76、test growth rate(8.8%),closing the gap on pre-pandemic levels.Switzerland followed with a growth rate of 5%,and Germany with 3.3%.Knowledge-intensive services and manufacturing have led the COVID-19 recovery.Between 2019 and 2021,knowledge-intensive services and manufacturing saw some of the fastest

77、 productivity growth among the economies analysed.In the UK,for instance,labour productivity in manufacturing increased by 9.7%,while in information and communication it rose by 12.2%.This positive trajectory persisted to some degree in 2022.For example,Switzerland stands out for the rapid growth of

78、 its manufacturing industry,largely driven by its chemical and pharmaceutical industries.In contrast,the UK experienced a setback,with a decline of-3.3%in manufacturing value added in 2022.Knowledge-intensive services are expanding their contribution to the economy.Between 2019 and 2021,knowledge-in

79、tensive services,such as information and communication and professional,scientific and technical activities,significantly increased their contributions to the economies analysed.In the UK,these sectors together accounted for an increase of 0.4 percentage points in employment shares and 1.8 percentag

80、e points invalue added shares.Although their growth moderated in 2022,rapid expansions are expected to continue in the future.KEY FINDINGSStructure and performance of the UK economy1617Note:1Export data corresponds to goods exported in 2021,with industry percentages based on Office for National Stat

81、isticsexperimental data,and does not include category unknown industry.Source:Office for National Statistics.Chart 1.1.Structure of the UK economy,2022Gross value added,employment,exports of goods and business R&D expenditure(BERD)1In 2022 knowledge-intensive1and labour-intensive services1contribute

82、d to approximately 80%of the UK economys gross value added and employment.While medium/high-tech manufacturing1accounted for 4.1%of gross value added and 2.4%of employment,this sector stands out for its contribution to exports and R&D.It represented the largest share of goods exports,amounting to 37

83、.1%in 2021,and the second largest share of business R&D expenditure,approximately 41.1%in 2022.The main change observed in the structure of the UK economy,compared to the pre-pandemic period,is the expansion of knowledge-intensive services,as depicted in Charts 1.4 and 1.5.2,194 billion31.7 million3

84、31 billionNote:1Appendix 1.1 presents definitions of these classifications of sectors.49.9 million0%10%20%30%40%50%60%70%80%90%100%Gross valueaddedEmploymentExportsBERD%of total economy Mining and quarryingAgriculture,forestry and fishingUtilitiesMedium/high-tech manufacturingLow/medium-tech manufac

85、turingConstructionKnowledge-intensive servicesLabour-intensive services18Chart 1.2.Labour productivity growth in selected economies,20132021Value added per worker,annual growth rateSource:OECD Data Explorer.The economies analysed witnessed substantial declines in productivity in 2020,with the US bei

86、ng the only exception.However,all these economies resumed growth in 2021.Notably,the UK experienced the most pronounced decline in productivity growth in 2020(-9.2%),followed by France(-7.3%)and Germany(-3.3%).However,in 2021 the UK displayed the fastest growth rate(8.8%),closing the gap on pre-pand

87、emic levels(in real terms).Switzerland followed with a growth rate of 5%,and Germany with 3.3%.Recent research suggests that the US managed to record a positive productivity growth in 2020(4.1%),because most of the jobs lost were in low-wage activities,and investment and capacity utilisationrecovere

88、d rapidly.1The distinct treatment of furlough schemes also played a role.2For further insights on this issue,please refer to the related blog.Among the European economies studied,Switzerland saw the strongest productivity performance.This can be partly explained by its lower dependence on the hospit

89、ality sector and robust chemical and pharmaceutical industries.3Source:1Stewart(2022);2 Vries,Erumban and van Ark(2021)and Office for National Statistics(2020);3FDFA(2023)and OECD(2022).-12%-10%-8%-6%-4%-2%0%2%4%6%8%10%2013 2014 2015 2016 2017 2018 2019 2020 2021Annual productivity growth(value adde

90、d per worker)FranceGermanySwitzerlandUKUS19Across the economies analysed,the sectors that were impacted the most in 2020,such as accommodation and food service activities,the arts,entertainment and recreation,and administrative and support services,also bounced back quickly in 2021,albeit to product

91、ivity levels below those seen pre-pandemic.In contrast,knowledge-intensive services and manufacturing experienced among the fastest productivity growth between 2019 and 2021.Between 2019 and 2021,Switzerland led with the swiftest productivity growth in the manufacturingsector,at 17.8%,followed by th

92、e UK at 9.7%,and the US at 8.8%.The US(13.6%)and the UK(12.2%)also experienced the fastest growth in information and communication,along with professional,scientific and technical activities(the US at 15.1%;the UK at 6.5%),followed closely by Switzerland(at 6.3%).In financial and insurance activitie

93、s,the fastest productivity growth was observed in Switzerland(10.2%),the US(9.8%)and Germany(7.1%).Chart 1.3.Sectoral labour productivity growth in selected economies,2019 2021Value added per worker,annual growth rateSource:OECD Data Explorer.Economic activityFranceGermanySwitzerlandUKUSManufacturin

94、g-6.7%4.9%17.8%9.7%8.8%Financial and insurance activities5.3%7.1%10.2%0.5%9.8%Information and communication1.1%3.0%2.9%12.2%13.6%Professional,scientific and technical activities-3.9%4.3%6.3%6.5%15.1%Mining and quarrying0.4%18.4%11.7%-19.5%2.3%Wholesale and retail trade;repair of motor vehicles and m

95、otorcycles2.0%0.5%-3.0%3.1%2.1%Water supply;sewerage,waste management and remediation activities-0.4%-9.9%3.1%0.6%9.5%Agriculture,forestry and fishing-8.3%18.4%-1.7%-6.1%-3.9%Real estate activities-5.9%3.1%-2.3%-1.2%2.7%Human health and social work activities-2.3%-1.7%1.6%-9.3%5.4%Public administrat

96、ion and defence;compulsory social security0.1%-0.9%-1.5%-8.9%-0.9%Administrative and support service activities-5.6%-5.1%-0.5%-8.1%7.0%Construction-12.2%-5.5%1.4%3.6%-0.6%Other service activities-12.1%-4.7%1.6%-3.5%-0.1%Education-3.4%-10.3%-7.3%-9.9%3.4%Activities of households as employers;undiffer

97、entiated goods-and services-producing activities of households for own use1.3%-3.9%-17.3%-29.4%11.8%Arts,entertainment and recreation-29.4%-19.3%14.5%-9.8%4.2%Electricity,gas,steam and air conditioning supply-2.0%-8.6%-24.7%-27.3%4.5%Transportation and storage-16.4%-6.2%-21.3%-25.2%-8.6%Accommodatio

98、n and food service activities-34.7%-30.6%-32.9%-14.7%9.0%Negative Productivity growth Positive-Fastest20Differences in how sectoral productivity grew between 2019 and 2021 were identified.Knowledge-intensive services,such as information and communication,financial and insurance activities,and profes

99、sional,scientific and technical activities generally experienced expansions in both value added and employment.In the UK these sectors together accounted for an increase of 0.4 percentage points in employment shares and 1.8 percentage points in value added shares.In contrast,the rapid productivity s

100、urge observed in the UK manufacturing sector in 2021(Chart 1.3)is explained by a combination of increased value added and a reduction in employment levels.These figures should be interpreted in the context of both temporary lay-offs and labour shortages.1 For further insights on this issue,please re

101、fer to the related blog.Across countries,the US experienced reductions in employment or slower growth than other economies.This may reflect the different treatment of furlough schemes,which was not reflected as a cost in value added in the US but had a negative impact on employment.Chart 1.4.Growth

102、in value added and employment in selected sectors and economies,2019 2021Growth rates size of bubbles represents 2021 value added sharesSource:OECD Data Explorer.Source:1Make UK(2022);Randstand(2022).21Recent data shows that the information and communication sector maintained a positive trend in 202

103、2.Except for Switzerland,professional,scientific and technical services also sustained a positive trend,albeit at a slower pace in 2022,and rapid expansions are expected in the future.1 In contrast,the financial and insurance sector saw negative value added growth in 2022 in France,Switzerland and t

104、he US.In comparison,Germanystood out for its relatively strong value added growth in this sector(4.2%).Several countries have launched strategies to strengthen their manufacturing sectors,signalling an intention to expand this industry in the future.In 2022 expansions in employment were observed in

105、all economies analysed.In terms of value added,Switzerland(6.8%)led the growth in manufacturing,largely supported by the performance of its chemical and pharmaceuticalindustries.In contrast,the UK recorded negative rates(-3.3%),with the largest falls(in absolute terms)observed across machinery and e

106、quipment,transport equipment and basic metals and metal products.Chart 1.5.Growth in value added and employment in selected sectors and economies,2021 2022Growth rates size of bubbles represents 2022 value added sharesSource:OECD Data Explorer,Office for National Statistics,US Bureau of Labor Statis

107、tics,US Bureau of Economic Analysis.Source:1US Bureau of Labor Statistics(2023);McKinsey&Company(2020).22Appendix 1.1.Sector classification and statistical codesClassification of sectors based on the UK Standard Industrial Classification(SIC)ClassificationSection DivisionDescription ClassificationSe

108、ction DivisionDescription Low/medium-tech manufacturingC1012Food products,beverages and tobacco Knowledge-intensive servicesJ5863Information and communication C1315Textiles,wearing apparel,leather and related products K6466Financial and insurance activitiesC1618Wood and paper products,and printing M

109、6982Professional,scientific and technical activitiesC19Coke and refined petroleum products P85EducationC2223Rubber and plastics products,and other non-metallic mineral products C2425Basic metals and fabricated metal products,except machinery and equipment Labour-intensive servicesG4547Wholesale and

110、retail trade,repair of motor vehicles and motorcycles C3133Furniture;other manufacturing;repair and installation of machinery and equipment H4953Transportation and storageMedium/high-tech manufacturingC20Chemicals and chemical productsI5556Accommodation and food service activities C21Basic pharmaceu

111、tical products and pharmaceutical preparations L68Real estate activities C26Computer,electronic and optical products N7782Administrative and support service activities C27Electrical equipmentO84Public administration and defence;compulsory social securityC28Machinery and equipment n.e.c.Q8688Human he

112、alth and social work activitiesC29Motor vehicles,trailers and semi-trailersR9093Arts,entertainment and recreation C30Other transport equipmentS9496Other service activitiesOther productionA0103Agriculture,hunting,forestry and fishing T9798Activities of households as employers;undifferentiated activit

113、ies of households for own use B0509Mining and quarryingUtilitiesD35Electricity,gas,steam and air conditioning supply utilitiesF4143Construction E3639Water supply;sewerage,waste management and remediation activities utilitiesTHEME TWOInvestment in innovationIs the UK spending enough on R&D?How does t

114、he UK perform at different stages of innovation?How do the public and private sectors contribute to national expenditure on innovation?23The UK is considered to be a leading global hub for scientific knowledge.The UK produces more academic publications than any other country,except China and the US,

115、but 57%more than the US and six times more than China in per capita terms.The UK is the world leader in field-weighted citation impact(FWCI),a common benchmark for research quality.However,the UK falls behind in converting scientific knowledge into commercial success.Compared to the US,the UK lags b

116、ehind in development and scale-up metrics.The proportion of the workforce employed in medium and high value added manufacturing is lower than in competitor nations,and the value added per worker in these sectors is less than half of that in the US.The UKs spending on R&D is higher than the average o

117、f the OECD countries,but it is still below that of leading nations.The UKs gross domestic expenditure on research and development(GERD)as a share of GDP was 2.91%in 2021,above the OECDaverage of 2.72%.However,the UK still lags behind countries such as Korea,the US,Japan and Germany.In 2021,UK govern

118、ment-funded R&D amounted to 0.57%of GDP,below the OECD average of 0.63%.Among the top 100 R&D-investing companies in the world,only three have headquarters in the UK.This is quite low,considering that in 2022 the UK was home to a total of 95 of the worlds top 2,500 R&D-investing companies.The UK ran

119、ks fifth behind the US,which has 827;China,which has 679;Japan,which has 229;and Germany,which has 113 such companies.KEY FINDINGSTheme 2:Investment in innovation24050100150200250Publication per 000populationR&D expenditure onGDPBusiness-fundedR&D expenditure onGDPPatents per 000populationVenture ca

120、pital(share of GDP)Unicorns per millionpopulationEmployment inmedium/high techmanufacturing permillion labour forceValue added perworker inmedium/high-techmanufacturing(PPP)UKUSAGermanyResearchDevelopmentScale-upValue addedThe US=10025Chart 2.1.The UKs performance in research,development,scale-up an

121、d industrial value added comparedIndex,the US=100,2023 or latest availableUS2.143.46%2.35%1.550.75%1.9839,172$203,073UK3.362.91%1.71%0.820.11%0.7922,687$178,763Germany2.313.13%1.96%1.880.09%0.3781,200$169,685Note:Medium/high-tech manufacturing includes:chemical products;pharmaceuticals;computer and

122、electronics,electrical equipment;machinery and equipment n.e.c;automotive and aerospace.Source:Publication DSIT(2022).International comparison of the UK research base,2022;R&D expenditure on GDP,and Business-funded R&D on GDP OECD(2023).Main Science and Technology Indicators,September edition;Patent

123、s WIPO(2023)Database:Indicator:1 Total patent applications(direct and PCT national phase entries);Venture Capital OECD(2023).Venture capital investments Unicorns CB Insights(2023).Global Unicorn Club;Employment and value added data OECD(2024).National Accounts;Population and labour force data World

124、Bank(2024).World Development Indicators.The UK is a leading global research hub,producing more academic publications than any other country,after China and the US,but 57%more than the US and six times more than China in per capita terms.1In field-weighted citation impact(FWCI),a common benchmark for

125、 research quality,the UK comes top in the world.In 2020 the UKs FWCI was 57%higher than the world average and 34%higher than the EU 27 average.1Compared to the US,the UK lags behind in development and scale-upmetrics like business-funded R&D,patents,venture capital and the creation of unicorns.The p

126、roportion of the workforce employed in medium and high value-added manufacturing is lower than in competitor nations.In absolute terms,value added per worker in these sectors is less than in the US.Note:1 Data refers to 2020 DSIT(2022)International comparison of the UK research base.26Chart 2.2.R&D

127、intensity:international comparison Gross domestic expenditure on R&D(GERD)as a share of GDP,%,2021Source:OECD(2023).Main Science and Technology Indicators,September edition.The latest OECD estimate of the UKs gross domestic expenditure on research and development(GERD)as a share of GDP was 2.91%in 2

128、021,above the OECD average of 2.72%.The UK lags behind countries such as Korea,the US,Japan and Germany,which in 2021 invested between 3.13%and 4.93%of their GDP in R&D.In 2022 the UKs Office for National Statistics(ONS)introduced major revisions to the way in which GERD,performed by the business se

129、ctor and the higher education sector,is measured.1 Based on the ONS revised methodology,the UKs GERD amounted to 66.2 billion in 2021,an increase of 4.3 billion from 2020.2As of February 2024,ONS had not published the official estimates of GERD on GDP incorporating the methodological revisions intro

130、duced in 2022.For 2020,the Department for Science,Innovation and Technology(DSIT)estimated the UKs R&D intensity to be between 2.9%and 3.0%.3 Note:1 ONS(2022).Gross domestic expenditure on research and development,UK:2020(published on 22 November 2022).See also Section 2 of the 2023 edition of the U

131、K Innovation Report.2 ONS(2023).Gross domestic expenditure on research and development,UK:2021(published on 17 July 2023).3 Nurse,P.(2023).Independent Review of the Research,Development and Innovation Organisational Landscape Final Report and Recommendations.2.91%2.72%0%1%2%3%4%5%6%GERD as a share o

132、f GDP(%)27Chart 2.3.Government-funded expenditure on R&DShare of GDP,%,2021Note:Data for Israel and Denmark is not available.Source:OECD(2023).Main Science and Technology Indicators,September edition.The methodological revisions introduced by ONS to measure the expenditure on R&D in the UK have not

133、impacted the R&D funded by the government.In 2021 the R&D funded by the government in the UK:1o amounted to 12.8 billion,an increase of 700 million from 2020;ando represented the second source of R&D funding,after the business sector,which contributed 38.7 billion,and before higher education(5.6 bil

134、lion),the private non-profit sector(1.9 billion)and funding from overseas(7 billion).In 2021 government-funded R&D represented 0.57%of the UKs GDP,below the OECD average(0.63%).The government contribution to R&D in countries at the top of this measure,such as Korea,Germany and theUS,was between 0.69

135、%and 1.12%of GDP.Note:1 For the UK,government includes central government,UK Research and Innovation,and the Higher Education Funding Councils.ONS(2023).Gross domestic expenditure on research and development,UK:2021(published on 17 July 2023).0.63%0.57%0.0%0.2%0.4%0.6%0.8%1.0%1.2%Government-funded G

136、ERD as a share of GDP(%)US 827China 679Japan 229Germany 113UK 95Taiwan 77France 54Switzerland 52Korea 47Netherlands 40Other countries 28728Chart 2.4.Top R&D-investing companies in the worldTop 10 countries by number of companies,and main sectors in the UK,2022In 2022,among the top 100 R&D-investing

137、companies in the world,only three companies had headquarters in the UK:AstraZeneca(14th)and GSK(39th)in thepharma and biotech sector;and HSBC(86th)in thebanking sector.This is quite low,considering that the UK is home to 95 of the worlds top 2,500 R&D-investing companies,ranking fifth in the world,b

138、ehind the US,which has 827;China,which has 679;Japan,which has 229;and Germany,which has 113 such companies.Number of companies,by countrys headquartersMain sectors in the UKTotal companies=2,500United KingdomSectorNumber of companiesPharmaceuticals and biotechnology17Electronic and electrical equip

139、ment8Software and computer services8Support services6Automobiles and parts5General retailers4Healthcare equipment and services4Industrial engineering4Personal goods4Real estate investment and services4Travel and leisure4Rest of the economy27Total95Note:The 2023 EU Industrial R&D Investment Scoreboar

140、d provides economic and financial information on the worlds top 2,500 firms investing in R&D.These companies have headquarters in 42 countries and over 1 million subsidiaries globally.Source:European Commission(2023).The 2023 EU Industrial R&D Investment Scoreboard.29Chart 2.5.Patent applications in

141、 key technologiesNumber of patent applications by top three patent offices and the UK,share of world patents,2021Note:*EPO=European Patent Office.In the tables,only patent applications filed directly with national and regional offices are included.Utility models,design patents and plant patents are

142、excluded.Data refers to published patent applications filed in 2021.See Appendix 2.1 for the correspondence table between International Patent Classification(IPC)symbols and the five technology fields.Source:WIPO Statistics Database and EPO PATSTAT database(PATSTAT 2023 Autumn version).The UK Scienc

143、e and Technology Framework,released in March 2023,identified five“critical technologies”that will underpin the strategy approach to make the UK a science and technology superpower by 2030:1o Artificial intelligenceo Engineering biologyo Future telecommunicationso Semiconductorso Quantum technologies

144、 The chart shows the UK patenting activity position in the five critical technologies by looking at the patent offices with the highest number of patent applications for each technology.Patent applicants may choose to file a patent where the invention is expected to have broader application and/or h

145、igher return.2In 2021 the UK Intellectual Property Office(UKIPO)ranked 10thin the world for total patent applications,receiving 0.61%of the total world patent applications,in a rank dominated by China and the US.UKIPO ranks between 10thand 13thposition for four of the five critical technologies,with

146、 only the world share of patents in biotechnology at 23rdposition.Note:1 UK Gov(2023).The UK Science and Technology Framework2 WIPO(2019).Artificial Intelligence Technology Trend.Total patentsWorld rankCountryWorld share1stChina55.6%2ndUS15.7%3rdJapan8.1%.10thUK0.6%SemiconductorsWorld rankCountryWor

147、ld share1stChina33.4%2ndUS23.4%3rdKorea11.1%13thUK0.1%BiotechnologyWorld rankCountryWorld share1stChina34.7%2ndUS13.8%3rdEPO*7.5%23rdUK0.16%TelecommunicationWorld rankCountryWorld share1stChina39.4%2ndUS21.2%3rdEPO*8.2%13thUK0.3%Artificial intelligenceWorld rankCountryWorld share1stChina66.5%2ndUS16

148、.9%3rdKorea8.7%10thUK0.2%Quantum technologiesWorld rankCountryWorld share1stChina36.7%2ndUS35.5%3rdKorea8.4%10thUK0.6%30Appendix 2.1.Correspondence table between the International Patent Classification(IPC)codes and the five technology fieldsTechnology areasIPC codesSourcesSemiconductorsH01L;H10WIPO

149、 IP Statistics*Semiconductors is one of the fields of technology identified by WIPO.For further information,please refer to Concept of a Technology Classification for Country Comparisons and https:/www.wipo.int/ipstats/en/Biotechnology(C07G;C07K;C12M;C12N;C12P;C12Q;C12R;C12S)not A61KWIPO IP Statisti

150、cs*Biotechnology is one of the fields of technology identified by WIPO.For further information,please refer to Concept of a Technology Classification for Country Comparisons and https:/www.wipo.int/ipstats/en/TelecommunicationG08C;H01P;H01Q;H04B;H04H;H04J;H04K;H04M;H04N001;H04N-007;H04N-011;H04Q;H04

151、L;H04N21;H04WWIPO IP Statistics*Telecommunication in this slide is to merge two technology fields identified by WIPO:telecommunications and digital communication.For further information,please refer to Concept of a Technology Classification for Country Comparisons and https:/www.wipo.int/ipstats/en/

152、Quantum technologyH04L 9/08;H04L 9/12;H04L 9/00;H04K 1/00;H04B 10/00;H04B 10/04;H04L 9/32;H04B 10/70;H04B 10/06;H04B 10/30(quantum telecommunications)Patstat online(Patstat 2023 Autumn version)*The IPC codes used here to identify quantum-technology-related patents were applied by the UK Intellectual

153、 Property Office in the Eight Great Technologies Quantum Technologies A patent overview report.G06N 99/00;G06N 1/00;H01L 29/06;H01L 39/22;H01L 29/66;G02F 3/00;H03K 19/195;H01L 29/02;G06E 3/00;G06F 15/00(quantum computation)G01R 33/035;G01R 33/02;A61B 5/05;H01L 39/22;G01N 27/72;A61B 5/055;G01R 33/12;

154、G01N 27/82;G01V 3/00;H01L 39/04(quantum sensor)G04F 5/14;H03L 7/26;H01S 1/06;H03B 17/00;G04F 5/00;H01S 1/00;H03H 3/02;H03H 9/02;H03H 9/19(quantum timing and atomic clock)Artificial intelligenceG06F19/24;G06N3;G06N5;G06N7/02;G06N7/04;G06N7/06;G06N20;G06T1/40;G16B40/20;G16B40/30;G16C20/70Patstat onlin

155、e(Patstat 2023 Autumn version)*The IPC codes used here to identify AI-related patents were applied by the UK Intellectual Property Office in the Artificial Intelligence A worldwide overview of AI patents and patenting by the UK AI sector report.THEME THREEIndustrial performance-focus on the UK machi

156、nery and equipment(M&E)manufacturing sectorHow does the UK machinery and equipment(M&E)manufacturing sector perform in international comparison?What are the drivers behind the productivity,value added and employment economic trends in the UK M&E sector?Is the UK M&E sector investing enough in R&D co

157、mpared to the rest of UK manufacturing?31The UK machinery and equipment(M&E)sector is a major global player,but some sub-sectors have contracted significantly.According to OECD data,the UK ranked among the top players in the world by value added in 2021,behind Japan,the US,Germany and Italy but ahea

158、d of the Netherlands,France and Switzerland.Between 2008 and 2021,value added in some M&E sub-sectors experienced substantial expansion,with other general-purpose machinery and lifting and handling equipment growing by 41%and 36%,respectively.Conversely,some sub-sectors have experienced a significan

159、t contraction,particularly other engines and machinery for plastic and rubber,which declined by 50%and 90%,respectively.Overall,value added in the M&E sector contracted from 13.1 billion in 2008 to 12.5 billion in 2021.However,the productivity of the M&E sector remains 37%higher than the average pro

160、ductivity of the whole manufacturing sector and 60%higher than the whole economy.A decline in employment across 17 out of 21 UK M&E sub-sectors resulted in a loss of 28,000 jobs between 2011 and 2021.The UK M&E sector ranked sixth in terms of employment among OECDcountries in 2021,employing 162,000

161、people.This represents a loss of 28,000 jobs compared to 2011,amounting to a 15%reduction over the course of 10 years.Among M&E sub-sectors,the most significant job losses between 2011 and 2021 were reported in machinery for mining,quarrying and construction(-5,300),machinery for plastics and rubber

162、(-4,000),office machinery(-3,200)and pumps and compressors(-3,200).While the UK is the 10th largest M&E exporter in the world,the country has one of the largest trade deficits.The UKs trade deficit in the M&E sector more than tripled between 2011 and 2022,ranking 176th out of 188 countries in trade

163、balance.The largest UK M&E sub-sectors by trade value in 2022 were other engines and machinery for mining,quarrying and construction.China,the largest M&E exporter,has been gradually gaining market share at the expense of other competitor countries.Growth of business expenditure on R&D(BERD)in the U

164、K M&E sector has been slower than in the manufacturing sector as a whole.Business expenditure on R&D(BERD)in the M&E sector represented 5.9%of total BERD in the UK manufacturing sector in 2022.BERD in the UK M&E sector rose from 0.7 billion in 2000 to 1 billion in 2020,with a compound annual growth

165、rate(CAGR)of 1.9%.This is lower than the compound annual growth rate observed for overall UK manufacturing(2.9%)during the same period.KEY TRENDSTheme 3:Machinery and equipment manufacturing sector32The M&E market depends on demand from other sectors and is typically sensitive to economic cycles.The

166、 UK M&E sector aggregates many sub-sectors,which are quite distinct from each other and which respond differently to economic cycles.Sales orders in the M&E sector are usually tied to the long-term investment plans of other sectors.In periods of economic uncertainty,these plans are often postponed.H

167、igh production costs,political uncertainty and foreign ownership are among the factors influencing offshoring decisions in some sub-sectors.Reasons for offshoring appear to be the loss of key suppliers and high production costs in the UK.For example,the fluid power equipment and the valves and actua

168、tors sub-sectors are affected by the high cost and low availability of steel in the UK.As a result,many products are designed in the UK but manufactured in China.The UKs exit from the EU has contributed to the consolidation in Europe of manufacturing in the pumps and compressors sub-sector,which is

169、dominated by European firms.Changes in regulations,intra-industry trade and policy changes in export markets may have impacted UK imports and exports.New trade rules with the EU have impacted the ability of SMEs to export to Europe.The decision to move away from the European CE conformity assessment

170、 marking,and to create a UK-specific UKCA marking,followed by a reversal of this decision,has also affected some sub-sectors.New regulations require certain valves to be tested within China by a local inspector,adding costs to qualify for the Chinese market.Labour shortages have impacted growth and

171、incentivised automation across sub-sectors.The consulted firms reported difficulties hiring younger and more diverse workers for the sector.These difficulties cut across sub-sectors and functions,affecting both engineering and technician positions.New skills are also needed,for example,cyber-securit

172、y,robotics,IoT,advanced manufacturing,cloud and big data.Investments in automation and factory optimisation have been occurring in the sector and partly explain the reduction in employment.R&D investment decisions in the UK M&E sector are often made abroad.There is a dominant presence of foreign-own

173、ed original equipment manufacturers(OEMs)and distributors across UK M&E sub-sectors.The consulted stakeholders perceive UK M&E companies to be less R&D-intensive than foreign ones,except for some large internationally competitive firms.The UK M&E sector is dominated by SMEs,which might have fewer re

174、sources available for R&D and fewer advisory and support options from the broader innovation ecosystem than large firms.Sustainability,digitalisation and materials research trends have shaped the direction of innovation efforts in recent years.Emissions regulations,such as those for non-road mobile

175、machinery,and net-zero targets make it imperative to develop more energy-efficient and environmentally sustainable machines and equipment.KEY DRIVERSTheme 3:Machinery and equipment manufacturing sector3334Machinery and equipment(M&E)manufacturing statistical definition*This report uses the statistic

176、al definition applied by the UK Office of National Statistics(ONS)UK SIC 2007 code Division 28:Manufacture of machinery and equipment n.e.c.,which includes:Group 28.1:Manufacture of general purpose machineryOther engines;fluid power equipment;other pumps and compressors;other taps and valves;and bea

177、rings,gears,gearing and driving elements.Group 28.2:Manufacture of other general-purpose machineryOvens,furnaces and furnace burners;lifting and handling equipment;office machinery;power-driven hand tools;non-domestic cooling and ventilation equipment;other general-purpose machinery n.e.c.Group 28.3

178、:Manufacture of agricultural and forestry machineryGroup 28.4:Manufacture of metal forming machinery and machine toolsGroup 28.9:Manufacture of other special-purpose machineryMachinery for metallurgy;machinery for mining,quarrying and construction;machinery for food,beverage and tobacco processing;m

179、achinery for textile,apparel and leather production;machinery for paper and paperboard production;plastics and rubber machinery;and other special-purpose machinery n.e.c.The definition excludes:The manufacture of metal products for general use,associated control devices,computer equipment,measuremen

180、t and testing equipment,electricity distribution and control apparatus,and general-purpose motor vehicles.*Note:the repair and maintenance services of machinery and equipment are coded in Class 33.12 in the UK SIC 2007.For the detailed statistical definition for each subsector within the machinery a

181、nd equipment manufacturing,please refer to the UK Standard Industrial Classification(SIC)Hierarchy published by the ONSSource:ONS,2023.35Chart 3.1.Machinery and equipment(M&E)manufacturing contribution to the UK economyM&E direct contribution to the UK economy The sector contributes significantly to

182、 the UK economy,not only on its own but also through its impact on other sectorsManufacturing value added(bn,2021)11.5%(40.3)88.5%(309.7)Manufacturing exports(bn,2023)6%(163)Manufacturing employment(000,2021)Machinery and equipment manufacturingRest of UK manufacturing94%(2,563)Machinery and equipme

183、nt sectorSpecialised machineryGeneral-purpose machineryMetal-forming machinery and machine toolsEngines and power systemsUser industriesAgricultureExtractive industries:mining,forestry,oil and gas,etc.Manufacturing industriesConstruction&building upkeepSuppliers of technology for industrial and serv

184、ice businessesRole in the diffusion of innovations and retrofitting/upgradingDeterminant of factory productivityOther machinery and equipmentOther user industriesIndustrial intermediatesUtilities,logistics,retail,entertainment,etc.M&E indirect contribution to the UK economy7%(12.5)93%(165.4)Source:O

185、NS(2023).Annual business survey;ONS(201222).Business register and employment survey;ONS(2023).EMP13:Employment by industry;ONS(2024).UK trade in goods by classification of product by activity time series.36Chart 3.2.Machinery and equipment(M&E)manufacturing value added,employment and labour producti

186、vityTop 10 OECD countries by value added in 2021Note:OECD provides the value added for each country in its national currency in current prices;these were converted into USD by referring to annual exchange rates provided by OECD.Labour productivity is estimated as value added divided by employment.So

187、urce:OECD data explorer.Annual value added and its components by economic activity(accessed in February 2024);OECD data explorer.Exchange rates(accessed in February 2024);OECD data explorer.Annual employment by detailed economic activity,domestic concept(accessed in January 2024).Based on OECD data,

188、the UK ranked fifth among member countries by machinery and equipment(M&E)manufacturing value added in 2021,behind Japan,the US,Germany and Italy but ahead of the Netherlands,France and Switzerland1.The M&E value added for the US was eight times larger than for the UK in 2021.In terms of employment,

189、the UK ranked sixth among OECD member countries,with 162,000 people employed in the sector,below the US,Japan,Germany,Italy and Mexico.A labour productivity value of USD137,100 per employee places the UK M&E sector fifth among OECD comparator nations,ahead of countries such as Japan,Germany and Ital

190、y.The consulted stakeholders suggested that the high productivity of the Netherlands could be attributed to its focus on high value-added M&E segments such as machinery for semiconductors.The UK is Europes leading producer of construction equipment,accounting for 28%of total European production,foll

191、owed by Germanywith 21%2.RankOECDCountryValue added(billion USD)Employment(thousand persons)Labour productivity(value added per employee)(thousand USD)1US174.31170149.02Japan154.9166193.23Germany131.61145114.94Italy48.1477100.85UK22.2162137.16Netherlands21.893234.77France14.714899.18Switzerland13.17

192、3179.59Sweden13.080163.110Mexico12.037632.01 Data does not cover China,Korea or India.2 Construction Equipment Association(2023)The UKs Construction Equipment Sector Report 2023.37Chart 3.3.UK machinery and equipment(M&E)manufacturing value added(1/2)Billion pounds()at basic prices,2008-210204060801

193、0012014016018020092010201120122013201820172019201620202015202120142008Billion pounds()at basic prices149.413.1177.912.5UK manufacturing sectorUK machinery and equipment manufacturingSource:ONS(2023).Annual business survey.According to ONS data,value added for the UK M&E sector experienced a contract

194、ion between 2008 and 2021,with a compound annual growth rate(CAGR)of-0.4%.In contrast,value added for the UK manufacturing sector grew with a compound annual growth rate(CAGR)of 1.3%during the same period.The UK M&E sector aggregates many sub-sectors that are quite distinct from one another and that

195、 show variable degrees of sensitivity to economic cycles and instability.In general,sales orders are tied to the long-term investment plans of other companies.In periods of economic uncertainty,these plans are often postponed.For example,a large share of demand for valves and actuators comes from th

196、e oil and gas sector and is indirectly affected by global oil prices and investments in oil and gas projects.The consulted stakeholders pointed out that M&Esectoral growth may have been constrained by regulatory uncertainties,rising costs and the loss of key suppliers,which could have resulted in th

197、e offshoring of various operations.For example,offshoring in the fluid power equipment and the valves and actuators subsectors have been driven by labour and energy costs and low availability of raw materials such as steel in the UK.CAGR(200821)-0.4%CAGR(200821)+1.3%0.50.40.40.40.4-0.1-0.2-0.3-1.1-1

198、.2-1.5-1.0-0.50.00.51.0Other general-purpose machinery n.e.c.Lifting and handling equipmentOther special-purpose machinery n.e.c.Agricultural and forestry machineryFluid power equipmentMetal forming machineryOther pumps and compressorsMachinery for food,beverage and tobacco processingOvens,furnaces

199、and furnace burnersMachinery for textile,apparel and leather productionNon-domestic cooling and ventilation equipmentMachinery for paper and paperboard productionOther taps and valvesPower-driven hand toolsBearings,gears,gearing and driving elementsMachinery for metallurgyOther machine toolsMachiner

200、y for mining,quarrying and constructionOffice machineryPlastics and rubber machineryOther engines38Chart 3.4.UK machinery and equipment(M&E)manufacturing value added(2/2)Value added by sub-sector,billion pounds()at basic prices,2008-21Source:ONS(2023).Annual business survey.Value added in 2021(bn)1.

201、20.10.21.00.10.00.40.00.50.01.40.10.20.51.10.40.60.70.81.51.71.20.10.21.00.10.00.40.00.50.01.40.10.20.51.10.40.60.70.81.51.7 billions at basic pricesWithin M&E sub-sectors,other engines1and machinery for plastic and rubber were the sub-sectors that experienced the highest reduction in value added be

202、tween 2008 and 2021,losing 1.2 billion(50%)and 1.1 billion(90%),respectively.In contrast,lifting and handling equipment and other general-purpose machinery experienced the highest value added increments during the same period,gaining 0.4 billion(41%)and 0.5 billion(36%),respectively,becoming the two

203、 sub-sectors with the largest value added in 2021.Other sectors that experienced significant value added growth between 2008 and 2021 include other special-purpose machinery,agricultural and forestry machinery,and fluid power equipment.1“Other engines”includes the manufacturing of internal combustio

204、nengines,steam and other vapour turbines,hydraulic turbines,and windand gas turbines.In addition,this sub-sector includes the manufacturingof parts such as pistons,piston rings,carburettors and exhaust valves.The manufacturing of motor vehicle,aircraft and cycle propulsionengines and generator sets

205、is excluded from this sub-sector.Value added change 200821(bn)39Chart 3.5.UK machinery and equipment(M&E)manufacturing employment(1/2)Machinery and equipment(M&E)and total manufacturing,2011-21Note:Employment figures include employees and self-employed.Source:ONS(201222).Business register and employ

206、ment survey;ONS(2023).EMP13:Employment by industry.With 163,000 total employment in 2021,the UKM&E sector employed 28,000 fewer people than in 2011(14.7%reduction).This reduction is higher than that experienced by the UK manufacturing sector,which employed 2.7 million people in 2021,around 4.8%fewer

207、 than in 2011.Despite the fall in employment,the consulted stakeholders reported difficulties hiring younger and more diverse workers for the sector.New entrants are also seen as not having the right specialised skills.These difficulties cut across sub-sectors and functions,affecting both engineerin

208、g and technician positions.According to consulted stakeholders,some companies used the idle periods and furlough schemes of the pandemic as an opportunity to automate and rationalise their operations,often leading to reductions in headcount.However,automation does not fully explain the recent downwa

209、rd trend in UK employment in this sector,which could also be attributed to the poor performance of some sub-sectors.2,86319116305001,0001,5002,0002,5003,0003,50020112012201320142015201620172018201920202021Employment(thousands)2,726UK manufacturing sectorUK machinery and equipment manufacturing%chang

210、e 201121:-4.8%change 201121:-14.7%1.50.40.4-3.1-3.2-3.2-4-5.3-6-4-202Agricultural and forestry machineryOther special-purpose machinery n.e.c.Machinery for food,beverage and tobaccoPower-driven hand toolsLifting and handling equipmentFluid power equipmentMachinery for textile,apparel and leatherMach

211、inery for paper and paperboard productionMachinery for metallurgyMetal forming machineryOvens,furnaces and furnace burnersOther machine toolsOther taps and valvesNon-domestic cooling and ventilation equipmentBearings,gears,gearing and driving elementsOther enginesOther general-purpose machinery n.e.

212、c.Other pumps and compressorsOffice machineryPlastics and rubber machineryMachinery for mining,quarrying and constructionTotal employment in 2021(000)1.20.10.21.00.10.00.40.00.50.01.40.10.20.51.10.40.60.70.81.51.740Chart 3.6.UK machinery and equipment(M&E)manufacturing employment(2/2)Employment by s

213、ub-sector(thousands),201121Note:Employment data for Great Britain only;data for Northern Ireland unavailable.Source:ONS(201222).Business register and employment survey.ThousandThe 28,000 reduction in employment experienced by the UK M&E sector between 2011 and 2021 can be attributed to a loss in emp

214、loyment in 17 out of 21 sub-sectors.Machinery for mining,quarrying and construction(-5,300),for plastics and rubber (-4,000),office machinery(-3,200),pumps and compressors(-3,200)and other general-purpose machinery(-3,100)experienced the highest reductions in employment.Machinery for food,beverages

215、and tobacco(+400),other special purposes(+400)and agriculture and forestry(+1,500)were the only sub-sectors to increase their employment levels during the same period.In absolute terms,the UK M&E sub-sectors with the highest employment in 2021 were other general-purpose machinery(20,900),non-domesti

216、c ventilation and cooling equipment(18,900),lifting and handling equipment(16,600),other engines(13,200)and otherpumps and compressors(11,800).Together,these sub-sectors accounted for 52.5%of total employment in the UK M&E sector in 2021.9.72 3.3 11.8 20.9 13.2 7.118.97.4 3.1 2 5.1 0.4 0.8 1.26.8 16

217、.6 0.8 6.69.8 7.5 Employment change 201121(thousands)41Chart 3.7.UK machinery and equipment(M&E)manufacturing labour productivityValue added(VA)per employee(thousand in chained volume measure CVM)In 2021 productivity of the M&E sector was 37%higher than the average productivity of the whole manufact

218、uring sector and 60%higher than the whole economy.Overall,the UK M&E sectors productivity(measured in value added per employee)was higher in 2021 than 2011,mostly driven by a reduction in employment during this period.Productivity in the UK M&E sector has remained consistently higher than the UK man

219、ufacturing sector as a whole between 2011 and 2021.Despite this gap,the difference between M&Eproductivity and the productivity of the UK manufacturing sector narrowed,from 32,800 per employee in 2011 to 27,400 per employee in 2021.Note:Productivity estimated as value added divided by number of empl

220、oyed;productivity data corresponds to the whole machinery and equipment(M&E)sector.Data for each M&E sub-sector might show different trends.Source:ONS(2024).GDP output approach low-level aggregates;ONS(201222).Business register and employment survey;ONS(2023).EMP13:Employment by industry.58.474.991.

221、2102.3506070809010011020112012201320142015201620172018201920202021Thousand pounds()per employee(in CVM)UK machinery and equipment manufacturingUK manufacturing sector42Chart 3.8.Machinery and equipment(M&E)manufacturing trade balance Global ranking by trade balance in M&E manufacturing,2011 and 2022

222、Trade balance 2022Rank*CountryUSD billion1China167.52Germany102.23Japan89.74Italy50.15Netherlands21.7176UK-7.2187Canada-30.8188US-102.5Trade balance 2011Rank*CountryUSD billion1Germany127.32Japan125.33Italy61.64Netherlands15.05Switzerland12.1144UK-2.0187Canada-24.6188Russian Federation-38.5UK export

223、s2011(USD billion)2022(USD billion)CAGR(201122)44.242.0-0.5%UK imports2011(USD billion)2022(USD billion)CAGR(201122)46.149.20.6%Note:*The mapping between SIC 2007 code and HS code is based on the“Correspondence Tables”published by OECD.Appendix 3.1 provides the summary for the mapping.For more infor

224、mation,please refer to the Correspondance Tables forClassification Codes published by ONS in April 2020.Source:UN Comtrade(accessed February 2024).Based on UN trade data,the UK trade deficit in the M&E sector widened to USD7.2 billion in 2022from USD2 billion in 2011,driven by a reduction in exports

225、(CAGR:-0.5%)and an expansion in imports(CAGR:0.6%)during this period.The widening M&E trade deficit meant that the UK moved down to 176thposition out of 188 countries in terms of trade balance in 2022.China climbed to the top of the trade balance ranking by becoming the top net exporter in the globa

226、l M&E sector in 2022,while the US became the biggest net importer.New trade rules with the EU were mentioned by the consulted stakeholders as a factor influencing long-term investment decisions and trade.The rules have particularly impacted the ability of SMEs to export to Europe,as many lack the or

227、ganisational capabilities to deal with the additional certifications and bureaucracy.As value chains become fragmented,and UKcompanies offshore their manufacturing activities,the trend in some sub-sectors is for companies to keep only the early stages(e.g.R&D and design)and final stages(e.g.testing,

228、inspection,assembling and marketing)of production in the UK,which could explain a large share of the rise in imports in the country.18.6%12.7%10.4%8.1%5.7%4.0%3.3%2.9%2.6%2.6%0%2%4%6%8%10%12%14%16%18%20%Export market share201120152019202243Chart 3.9.Machinery and equipment(M&E)manufacturing global e

229、xport market shareTop 10 countries by export market share in 2022 Source:UN Comtrade(accessed February 2024).UK M&E companies are highly export-oriented.The Construction Equipment Association(CEA)estimates that over 60%of UKs output in construction equipment is exported1.Similarly,the Manufacturing

230、Technologies Association(MTA)calculates that over 80%of UK machine tools,cutting tools and tool/work-holding equipment production was exported in 20212.The UK had the 10thlargest global market share(2.6%)in M&E goods in 2022,down from 3.1%in 2011.China had the largest export market share in 2022,inc

231、reasing from 10.7%to 18.6%and overtaking Germany,the US and Japan.In 2022,the top 10 global exporters of M&Emanufacturing goods accounted for 71%of the global market.1Equipment for semiconductor manufacturing was the top export category for the US(USD17.6 billion),Japan(USD18.9 billion),the Netherla

232、nds(USD17.4 billion)and Singapore(USD13.5 billion)in 2022.3For the UK,the M&E product with the highest export value in 2022 was other diesel or semi-diesel engines.41 Construction Equipment Association(2023)The UKs Construction Equipment Sector Report 20232Manufacturing Technologies Association(2023

233、)Basic Facts 20233UN Comtrade.4UN Comtrade items under other diesel or semi-diesel engines include engines and compression-ignition internal combustion piston engines(diesel or semi-diesel engines),of a kind used for other than marine propulsion or vehicles.6.26.06.14.84.94.63.94.63.54.217.425.00102

234、030405060ExportsImportsUS$billionOther M&E subsectorsOther pumps and compressorsOther general-purpose machinery n.e.c.Other special-purpose machinery n.e.c.Machinery for mining,quarrying and constructionOther engines44Chart 3.10.UK machinery and equipment(M&E)manufacturing exports and importsTop UK

235、machinery and equipment(M&E)sub-sectors,USD billion,2022Source:UN Comtrade(accessed February 2024).In 2022 the top five UK M&E sub-sectors accounted for 58.6%of exports and 49.2%of imports of the total sector.Of these five sub-sectors,pumps and compressors and other general-purpose machinery had tra

236、de deficits of USD0.7 billion each.In contrast,machinery for other special purposes,machinery for mining,quarrying and construction and other engines had trade surpluses of USD0.3 billion,USD1.3 billion and USD0.2 billion,respectively.Overall,the largest UK M&E sub-sectors by trade value(considering

237、 both exports and imports)in 2022 were other engines and machinery for mining,quarrying and construction.Total exportsUSD42.0 billionTotal importsUSD49.2 billion24.224.645Chart 3.11.UK machinery and equipment(M&E)manufacturing business spending on R&DBusiness enterprise expenditure on R&D(BERD)by pr

238、oduct group classification,billion pounds()in current prices1.49.216.318.218.219.423.70246810121416182022242002200320042005200620072008200920102011Billion pounds()in current prices2013201420152016201718.5201820191.00.7200020202021202220012012UK M&E manufacturingUK manufacturing sector UK manufacturi

239、ng sector(updated methodology*)ONS data by product group classification shows that the UK business enterprise expenditure on R&D in the M&E sector was 1.4 billion in 2022,accounting for 5.9%of total UK BERD in the manufacturing sector.Business spending on R&D in the UK M&E sector increased from 0.7

240、billion in 2000 to 1 billion in 2020,with a compound annual growth rate(CAGR)of 1.9%during this period.The 1.9%annual growth rate was lower than the compound annual growth rate observed for UKmanufacturing(2.9%)in the same period.ONS manufacturing BERD data,estimated with an updated methodology for

241、201822,shows a higher growth trend(dotted blue line)than data calculated using the previous methodology.The 2022 M&E BERD estimate obtained under the new methodology is 40%higher(1.4 billion)than the last data point available for the old methodology in 2020(1 billion).The consulted stakeholders perc

242、eived UK M&Ecompanies to be less R&D-intensive than foreign ones,except for some large internationally competitive firms,such as JCB and Cummins.Environmental sustainability and digitalisation were seen by interviewees as the main current drivers of R&D in the sector.CAGR(200020)+2.9%CAGR(200020)+1.

243、9%Note:Developed by ONS,the term product group refers to business R&D expenditure allocated to the product group that bestdescribes the subject type of R&D activities carried out by firms,rather than being based on the economic activities SIC classification.*ONS has revised the methodology for BERD

244、since 2022.Please see ONS(2023).Update on transformation of research anddevelopment statistics:November 2023.Source:ONS(2021).Business enterprise research and development time series;ONS(2022).Business enterprise research and development,UK(designated as official statistics),worksheet 3:expenditure

245、on R&D performed in UK businesses:broad product groups,2018 to 2021 current prices(not designated as national statistics);ONS(2024).Business enterprise research and development,UK(designated as official statistics),worksheet 2:expenditure on R&D performed in UK businesses:detailed product groups,202

246、2(not designated as national statistics).UK M&E manufacturing(updated methodology*)Drivers behind the trends in the machinery and equipment(M&E)manufacturing sectorInsights from the literature review and consultations with sector experts4647What is driving value added,employment,productivity and tra

247、de trends in M&E manufacturing?(1)Key trends identifiedThe UK machinery and equipment(M&E)sector is a major global player,but some sub-sectors have contracted significantly.A decline in employment across 17 out of 21 UK M&E sub-sectors resulted in a loss of 28,000 jobs between 2011 and 2021.While th

248、e UK is the 10th largest M&E exporter in the world,the country has one of the largest trade deficits.Potential drivers identified from the literature review and consultations with sector experts(see Appendix 3.2 for details)The M&E market depends on demand from other sectors and is typically sensiti

249、ve to domestic and global economic performance.The UK M&E sector aggregates many sub-sectors that are quite distinct from one another and which show variable degrees of sensitivity to economic cycles and instability.In general,sales orders are tied to the long-term investment plans of other companie

250、s.In periods of economic uncertainty,these plans are often postponed.For example,a large share of demand for valves and actuators comes from the oil and gas sector and is indirectly affected by global oil prices and the timing of investments in oil and gas projects.In the case of mining,quarrying an

251、d construction equipment,government investment(e.g.public works)is a crucial source of demand.M&E sub-sectors show variable resilience levels to recession and external events.Events such as the COVID-19 pandemic affected the various segments of the sector differently.For example,while the consulted

252、stakeholders mentioned that the value added for machinery for mining,quarrying and construction was acutely affected by the pandemic(and in 2021 had not recovered to pre-pandemic levels),lifting and handling equipment,pumps and compressors,fluid power equipment and agricultural and forestry equipmen

253、t did not suffer the same effect and recovered well in 2021.In particular,segments such as agricultural and forestry equipment are not easily affected by external events,as they deal with essential products from sectors with inelastic demand,such as agriculture.In the case of mining,quarrying and co

254、nstruction,UK companies faced supply chain issues in the aftermath of the pandemic,which allowed Chinese firms to supply new equipment faster and may partly explain the increase in M&E imports observed after 2020.This effect may be observed in other sub-sectors such as machinery for agriculture and

255、forestry.High production costs,political uncertainty and foreign ownership are among the factors boosting offshoring in some sub-sectors.Across some sub-sectors,there has been a relocation of manufacturing activities to other locations in Europe,the US and Asia.This is driven by UK firms setting up

256、facilities abroad and by European firms consolidating production in Europe.Key reasons for this movement appear to be the loss of key suppliers and high production costs in the UK.For example,offshoring in the valves and actuators industry has been driven by the high cost and low availability of raw

257、 materials such as steel in the UK,which represent 30%50%of the final cost of products.This has led to a situation where many products are UK-designed but manufactured in subsidiary plants in Chinaor other lower-cost countries.The pumps and compressors and fluid power equipment segments have also ex

258、perienced offshoring,according to the consulted interviewees.The UKs exit from the EU contributed to the consolidation of manufacturing activities in Europe to facilitate exports to the EU,thus reducing manufacturing employment in the UK.48What is driving value added,employment,productivity and trad

259、e trends in M&E manufacturing?(2)Key trends identifiedThe UK machinery and equipment(M&E)sector is a major global player,but some sub-sectors have contracted significantly.A decline in employment across 17 out of 21 UK M&E sub-sectors resulted in a loss of 28,000 jobs between 2011 and 2021.While the

260、 UK is the 10th largest M&E exporter in the world,the country has one of the largest trade deficits.Potential drivers identified from the literature review and consultations with sector experts(see Appendix 3.2 for details)Changes in regulations,intra-industry trade and policy changes in export mark

261、ets may have impacted UK imports and exports.Changes in trade regulations and rulesNew trade rules with the EU were mentioned by the consulted stakeholders as a factor influencing long-term investment decisions.They have particularly impacted the ability of SMEs to export to Europe,as many do not ha

262、ve the organisational capabilities to deal with the additional certification and bureaucracy.The stakeholders also claimed the decision to move away from the European CE conformity assessment marking,and to create a UK-specific UKCA marking,followed by a reversal of this decision(DBT,2023;DBT,2024),

263、has also affected some segments.Interviewed stakeholders suggested that the UK governments changes to its export promotion policy,focusing on a narrower selection of sectors,while closing down some export promotion units,has reduced sectoral promotion overseas.Slow processes for dual-use(civil and m

264、ilitary)exports also affect the sectors ability to compete internationally in some segments.Vertical disintegrationAs value chains become fragmented,and UK companies offshore their manufacturing activities,the trend in some sub-sectors is for companies to keep only the early stages(e.g.R&D and desig

265、n)and final stages(e.g.testing,inspection and marketing)of production in the UK,which could explain a significant share of the rise in imports in the country.Policy changes in export markets For example,the Chinese government has created extra requirements for foreign products to enter the country b

266、y implementing in-country mandatory auditing.In the valves and actuators sector,all valves of a certain specification will have to be tested in China by a local inspector,adding costs to qualify for the Chinesemarket,according to the interviewed stakeholders.Labour shortages have impacted growth and

267、 incentivised automation across subsectorsConsulted firms have reported difficulties in hiring younger and more diverse workers for the sector.The younger workforce is also seen as not having the right skills,especially the traditional mechanical and electrical skillsets which are essential for age-

268、long sub-sectors,such as fluid power equipment,pumps and compressors.These difficulties cut across sub-sectors and functions,affecting both engineering and technician positions.New skills are also needed,for example,cybersecurity,robotics,IoT,advanced manufacturing,cloud,and Big Data(European Commis

269、sion,2021).According to consulted stakeholders,some companies used the idle periods of the pandemic and furlough schemes as an opportunity to automate and rationalise operations,often leading to reductions in headcount.The increasing productivity of the sector reflects these investments in productio

270、n efficiency.However,automation does not fully explain the recent downward trend in UK employment in this sector,which could also be attributed to the poor performance in some sub-sectors.49What is driving business R&D expenditure trends in M&E manufacturing?Key trend identifiedGrowth of business ex

271、penditure on R&D(BERD)in the UK M&E sector has been slower than in the manufacturing sector as a whole.Potential driversidentified from theliterature reviewand consultationswith sector experts(see Appendix 3.2for details)The prominent presence of foreign-owned OEMs and distributors across UK M&E sub

272、-sectors may impact BERD figures,with R&D investment decisions often made abroad.Despite the UK having a high-quality R&D ecosystem,including the Catapult network and high-quality research institutions,the consulted stakeholders perceive UK M&E companies to be less R&D-intensive than foreign ones,ex

273、cept for some large internationally competitive firms,such as JCB and Cummins.The UK M&E sector is dominated by SMEs,which might have fewer resources available for R&D and fewer advisory and support options from the broader innovation ecosystem.Environmental sustainability,digitalisation and materia

274、ls research trends have shaped the direction of innovation efforts in recent yearsEnvironmental sustainability:emissions regulations,such as those for non-road mobile machinery,and firm-level net zero targets,create an imperative for the development of more energy-efficient and environmentally susta

275、inable machines and equipment.For example:oMining,quarrying,and construction equipment:The segment has had to adapt to comply with Stage V emissions standards(ICCT,2016),which required innovation,investments,and development of new products and services(CEA,2023).Also,Londons Low Emission Zone is ant

276、icipated to transition to a Zero Emission Zone for construction equipment in the mid-2030s,driving further investments in zero-emission technologies and solutions within the industry.Other efforts towards decarbonisation include developing full electric machines,utilising hydrogen fuel cells,and hyd

277、rogen combustion engines(CEA,2023).oValves and actuators:According to the consulted stakeholders,there is a strong focus on this segment becoming an enabler for hydrogen-and carbon-capture national infrastructure,as the current valves are not adapted to hydrogen gas.In this regard,interviewees perce

278、ive limitations in the availability of government R&D funding to support innovation at established players,beyond the existing focus of supporting R&D in academic organisations.oPumps and compressors:Interviewees suggested that energy efficiency is one of the most important competitiveness drivers i

279、n this sub-sector,as energy represents around 80%of the costs in compressed air.New compressors are around 30%more energy efficient than those of 15 years ago.However,a significant incentive policy for the acquisition of energy-efficient compressors in the UK is lacking(DESNZ,2024).oOther Engines:mo

280、re stringent industrial emission regulations in the UK have incentivised the manufacturers to invest more on the R&D of low-emission industrial engines.Meanwhile,wind turbines and combined-cycle gas turbines have seen significant opportunities from the UKs Net Zero target by 2050(IBIS World,2023).Ot

281、her R&D trends:Digitalisation:Smart machines,telematics,human-machine interaction,3D printing,digital supply-chain tracking and digital modelling have also been important R&D trends in the UK M&E sector.For example,3D printing enables faster modelling and prototyping of complex valves and components

282、,and digital passports enable tracking of components and production processes within the supply chain.Materials:Significant R&D in the sector is dedicated to developing,adopting,and adapting new materials.The M&E sector is heavily reliant on steel,with an emerging trend towards green steel necessita

283、ting substantial increases in renewable electricity and green hydrogen production.Appendix 3.1 Mapping between SIC 2007 code and HS code HS codes relevant to the M&E sectorChapters in HS 2007 relevant to the M&E sectorChapter titlesNo.of relevant subheading included in the chapter84Nuclear reactors,

284、boilers,machinery and mechanical appliances;parts thereof.44185Electrical machinery and equipment and parts thereof;sound recorders and reproducers,television image and sound recorders and reproducers,and parts and accessories of such articles.887Vehicles other than railway or tramway rolling-stock,

285、and parts and accessories thereof.873Articles of iron or steel.390Optical,photographic,cinematographic,measuring,checking,precision,medical or surgical instruments and apparatus;parts and accessories thereof.395Furniture;bedding,mattresses,mattress supports,cushions and similar stuffed furnishings;l

286、amps and lighting fittings,not elsewhere specified or included;illuminated signs,illuminated name-plates and the like;prefabricated buildings.388Aircraft,spacecraft,and parts thereof.1Note:OECD Correspondence Tables5051Appendix 3.2 References and consultationsCited sourcesEuropean Commission(2021)Ad

287、vanced Technologies for Industry Sectoral Watch:Technological trends in the machinery industry.ICCT-International Council on Clean Transportation(2016)European Stage V Non-road Emission StandardsConstruction Equipment Association(2023)The UKs Construction Equipment Sector Report 2023Department for B

288、usiness and Trade(2024)Guidance-Using the UKCA markingDepartment for Business and Trade(2023)UK Government announces extension of CE mark recognition for businessesDepartment for Energy Security&Net Zero(2024)Industrial Energy Transformation Fund-Phase 3:Spring 2024 GuidanceIBIS World(2023)Engine&Tu

289、rbine Manufacturing in the UKManufacturing Technologies Association(2023)Basic Facts 2023Other useful sourcesBain&Company(2022)Thinking Outside the Machine:Global Machinery&Equipment Report 2022House of Commons(2017)Electronics and Machinery Sector ReportAllianz(2023)Machinery&Equipment Sector Risk

290、ReportStatista(2022)Manufacturing of Machinery in the UK Industry Insights&Data AnalysisStatista(2022)Global Manufacturing of Machinery Industry Insights&Data AnalysisGTAI Germany Trade and Invest(2023)The Machinery&Equipment Industry in Germany.FI Group(2022)Federal funding for energy and resource

291、efficiency in the economy.BMWK (2021)Bekanntmachung der Richtlinie fr die Bundesfrderung fr Energie-und Ressourceneffizienz in der Wirtschaft Zuschuss und Kredit.Department for International Trade and Agricultural Engineering Association(2019)UK Capability in Agri-Tech EngineeringEngineering and Mac

292、hinery Alliance(2023)UK Manufacturing:a short policy paperAgricultural Engineering Association(2023)Industry FactsBritish Fluid Power Association(2023)UK Fluid Power Industry FactsReferences used and stakeholders consultedConsulted stakeholdersDepartment for Business and Trade(DBT)British Valve and

293、Actuator Association(BVAA)British Compressed Air Society(BCAS)Engineering and Machinery Alliance(EAMA)Manufacturing Technologies Association(MTA)J C Bamford Excavators Ltd(JCB)Cummins UKBritish Fluid Power Association(BFPA)Agricultural Engineering Association(AEA)KGP Powertrain IntelligenceTHEME FOU

294、RScience and engineering workforceIs the UK producing enough scientists and engineers?How does this compare with other countries?Are there skills mismatches in science,technology,engineering and mathematics(STEM)disciplines in the UK?52The UK has a relatively high proportion of science,technology,en

295、gineering and mathematics(STEM)graduates.During the academic year 2021/22,42%of all graduates in the UK completed STEM disciplines.The UK produces more STEM graduates per capita in the 2034-year-old population than comparator countries.In 2020 the UK awarded 1,393 first university degrees per 100,00

296、0 individuals in STEM fields,compared to 1,317 in the US,and 690 and 650 in India and China,respectively.However,the UK is producing fewer graduates in engineering,manufacturing and construction.In 2022 more than half(52%)of the UKs STEM graduates pursued health-related disciplines.In 2021 the perce

297、ntage of graduates in engineering,manufacturing and construction in the UK was only 9.1%,which is significantly lower than Italy,Switzerland,Japan,Korea and Germany.In these countries,the percentage of graduates in these disciplines ranged from 14.4%to 22.1%.Despite the high proportion of STEM gradu

298、ates,there are significant STEM-related skills gaps in the UK labour market.In the UK 934,000 vacancies were recorded towards the end of 2023,46%of which were in fields related to STEM disciplines.At the beginning of 2024,12%of UK firms in manufacturing and 6.9%in information and communication said

299、they were experiencing a shortage of workers.For UK employers,it is difficult to find individuals with skills related to medical knowledge,scientific knowledge,production and technology knowledge and digital skills compared to the OECD average and the EU.KEY FINDINGSTheme 4:Science and engineering w

300、orkforce5354Chart 4.1.STEM degree production intensityFirst university degrees awarded per 100,000 of the 2034-year-old population,selected countries,201120The UK performs relatively well in terms of tertiary education attainment levels.In 2022 the share of the population with tertiary education in

301、the UK was 57.7%,compared to 47.4%of the OECD average.1Science,technology,engineering and mathematics(STEM)disciplines are particularly important for innovation activities.2In a study conducted for the UK government,it is estimated that the UK will need to fill around 382,000 research and developmen

302、t(R&D)jobs by 2027.Engineering UK,an advocacy group,estimates that 173,000 new engineering and technology jobs will be created by 2030.3In 2020 the UK awarded 183,000 first university degrees in STEM disciplines,compared to 2.5 million in India,2 million in China and 900,000 in the US.4When normalis

303、ing for the population in the 2034-year-old population,however,the UK produces a higher proportion of STEM graduates.In 2020 the UKawarded 1,393 first university degrees per 100,000 people in STEM disciplines,compared to 1,317 in theUS and 690 and 650 in India and China,respectively.Note:The chart s

304、hows the top five countries by STEM doctorates awarded in 2020;medicine and subjects allied to medicine are not included;international students are included in the computation.Source:National Science Foundation(2023).Higher Education in Science and Engineering Figure HED-33.Note:1 Tertiary education

305、 attainment is measured as the percentage of the population aged 2534,in the same age group.OECD(2024).Population with tertiary education(indicator).2There is no accepted definition of STEM disciplines,particularly regarding which subject disciplines to include in the classification.Therefore,differ

306、ences among data sources may depend on the chosen classification.3 DSIT/BEIS(2021).The R&D Pipeline.BEIS Research Paper Number:2021/22.Engineering UK(2023).Engineering skills needs now and into the future.4 Source:National Science Foundation(2023).Higher Education in Science and Engineering Figure H

307、ED-29.02004006008001,0001,2001,4001,6002011201220132014201520162017201820192020ChinaIndiaUSAGermanyUK55Chart 4.2.STEM graduates in the UKUndergraduate and postgraduate programmes,academic year 2021/22 In the academic year 2021/22,graduates from STEM disciplines accounted for 42%of all graduates in t

308、he UK,a value above that for 2020/21(40%)and 2019/20(41%).In 2022 health and related disciplines represented 52%of UK STEM graduates.Women are under-represented among certain STEM disciplines in the UK.For example,in 2021 women represented 53%of total STEM graduates,compared to 61%of the share of wo

309、men who graduated in non-STEM disciplines.In disciplines such as engineering and technology,and computing,women represent only 22%and 24%of graduates,respectively.Analysis presented in previous editions of this report has found that the UK has a relatively low share of graduates in engineering,manuf

310、acturing and construction compared to other countries.1For example,in 2021 the number of graduates in engineering,manufacturing and construction as a share of all graduates in the UK was 9.1%,compared to Italy,Switzerland,Japan and Germany,whose share of graduates in these disciplines was between 14

311、.4%and 22.1%.1Note:Health and related disciplines include:medicine and dentistry;subjects allied to medicine;psychology;biological and sport sciences;veterinary sciences.Source:HESA(2023).Figure 17 HE qualifications obtained by CAH level 1 subject and sex.72%22%24%41%41%58%27%78%76%58%59%42%200,5706

312、0,34550,46534,90022,52516,940050,000100,000150,000200,000250,000Health andrelateddisciplinesEngineering andtechnologyComputingPhysical andmathematicalsciencesArchitecture,building andplanningNaturalsciences,andagricultureNumber of graduatesFemaleMaleOtherSTEM385,730 42%Non-STEM534,210 58%Total gradu

313、ates in the UK 2021/221 Source:OECD(2023).Graduates by field database.Note:The classification used by the OECD differs from that used in Chart 4.2.Human health and social work activities34%Professional,scientific and technical activities13%Information and communication 9%Manufacturing8%Education8%Ot

314、her sectors28%Manufacturing28%Professional,scientific and technical activities23%Construction9%Information and communication 9%Wholesale and retail5%Other sectors 26%Professional,scientific and technical activities21%Manufacturing15%Information and communication12%Education11%Wholesale and retail 7%

315、Other sectors 34%Information and communication 44%Wholesale and retail 9%Financial and insurance 8%Manufacturing 7%Professional,scientific and technical activities 7%Other sectors 25%56Upon obtaining a degree,graduates with STEMskills are employed across a variety of economic sectors.For the academi

316、c year 2020/21:o Total STEM graduates:only 13%were employed in professional,scientific and technical activities,9%in information and communication and 8%in manufacturing.o Engineering and technology graduates:28%were working in manufacturing,23%in professional,scientific and technical activities and

317、 9%in construction,while an additional 26%was spread across public administration,finance,education and public utilities.o Physical sciences graduates:21%were working in professional,scientific and technical activities,15%in manufacturing and 12%in information and communication.o Computing graduates

318、:44%were working in information and communication.Source:HESA(2023).Figure 11 standard industrial classification of graduates entering work in the UK by subject area of degree higher education providers(HEPs)academic year 2020/21.Chart 4.3.Where do UK STEM graduates work?Graduates entering work in t

319、he UK by field of study and economic sector,2020/21Total STEM graduatesEngineering and technology graduatesPhysical science graduatesComputing graduates57Chart 4.4.Skills needs:international comparisonIndex,selected skills and countries,2019The OECD Skills for Jobs database shows how the UKcompares

320、to the OECD average and the EU in terms of“hard-to-find”skills.In the UK it is relatively hard to find skills related to medicine,scientific knowledge(biology,chemistry,physics),digital skills(computer programming,data processing,ICT safety and network,office tools and collaboration software)and pro

321、duction and technology knowledge(building and construction,design,engineering and technology,quality control analysis).Other analyses have highlighted labour shortages in theUK.1 In OctoberDecember 2023,there were 934,000 vacancies in the country.Although this number is lower than its highest value,

322、reached in MarchMay 2022(1.3 million),it is still above the pre-pandemic value(801,000 in JanuaryMarch 2020).2In OctoberDecember 2023,46%of vacancies were in sectors where STEM graduates are most likely to be employed,including human health(18%),professional scientific and technical activities(10%),

323、manufacturing(7%),education(7%)and information and communication(4%).2At the beginning of 2024,12%of UK firms in manufacturing and 6.9%in information and communication,for example,said they were experiencing a shortage of workers.3Note:1 Francis-Devine B.and Buchanan I.(2023).Skills and labour short

324、ages.House of Common Library.2ONS(2024).VACS02:Vacancies by industry.3ONS(2024).Business insights and impact on the UK economy Wave 101.Note:Medicine knowledge:medicine,dentistry,psychology,etc.Scientific knowledge:biology,chemistry,physics,etc Digital skills:computer programming,data processing,ICT

325、 safety and network,office tools and collaboration software,etc.Production and technology knowledge:building and construction,design,engineering and technology,quality control analysis,etc.In the OECD Skills for Jobs database:“Skills are defined as hard-to-find(or in shortage)when employers are unab

326、le to recruit staff with the required skills in the accessible labour market and at the going rate of pay and working conditions.Skills surpluses arise in the opposite case,when the supply exceeds demand for a given skill.The indicators measuring skills shortage and surplus areconstructed on the bas

327、is of signals extracted from five sub-indices:wage growth;employment growth;hours worked growth;unemployment rate;under-qualification growth.”See OECD(2022).OECD Skills for Jobs database:Measuring skill needs in the new era of work.Source:OECD(2022).Skills need by country data set.How to read:the va

328、lue of 1 represents the largest shortage of skills;and the value of-1 the largest surplus of skillsHard to findIn excess-0.3-0.2-0.100.10.20.30.40.5Medicine knowledgeScientific knowledgeDigital skillsProduction andtechnology knowledgeUnited KingdomEuropean UnionOECD58Chart 4.5.Engineering profession

329、 salariesGross annual pay,median,full-time and part-time employees,2023In 2023 the median gross salaries for the majority of core engineering occupations in the UK were higher than the average in the job market.1 For example,the median annual gross salary for an electrical engineer was 80%higher tha

330、n the median salary for all UK employees.Although engineering professions are better paid,women are under-represented in the profession.In 2023 women represented just 14%of the core engineering workforce,compared to 52%of the rest of the workforce.2Note:1For the definition of core engineering profes

331、sions,see Engineering UK(2018).The State of Engineering 2018.2Core engineering workforce,as defined by Engineering UK(2018).Data for the UK workforce:ONS(2023)Annual population survey Occupation(SOC2020)by sex,employment status and full/part-time.010,00020,00030,00040,00050,00060,000 Quality assuran

332、ce and regulatory professionals Engineering professionals n.e.c.Mechanical engineers Information technology professionals n.e.c.Aircraft maintenance and related trades Civil engineers Production managers and directors in manufacturing Aerospace engineers Research and development(R&D)managers Program

333、mers and software development professionals Electronics engineers Production managers and directors in construction Production managers and directors in mining and energy IT business analysts,architects and systems designers Electrical engineersAnnual gross pay(median)Median annual gross pay for all UK employees29,669Note:Standard Occupational Classification(SOC)codes for the engineering professio