Dyson: Lessons for the British economy

Robert Peston
Economics editor

James DysonImage source, PA
Image caption,
Dyson paid £50m of taxes to the British exchequer

Amidst all the gloom, the results of Dyson - the designer and manufacturer of all those sleek and efficient consumer electricals - were impressive.

In low-growth UK, Dyson has been hiring, deploying £45m a year in research and development, and investing in new technologies that won't become commercial for five to ten years.

The group's research and development priority right now is something called "digital motor technology", on which 70 motor specialists are currently working (digital motors are apparently much faster and more efficient than conventional engines).

Dyson's reward has been record financial results. Sales rose more than 15% to £886.5m last year. And in spite of a remarkably sharp 30% rise in administrative expenses to £315m, pre tax profits were 21% higher at £198m.

"If only we had more Dysons" is the lament you will have heard from most senior politicians over the past decade or so - but especially since the great crash of 2007-8, when the risks of the UK's dependence on banking and financial services to deliver economic growth was exposed.

Factory future?

Here are the good things about Dyson.

Its success means an increase in high-skilled employment in Britain: last year it hired 200 engineers, to take its roster of engineers at Malmesbury in Wiltshire to 550; and its target is 700 engineers by the end of 2011.

Those graduating in engineering join Dyson with a starting salary of £25,200 and a joining bonus of up to £3000 - which is a decent living from the off, and is an incentive for those currently studying engineering or a science degree to consider applying those skills in British industry, rather than going straight into a hedge fund.

Also Dyson paid £50m of taxes to the British exchequer and £4m to charity.

All that said, it's the brainy stuff that Dyson does in the UK. The making and assembling takes place in other parts of the world.

In some ways it is similar to that other great British technological success story, Arm - which designs the chips that are in gazillions of smartphones, tablets and hi-tech electronics, but which licences its technologies and manufactures nothing.

For years that has been the trend in the shrinking part of the British economy that produces things rather than services: it has tended to concentrate on the intellectual side of manufacturing and producing, the knowhow, the ideas; but the jobs in making and assembling have gravitated to Asia, Eastern Europe, Turkey and other places where it can all be done so much cheaper.

It was a question of survival. In many ways manufacturers did brilliantly in the decade before the recession of 2008/9, given that the brightest and brainiest young talent was going into the City and strong sterling, buoyed up by the strength of financial services, made British exports expensive.

In these boom years for the British economy - which we know were built on dangerously unsafe foundations - manufacturers' share of British GDP may have shrunk and employment in British manufacturing may have dwindled. But absolute sales and profits of British manufacturers rose.

So here is the question. As we rebalance our economy from one fuelled less by debt, from one less reliant on financial services, from one less dependent on consumption and more geared to towards investment and exports, where will the jobs come for those of our young people who will never be boffins, or best-selling authors, or premier-league footballers?

Who is going to deny that it would be great to have more Dysons, Arms, GlaxoSmithKlines and so on. But if the great retailing bonanza is over, does the UK also need a few more factories?