A tale of continued success

What does the future hold for the UK laboratory technology supply market? Tim Collins thinks he knows

THE UK laboratory technology supply industry is estimated to be worth around £3 billion per year and contributes annually over £300m to the UK balance of trade^1,2. The industry employs tens of thousands of people², many at graduate level or above. It is also a key industry sector underpinning almost every other industry. So what condition is the industry in and what does the future look like?

Before we look forward we should look a little at the past. The industry is obviously interwoven with the development of science and most early scientists were their own instrument makers. Prior to 1571, Leonard Digges constructed a theodolite; and in 1640, a young astronomer named William Gascoigne invented a micrometer. From these early days until the late 1800s most of the developments in scientific instrumentation were in the field of optics – microscopes, telescopes etc. – and British makers of optical and scientific glassware – the development of fused silica was due to English scientific work – were held in high regard.

The development of early electrical instruments (circa 1860 onwards) was also largely due to British scientists, with the likes of Faraday, Maxwell, Wheatstone, Kelvin and others. In 1900, the National Physics Laboratory (NPL) was established, but the scientific and laboratory industries really kicked in during and shortly after the First World War.

Before the war, most of the companies supplying laboratory equipment, consumables and chemicals were very small, usually local firms, with materials often being imported and then worked on further (e.g. glassware). So what happened? Firstly a large amount of the imported materials for pharmaceutical and laboratory glassware and porcelain came from Germany and secondly during the war, many more people were trained to make instruments and ones that would work in harsh and extreme conditions – such as in tanks in the desert or radios in the Arctic etc. Also at this time, it was realised that science and industry were largely interdependent, new developments in each sector driving those in the other.

This period saw the birth of several associations; the British Optical Instrument Manufacturers Association of Great Britain (later the Scientific Instrument Manufacturers Association) came into force; as did the British Laboratory Ware Association (BLWA). Much later these associations – along with a few others – merged to become GAMBICA (the Group of Associations of Manufacturers of British Instrumentation, Control and Automation).

After the First World War the government realised – with some lobbying from industry – that it did not want the possibility of unrestricted foreign competition in the field of scientific instrumentation and apparatus, or to be left without a source of supply as had happened at the outbreak of the war. It therefore introduced a tariff under the Key Industries Duty, and thus protected domestic manufacturers and established the industry, as one of vital importance.

So what of the laboratory supply industry today? Since the 1960s there have been significant changes. Until then, the industry in the UK benefitted from the protection offered by the government but as that protection diminished, the prospect of sales to new markets grew and this led to many UK companies going abroad to show their wares. In the 1970s large groups of UK laboratory supply companies were not uncommon at shows as far away as Singapore. This however also raised these companies’ heads above the parapets and quite a few of those looked attractive to others.

During the 1980s, 1990s and into the 21st Century there were many mergers and acquisitions. This was recently illustrated at the annual Laboratory Technology Suppliers’ Conference where it was highlighted that out of around 1000 instrument suppliers around the world; about 40 of them had nearly 85% of the market by revenue. That may seem surprising to many but the market has changed; with the advent of globalisation many of the industry’s customers have also become global. Sectors such as pharmaceuticals, food, metals, chemicals and utilities have spread around the world and wanted their suppliers to follow them. Additionally many developing countries were not seen as export markets. Thirty years ago few went to China, India, Russia, South America, the Middle East and Asia; all now attract a lot of attention from suppliers large and small.

So what has happened in the UK market and to UK companies during this change? Many of the larger UK companies have become either international or part of a multinational. Companies such as BDH, Fisons, Pye Unicam and VG Instruments are now part of large multinationals. Their ownership may have changed but they haven’t necessarily gone from the UK – these large companies still employ hundreds and in some cases thousands of people in the UK and many of these original companies have spawned separate companies, leading to specialist clusters such as mass spectroscopy in the North West and spectrophotometers in the Cambridge area.

The customer base has also changed as universities and industry no longer have the staff to make equipment. The days of science departments and manufacturers having workshops, glassblowers, instrumentation engineers and so on have mostly gone. Now the focus must be on core activity with almost everything else outsourced.

This has changed innovation in the laboratory sector, but it has not stopped it.

Suppliers must now work more closely with clients if innovation is not to be stifled; innovation could be lost if everything were outsourced and no collaboration undertaken.

Many clients now have fewer scientists and more operators; they want equipment that is easy to use, repeatable and can be used in the field or scaled up. They also want to reduce the size and cost, improve the detection limit, and increase the robustness and speed.

We see products developed in universities and research centres being spun-out or licensed. Such products are not usually market-ready and can take another year or two before they get there. They may not be completely new but may improve existing analytical techniques, either in terms of detection limit or safety.

We have seen companies develop new applications from old technology, while the explosion in biosciences has been staggering. Diagnostic testing has allowed a quantum leap in healthcare management, so that even the pre-screening of embryos for genetic diseases is now a reality. At Medica in 2009 you could see the UK is still a world leader in these areas, with over a quarter of the UK group showing in the diagnostics and pathology section of the show, launching new products, some many years in development and truly groundbreaking.

There are estimated to be up to 400 UK companies involved in the laboratory technology supply industry. Some are large multinationals and some are UK-only distributors, but there is a significant number that are UK manufacturers and usually exporters. This latter group are the UK’s prime innovators in the laboratory technology supply industry. Most of the companies are SME’s, often working with local – but sometimes overseas – customers. They offer the flexibility and imagination to try and overcome their clients’ problems. As both industry and universities have cut back on their in-house staff to build equipment, so we need these companies to fulfil this role and remain innovative, if that is our primary goal.

The market in the UK had grown over the period 2005-20082 and early figures from the GAMBICA members in 2009 shows that the market continued to grow although there may have been a drop in the value of capital equipment purchased. Exports have also continued to grow over the last four years, despite the global downturn; 2008 it was a record year for exports for the laboratory sector and early figures for 2009 show exports improved even further.

So everything is looking promising then? Well there are a few barriers to overcome. Often the domestic market may not be big enough to sustain the company after its initial start. Indeed, in some areas, there may be almost no UK market. Funding is also often a stumbling block, particularly recently with many good ideas being shelved for the lack of a relatively small amount of money.

In recent years the UK government has put more money in to the science community, but little support for the UK supply industry. In a peculiar British trait, scientists and technicians don’t attend trade exhibitions in the UK. It seems that unlike almost everywhere else in the world, seeing what is new or speaking to suppliers is not seen as continuing professional development. Despite this and the decreasing government support, UK groups at exhibitions overseas – Analytica, Medica, Pittcon etc. – are usually one of the largest national groups.

The concern is that this situation will change as it becomes even more difficult to find home-based customers and in the knowledge of the continuing squeeze on government finances regarding science funding in the UK. We have already heard about cuts to universities but other reductions – for example in support to the NPL and to the National Measurement Office – are likely to damage our science base and our possibility to compete in export markets. It is also unlikely that the small amount of support they give to the supply industry will increase.

However the industry is generally in fair shape, it is attractive to both larger companies and investors, the world trends would appear still positive with developing countries requiring more and more scientific equipment and indeed establishing their own national laboratories. The UK still has a strong science base particularly in the life sciences and high technology areas. This year could be a difficult year for UK-only companies, especially in the equipment and instrumentation areas. The GAMBICA-organised Laboratory Purchasing Managers Index (LPMI)³ (see figure 1) has indicated an improving but still quite weak market for capital equipment, while consumables, chemicals servicing and repairs remains level or in some areas rising. The general feeling within the industry is one of some uncertainty with a little cautious optimism.

With finance still problematical and larger clients demanding companies accept longer payment terms, where will the resources come to develop the next innovative idea or breakthrough? The industry is still inextricably linked to the industries it supports. The almost strange relationship that exists between supplier and customer is perhaps best seen with its relationship with the NHS. A new test or diagnostic piece of equipment may cost a bit more than an existing product or method but will it save hundreds or thousands of pounds further on down the line? The NHS has to save money, so it says it can’t afford to buy it but can afford not to buy it?

At the recent UK annual laboratory technology supplier’s conference, one large multinational customer said they (the customer) wanted fit-for-purpose instrumentation that was interchangeable, reliable and reproducible but they also expected it to improve the resolution and speed up the time taken. They were however willing to work with their suppliers and this collaboration across the sector and with the suppliers’ clients must continue.

Most clients also expect their suppliers to make something that is greener and complies with all the necessary regulations and standards, of which there are many. And they would like it supplied and serviced in a dozen different countries around the world. “Not much to ask,” quoted one supplier, “let’s just hope they pay us on time!”

In summary the UK laboratory technology supply industry is one that has a long history and despite the many changes still continues to flourish, both in the UK and overseas. It continues to innovate and respond to the challenges of its client base but the warning signs are there; as the science base shifts or reduces and the support declines, companies will have to work harder and collaborate more if they are to succeed in the future.