Britain’s exceptional lack of automation
The U.K.'s use of industrial robots is below the world average. It is one of many metrics that point to Britain becoming one of the first formerly developed countries.
Robotics is not yet a strategic industry. Globally, it enjoyed hardware sales of $16.5 billion in 2018. Extended out to software and integration the industry had a turnover of $50 billion. By contrast, semiconductors turn over $450 billion annually. Phones sales were $522 billion in 2018. But over the next fifty years, the use of robots to automate large swathes of the economy will become critical to mitigating the negative impact of demographic aging. Already, robot use correlates strongly with high productivity growth. While the impact of robots on jobs is contested, multiple studies (including this one of French companies) show companies that adopt robots outcompete competitors that do not. As with companies, so with countries. This does not bode well for British industry, which has singularly failed to automate in line with the countries it considers its peers.
China’s automation dream
In the view of the Chinese state, the robotics industry is deserving of its very own 5-year plan. China’s expansion in industrial robotics is unprecedented. From 2000 to 2020, its share of worldwide new industrial robot installations grew from 0.4% to 44%, an increase of more than two orders of magnitude. It now has over 1 million industrial robots in stock. Japan is in second place with 347,000. While China remains highly dependent on Japanese and European suppliers, these companies also cannot envision a future of growth without Chinese demand. Chinese company purchases of European robotics champions and reciprocal foreign direct investment into Chinese production centers are slowly translating into greater self-sufficiency. This will be complemented by a greater Chinese presence in the foundational elements of the technology stack that allow for robots to do more: servo motors, reduction gears, sensors, integrated circuits, 5G cellular connectivity, and cloud computing services.
A lot of money has been spent to subsidize this growth. In 2016, four publicly traded Chinese robotics producers (Estun, Siasun, Guangdong Topstar, and Shanghai STEP Electric) relied on state subsidies for 40% of their collective net profits. This, and billions of dollars worth of subsidies in robotics, is but a fraction of the enormous capital spent on strategic technologies. According to the Center for Strategic and International Studies, Chinese 2019 industrial policy spending, including direct subsidies, tax incentives, below-market credit, and state investment funds, was $248 billion. Measured by purchasing power parity, China’s industrial policy was $406 billion in value. For context, The American figure was $84 billion. The French figure was $18 billion. Britain was not included in the study.
Robotics is an important technology for China because, while all technology is designed to achieve more with fewer inputs, it serves to automate physical labour. Robots amalgamate advances in processing hardware, sensors, mechatronics and computing, resulting in labour-saving productivity growth. This gains wider relevance in the context of demographic aging. Like other East Asian countries, Chinese officials are reticent about mass immigration, instead favouring automation and pro-natal policies. Given the possible severity of China’s impending demographic struggle and the poor record of policies designed to increase fertility, the promise of a future where most physical work can be automated is compelling.
But Japan, known as the country most receptive to automation over immigration, is slowly relaxing its immigration policies. To many commentators, this opening up is something to rejoice about. But it is also a concession of sorts. The immigration Japan allows is not intended to replace the country’s highly skilled manufacturing workforce but is to provide labour for the lower-wage service sectors. Despite many promises about social robots that can interact with humans in open, dynamic spaces, the results in Japan have so far been disappointing. To the extent robots currently have a viable role in services it is as floor scrubbers and forklifts, not as caregivers or bank attendants.
Automation is a painful process of trial and error, demanding large capital formation and an acceptance of delayed and uncertain payoffs. For this reason, it has been most readily deployed in tight labour markets where there is plenty of technical expertise and where shortages cannot be answered by just increasing the labour force or reducing wages. As labour markets tighten further, it appears Japan and South Korea are following America and Europe’s lead in expanding immigration, albeit in a more conservative manner. China could soon stand alone as the one major economy that eschews labour-expanding immigration for labour-replacing automation. It is therefore the bellwether for whether the more speculative promises of automation can be realized. If you don’t get fully automated luxury Communism in Shanghai, you will not be getting it in London.
An island with no machines
China’s concerted efforts to expand automation are more pronounced when compared with the original automating nation, Britain. Rather than being second-tier, Britain’s level of automation is behind the global average. One basic measure of robot use is robot density per 10,000 manufacturing workers. In 2020 the global average was 126 robots per 10,000 workers. Korea had the highest with 932 robots. China had 246 robots. Britain had 101 units, lower than every major manufacturing economy and including Slovenia and Czechia. Britain’s leading automation vendors, besides the exceptional fulfillment technology vendor Ocado, are start-ups in delivery in cleanroom lab automation. Besides a handful of successes, the country has very little profile in one of the key industries of the next fifty years.
Source: International Federation of Robotics, December 14, 2021
A contention with robots is that they take jobs. But despite automating the least of any major economy, the U.K. lost a greater proportion of manufacturing employment between 2000 and 2010 than any other major industrialized nation. Since 2008, U.K. productivity growth has lagged behind other advanced economies. The reasons behind this are complex, but some explanation lies in the country’s very low capital investment in machinery — including robotics. There are case studies for this in virtually every sector, including the NHS’s purchases of medical equipment. In terms of CT scanners and MRI scanners per capita, the U.K. trails behind the Greek healthcare system. Sub-par automation exemplifies a broader trend of just not buying many machines or expensive capital equipment at all.
The U.K. has become an exemplar of reverse automation. Automatic car wash sites plummeted up to 2018 as unregulated, untaxed, and often forced labour flooded the hand car wash market. The number of automated car washes halved from 9,000 in 2000 to less than 4,200 in 2015. The number of dedicated handwashing sites expanded to at least 20,000. This was not part of some broader global trend. Automatic car washes remain a growth industry. Rather the U.K.’s habitual solution to aging and tight labour is wage suppression as opposed to capital-intensive investment. The trend was only somewhat halted by belated parliamentary scrutiny and labour shortages caused by the coronavirus. Given the immigration trends of the current government, it is likely reverse automation in this sector will re-emerge.
The U.K. might bank its competency in robots on the talent residing in Britain’s elite universities. If it cannot deploy modern systems at scale, maybe it can capture future markets. This is in line with boffin-bias that pervades a great deal of British commentary. There are a number of government-funded robotics hubs listed below;
· The Robotics and Artificial Intelligence for Nuclear Hub (RAIN): An alliance of robotics and nuclear engineering experts, alongside representatives from RACE (Remote Applications in Challenging Environments), a robotics test facility near Oxford.
· The National Centre for Nuclear Robotics (NCNR): Focuses on robotics for nuclear decommissioning, radioactive waste management, and site monitoring.
· The National Hub on Future AI & Robotics for Space (FAIR-SPACE): led by the University of Surrey with more than 30 international partners.
· The Offshore Robotics for Certification of Assets (ORCA) Hub: The long-term aim is to create completely autonomous, self-maintaining installations.
As valuable as these projects are, they are tackling niche markets and can only be an accompaniment to a strategy that prioritizes mass adoption of currently available automation products across whole industries.
A permissive regulatory environment, though helpful, cannot compensate for the deficit in investment. It was a fast approval that convinced Amazon to set up its drone delivery testing regime in the U.K. in 2016. Drone delivery is a nascent and uncertain market with limited commercialization projects, and could stay that way. The Amazon project floundered and was moved back as soon as the U.S. testing regime was adequate. While the EU is dutifully seeking ways to hamstring its own competitiveness with onerous third-party certification, the emphasis on regulatory loosening by British policymakers is a misdiagnosis of the country’s problems. The Johnson government has routinely talked about ‘unleashing’ growth. But as the dreary forecasts and the figures on capital formation show, there is not that much to unleash. For this reason, I would argue the vaunted super-deduction will not change the current deficit in automation.
Identifying the scale of the problem
One minor way to improve the situation is to connect roboticists to the government. This 2021 paper on the robotics market provides a lot of economic analysis but also highlights the inability of Whitehall and the industry to align on any clear metrics for success. Relying on a third-party economics consultancy which in turn relies on a third-party market intelligence analyst (myself) to inform a national robotics strategy indicates civil servants and ministers only want to engage with the industry at a surface level. More direct dialogue and even maybe employing actual roboticists in government would surely be preferable.
A more well-resourced trade association would also be useful. The British Automation and Robotics Association (BARA) is limited in size and is sheltered within the processing and packaging machinery association (PPMA). With such limited exposure, British robotics cannot compete with the attention given to perpetually loss-making Fintech start-ups or wind turbine manufacturers. Some efforts to remedy this, perhaps through an automation-specific think tank or organization, would go some way to improving the industry’s profile within government. Inspiration could be taken from Denmark’s Odense robotics cluster, where companies, universities, and the government have worked to build world-leading companies like Universal Robots (UR) and Mobile Industrial Robots (MIR). This cluster was formed partially by the shipping giant Maersk trying and failing to automate shipbuilding.
But these more palatable options would only be so effective. Reorienting the British economy towards greater automation and higher productivity growth will incur institutional opposition. Neither the current government nor the opposition is well-positioned to overcome this.
China’s government perceives the threat of technological inferiority and demographic decline as sufficient reason to pour enormous resources into automation – even at the risk of major inefficiencies in the short term. It may well fail to mitigate demographic stagnation. But it has marshaled unprecedented effort and capital in a bid to promote productivity-oriented growth. In the U.K., the lack of perceivable economic growth, and the role insufficient automation has in this, are barely acknowledged. Before the situation can be improved, Britain has to be understood as a formerly developed country.