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  • 标题:Marketing in the United Kingdom - Cover Story
  • 作者:Robert McLaughlin
  • 期刊名称:Business America
  • 印刷版ISSN:0190-6275
  • 出版年度:1990
  • 卷号:August 27, 1990
  • 出版社:U.S. Department of Commerce * International Trade Administration

Marketing in the United Kingdom - Cover Story

Robert McLaughlin

The resurgence of the British economy that began in 1981 is now entering its ninth year, the longest running growth period in British postwar history. The rate of real gross domestic product (GDP) growth achieved since 1981 has been one of the highest among countries of the Organization for Economic Cooperation and Development (OECD). The central themes of the government's economic policy have been to reduce the role of the state in the economy, to cut public spending, and to revive U.K. industry. Specific measures have included tax reform, abolition of capital controls, privatization of national industries, deregulation of financial services, and labor law reform. These steps have brought about significant structural changes in the economy in the past 10 years that will help make the United Kingdom more competitive in the integrated European Community of the future.

International trade is vital to the economy, and the United Kingdom maintains an open economy with few major trade barriers. In 1989, exports of goods and services totaled approximately 25 percent of GDP. Britain accounts for nearly 6 percent of the total of world exports of visible goods. Major items in U.K. export trade include aerospace products, electrical products, electrical equipment, machinery, and chemicals. Major imports include agricultural products, raw materials, and semimanufactured goods.

Our Largest European Market

In 1989, the country's major trading partners, in order of total two-way trade, were the Federal Republic of Germany, the United States, France, and the Netherlands. The United Kingdom remains solidly entrenched as the United States' largest European market. U.S. exports to the United Kingdom last year totaled almost $21 billion. Demand for U.S. goods is expected to grow as the United Kingdom's industrial sector continues to invest to prepare for a more competitive European Community following the completion of the single market.

The U.K. economy slowed considerably in 1989 in response to higher interest rates, the weapon chosen by the government to battle inflation. Real GDP growth declined to 2.3 percent, well below the 1988 figure of 4.5 percent. The interest rate policy initiated in mid-1988 brought base (prime) rates from 7.5 to 15 percent by the end of 1989. The higher rates cut the growth of consumption, retail sales, and investment in housing, but also caused increases in retail prices.

Investment, excluding housing, rose an impressive 5.3 percent in 1989, reflecting business response to structural reforms carried out by the government, preparations for the European Community's Single Market initiative, and the recovery in local and global demand since 1982. Concurrent with the continued growth of the economy has been the shift of the United Kingdom from a net exporter to a net importer during the 1987-89 period. In 1989, real merchandise exports rose 1.7 percent as imports grew over 10 percent. Unemployment continued to fall and by year-end 1989 had settled to just under 6 percent.

The U.K. current-account deficit widened from $26 billion in 1988 to an estimated $34 billion in 1989. Most of the deficit resulted from a 15 percent rise in non-oil imports and strong internal demand that diverted goods from the export sector.

The Economic Outlook

The U.K. Government releases forecasts for the economy in the spring and autumn. In the budget presentation in March 1990, the Chancellor of the Exchequer presented the government's economic forecast. Real GDP growth of I percent was predicted for 1990 and 1.5 percent real growth for first-half 1991. In 1990, growth of consumer expenditure is projected to slow to 1.3 percent, after rising 6.7 percent in 1988 and close to 4 percent in 1989. This will help slow down the growth of imports from 7 percent in 1989 to I percent in 1990 and will contribute to a 7.3 percent gain in exports over the comparable 1989 level. The current-account deficit is expected to fall to 15 billion pounds sterling in 1990, down from the 21 billion-pound deficit in 1989. Inflation, as measured by the retail price index, is expected to rise 7.3 percent in 1990, after increasing 7.5 percent in 1989.

The Thatcher government has set out and pursued a series of medium-term financial strategies, instead of attempting to fine tune the economy by short-term adjustments of fiscal policy. These strategies have established targets for three- and four-year periods and have assured that fiscal policy does not interfere with private sector economic decisions. The commitment to this policy may be tested in 1990 as high interest rates slow the economy to near recession levels.

Best U.S. Export Prospects

The demand for imported goods in the United Kingdom--a market consisting of England, Scotland, Wales, and Northern Ireland--is wide and changing. The following industry sectors are expected to experience the most buoyant growth and provide the best opportunities for U.S. exporters over the near and intermediate term.

The U.K. market for computer software and services in 1989 was estimated at $4.5 billion, with a projected annual growth through 1990 of 25 percent. Imports from the United States in 1988 were valued at an estimated $3 billion. The projected annual growth of U.S. exports through 1990 is 25 percent. Software markets are exceptionally difficult to measure since software is often merged with other elements of computer systems during the initial sale and installation, and the value of the software content is obscured.

Taking the most recent figures for computer hardware sales, plus the installed base that continues to absorb new software, the value of software currently employed (operating systems and applications software) would be approximately $10 billion, giving an available annual market of perhaps $4 to $4.5 billion, growing close to 25 percent a year. The United States supplies nearly 80 percent of the packaged software available in Britain.

The British market for computers and peripherals was worth $9.2 billion in 1988. In 1989, the market was estimated at $10.5 billion, with 25 percent annual growth projected through 1990. Imports of U.S. computers and peripherals in 1989 were valued at nearly $2.2 billion, and they are expected to show annual growth through 1990 of 25 percent. Mainframe computer sales have retained their market share and still dominate the business and industrial sectors. Sales of computer peripherals remain buoyant, with increased interest in high performance output devices and mass storage (including optical disks). American companies and their local subsidiaries currently have the largest share of this market. Personal computers (PCs) are mostly sold for business use, and the growth in the number installed is predicted to increase from the current 20 percent share to 40 percent by 1990. Japanese vendors have targeted the printer/plotter and memory sectors. They have not successfully challenged U.S. firms with complete systems or processors.

The U.K. market for medical equipment was valued at close to $1 billion in 1989 and is expected to average 9 percent annual growth through 1991. Medical equipment imports from the United States in 1989 were $293 million and are projected to grow 9 percent annually through 1990. The forecasted annual growth rate for this market in 1991 is 9 percent. The United States still leads the field in market share, capturing approximately 31 percent of the total imports. Major competition comes from West Germany and France.

The National Health Service, currently throes of major administrative changes, provides most of the health care in the United Kingdom. Some 5,000 hospitals and 48,600 registered general medical practitioners are included in the National Health Service. The U.K. Government has also encouraged the growth of private sector health care. Nearly 6 million people, or more than 10 percent of the population, are covered by the private sector, which has more than 200 hospitals-one-tenth the total of the National Health Service. One-sixth of all major operations are carried out in the private hospitals.

The U.K. market for electric power generating equipment was $880 million in 1988, and is projected to grow 8 percent annually through 1990. The United States exported $90 million of this equipment in 1988, and is expected to show annual increases of 5 percent through 1990. Under the 1988 U.K. Government proposal to privatize the Central Electricity Generating Board (CEGB), the CEGB will lose its monopoly in power generation, and competition will be encouraged as area boards take on responsibility for generating power on their own account. The CEGB itself will end up with some 70 percent of the 78 power stations in England and Wales, and a new company rival to be carved away from the CEGB will obtain 30 percent of the existing generating capacity. In addition, the government has also published an energy diversification program to encourage alternative sources of supply. Private entrepreneurs who build new power plants will be able to sell their electricity to the restructured transmission grid. A consortium of U.K. construction groups has already announced plans for a 1 billion, 1,000 megawatt gas-field plant in East London. It is estimated that by the year 2025, some 25 new plants will have been constructed, with some additional 13 gigawatts in place by 2000.

The U.K. market for scientific and laboratory instruments, specialized computerized laboratory data management systems (SCLDMS), and associated software was valued at $1.7 billion in 1989, with annual growth through 1991 projected at 13 percent. Imports of this equipment from the United States were estimated at $183 million in 1989, and are expected to grow 5 percent annually through 1990. The U.K. market for this equipment is growing at an average annual rate of I I percent in real terms, with the area of software showing the most rapid growth (46 percent per year). The United Kingdom is one of the major world markets for this equipment and is also an important segment within the increasingly integrated European Community. U.K. manufacturers and importers of this equipment are increasingly looking to satisfy European standards.

The U.K. electronic components market, valued at $5.5 billion in 1989, is projected to show annual growth through 1990 of 15 percent. A substantial portion of local production comes from U.S.-owned plants in the United Kingdom. Imports of U.S. components totaled approximately $420 million in 1989 and are projected to show annual growth of 12 percent through 1991. Current market demand in the import sector is for active components, with the bulk of passive components supplied by local production. Market data are broadly confirmed by the Association of Franchised Distributors of Electronic Components and by reports in the trade press.

Biotechnology is moving from being a research-based industry to becoming a product-based industry. Much of the turnover now represents research spending, and the import values include a mixture of license fees and imports of actual products derived through biotechnology. The industry is changing rapidly, and there will be a larger product element in its output. Accordingly, there will be increased trade opportunities for products such as pharmaceuticals, hormones, enzymes, vaccines, diagnostic kits,insecticides, pesticides, bio-sensors, seeds, feed additives, and new materials. Imports and exports will grow rapidly as manufacturers bring products to the market to recover research and development costs.

The $4.2 billion British telecommunications market serves more than 12 million business and 18 million private subscribers. It has changed dramatically since privatization and the introduction of competition for business between the two licensed carriers and two cellular radio companies. Although the infrastructure is supplied principally by national manufacturers, elements of the system and subscriber apparatus are imported. As comeration, and competition will be encouraged as area boards take on responsibility for generating power on their own account. The CEGB itself will end up with some 70 percent of the 78 power stations in England and Wales, and a new company rival to be carved away from the CEGB will obtain 30 percent of the existing generating capacity. In addition, the government has also published an energy diversification program to encourage alternative sources of supply. Private entrepreneurs who build new power plants will be able to sell their electricity to the restructured transmission grid. A consortium of U.K. construction groups has already announced plans for a 1 billion, 1,000 megawatt gas-field plant in East London. It is estimated that by the year 2025, some 25 new plants will have been constructed, with some additional 13 gigawatts in place by 2000.

The U.K. market for scientific and laboratory instruments, specialized computerized laboratory data management systems (SCLDMS), and associated software was valued at $1.7 billion in 1989, with annual growth through 1991 projected at 13 percent. Imports of this equipment from the United States were estimated at $183 million in 1989, and are expected to grow 5 percent annually through 1990. The U.K. market for this equipment is growing at an average annual rate of I I percent in real terms, with the area of software showing the most rapid growth (46 percent per year). The United Kingdom is one of the major world markets for this equipment and is also an important segment within the increasingly integrated European Community. U.K. manufacturers and importers of this equipment are increasingly looking to satisfy European standards.

The U.K. electronic components market, valued at $5.5 billion in 1989, is projected to show annual growth through 1990 of 15 percent. A substantial portion of local production comes from U.S.-owned plants in the United Kingdom. Imports of U.S. components totaled approximately $420 million in 1989 and are projected to show annual growth of 12 percent through 1991. Current market demand in the import sector is for active components, with the bulk of passive components supplied by local production. Market data are broadly confirmed by the Association of Franchised Distributors of Electronic Components and by reports in the trade press.

Biotechnology is moving from being a research-based industry to becoming a product-based industry. Much of the turnover now represents research spending, and the import values include a mixture of license fees and imports of actual products derived through biotechnology. The industry is changing rapidly, and there will be a larger product element in its output. Accordingly, there will be increased trade opportunities for products such as pharmaceuticals, hormones, enzymes, vaccines, diagnostic kits, insecticides, pesticides, bio-sensors, seeds, feed additives, and new materials. Imports and exports will grow rapidly as manufacturers bring products to the market to recover research and development costs.

The $4.2 billion British telecommunications market serves more than 12 million business and 18 million private subscribers. It has changed dramatically since privatization and the introduction of competition for business between the two licensed carriers and two cellular radio companies. Although the infrastructure is supplied principally by national manufacturers, elements of the system and subscriber apparatus are imported. As computing and telecommunications continue to converge, opportunities for American firms will emerge, but again at subsystem and module levels. imports from the United States in 1989 were roughly $200 million and commanded a significant share of imports. Projected annual growth of these imports through 1991 is 15 percent.

The U.K. Government commitment to the environment should accelerate spending on air pollution control equipment. Plans announced in 1986 provided for $1.3 billion to be spent on equipping 6,000 megawatts of electrical generating capacity with flue gas desulfurization plants over the next nine years. A plan was also announced to install low nitrogen oxide burners at 12 of the largest power stations, at a cost of $286 million. The air pollution control equipment sector has grown at an average annual rate of 8 percent, and the specific plans to install desulfurization equipment on power stations will accelerate the growth sharply. The U.K. market for air pollution control equipment, valued at $528 million in 1989, is expected to grow to $586 million in 1990, with as much as $125 million of the increase being accounted for by the desulfurization plant. Imports from the United States were estimated at $39 million in 1989, and are projected to show average annual growth through 1991 of 10 percent. EC legislation in the field will also stimulate the market.

The market for sporting goods is growing rapidly. In the 1980s, the number of adults participating in sports increased by more than 10 percent for men and more than-20 percent for women, and a greater proportion of young people are now involved in sports. Given the British climate, indoor sports remain more popular than outdoor activities and new indoor facilities encourage family visits. Modem sports clubs and leisure centers provide comfortable facilities and evening hours when most adults participate in sports activities. Television coverage encourages many to take up new sports, and governing sports bodies have programs to encourage youngsters to participate in sports. The market had an estimated value of $680 million in 1989. Imports from the United States totaled $53 million in 1989 and should grow 5 percent per year through 1991.

The U.K. market for safety and security equipment was valued at $1.8 biIlion in 1989. gust 27, 1990 Domestic suppliers meet more than 75 percent of the local demand. Imports from the United States in 1989 were estimated at nearly $103 million. The U.S. share of the import market is approximately 25 percent; major competitors are the Federal Republic of Germany and Hong Kong. Leading end-users, accounting for 70 percent of total consumption, are industrial and manufacturing plants, office buildings, domestic dwellings, hotels, and retail outlets. Market development is toward more sophisticated equipment incorporating electronic and computer technology and multipurpose systems. An average growth rate of 8 percent is forecast for this market through 1991, and U.S. exports should grow at the same rate.

New OECD Report Examines

Trends in United Kingdom The OECD has just published a new economic survey of the United Kingdom. It contains more than 100 pages of text, tables, and charts depicting trends in the economy and the outlook for future growth. It is one of a series of economic surveys that the OECD-Organization for Economic Cooperation and Development--publishes regularly for various countries. The report on the United Kingdom can be obtained for $11 from OECD Publications and Information Centre, 2001 L St., NW., Suite 700, Washington, D.C. 20036-4095; tel. (202) 785-6323, fax (202) 785-0350.

Want to Learn More About

Marketing in the U.K.? This article was excerpted from a new report in the Commerce Department's Overseas Business Report series, Marketing in the United Kingdom, prepared by Robert McLaughlin in the Commerce Department's Office of Western Europe. The full report (OBR 90-05) is available for $2.25 from Commerce Department District Offices or Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402.

Demand is on an Upward Path In 1988, U.S. exports to the United Kingdom recorded another double-digit increase, rising 31 percent above the 1987 total to $18.4 billion. In 1989, exports reached a record $20.8 billion, a gain of 14 percent over the 1988 total.

Continued, if slower, economic growth; the absence of major trade barriers; and the ease of doing business will keep the United Kingdom an attractive marketplace for established and new exporters. Demand for U.S. goods and services should remain on an upward path for the foreseeable future, although double-digit increases in export volumes will be harder to attain i f growth of domestic demand is restrained by high interest rates.

Sources of Economic and

Commercial Information

General Information--General information concerning the U.K. market, including economic trends, commercial development, production and trade, can be obtained from the United Kingdom Desk, Office of Western Europe, HCHB-3042, U.S. Department of Commerce, Washington, D.C. 20230, tel. (202) 377-3748, or through any of the Commerce Department's district offices.

Government Representation--The U. S. Embassy is located at 24/31 Grosvenor Square,London WIA 1AE, England. U.S. mail inquires on doing business in the United Kingdom should be addressed to: Commercial Section, Box 33, American Embassy, FPO New York 09509; tel. (011-44-71) 499-9000.

COPYRIGHT 1990 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group

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