Further consolidation of the manufacturing sector in this country threatens the whole supply chain, according to distribution industry body Afdec.
The industry body’s latest figures show that the UK components market will shrink by almost 8 per cent this year.
According to Afdec, the distribution market has faired slightly better, but it also will see a 6 per cent decline.
One of the factors behind this decline is continuing contraction and consolidation in the contract electronics manufacturing (CEM) sector.
“The real risk is that further consolidation in the CEM sector will further reduce component spend in the UK,” said Adam Fletcher, president of Afdec.
The influence of the CEMs is obvious when you consider that they currently account for 40 per cent of the components market ion the UK.
According to Fletcher, the components market is still being hit by the continuing loss of manufacturing and sourcing activities to lower cost factories in Asia and Eastern Europe.
“In one sense I am surprised by this because I would have thought that off-shoring of manufacturing may have stabilised more by now, but it clearly hasn’t,” said Fletcher.
The components market has contracted in four of the last six years, according to Afdec.
Along which the risk from consolidation, Fletcher warned that price erosion and the weak dollar would continue to affect the market next year. Afdec forecasted that the distribution market will decline by 1.8 per cent in 2008 before showing a small growth in 2009.