Martin Banks, Personal Computer World 11/83 - checked

November 1983

The Lord giveth, and the Lord taketh away; that is one of the strange anomalies of life.

The 'Lord' in this particular context is that most blessed assemblage of Mafia entrance exam failures, the British Government (loud trumpets and much genuflection). To be fair, what I am about to regale you with this month is not all its fault; after all it did not give us microelectronics technology and all that followed on from it.

I will start with a statement made recently by our great Leader (of whom an acquaintance said, in all innocent honesty, 'she's the best man for the job'). She was making a guest appearance in Scotland, at one of the new companies in the microcomputer business. She glowed for the cameras and said that this (ie, all the new technology stuff) is where the new jobs lie.

And this is true, they do. The microcomputer industry, and its many spin-off activities, has the potential to absorb large numbers of those thousands now employed in not working at anything. In theory at least it is an industry that can absorb and use such numbers, if not the existing skills of the people.

But if the Government actually approves of these companies, and would like them to grow and prosper, what is it doing about the problem?

As is my wont, I will try to explain my point by way of a little story.

Once upon a time there was a company in Chesham called Nascom, and this company made microcomputers. In fact it made the first, under £200 computer kit ever and, once its early problems were sorted out, the cognoscenti tended to reckon it was a good machine, and great for the price. It was, however, a kit. This meant that those not skilled in the black arts of soldering could not take advantage of the machine. (There were some lovely horror stories around at the time which recounted the mess some people managed to make of this.)

As the Nascom 1 became more and more popular, the company worked at improving it. The enhanced machine eventually appeared as the Nascom 2 about 18 months after the launch of the first kit. Though still in kit form the company at last planned to service that growing band of people that wanted an assembled computer. The company investigated establishing an operation to perform this service here in dear old Blighty.

This was where the fun started, for the company did its sums and found that though it would have liked to have given the job to a British company and patriotically 'create jobs', it was cheaper to have the thing assembled in California.

To be fair, the company did not intend to set up its own manufacturing operation. Instead it intended to have the machines assembled by a third party company, so price was the crucial consideration. It did not intend actually to be the employer, but it did see the job as one which might be considered as beneficial in providing employment for others in another company.

So why was it cheaper to have the beasts assembled half way around the world in California and transported here? The short answer was, in a word, tariffs. There are a series of trade tariff barriers set between the European Community and the rest of the world that are intended to act as some degree of protection against the ravages of international trade. The idea is that if the Community has a trade or industry that could be wiped from the face of the earth by overseas competition, then that competition has a financial penalty set against it to reduce its competitiveness in the market-place.

There are thousands of these tariffs, all set to protect bits of our industrial base (and/or make a bit of extra money for the Exchequer out of our imports). A couple of such tariffs are relevant to this story. One is a tariff against electronic components, and the other is one against 'electronic data processing equipment' (computers to the rest of the world). These two tariffs have played, and continue to play, a significant role in the state of the UK microcomputer industry and carry much responsibility for the fact that some of our leading companies actually manufacture their machines abroad, rather than create jobs here.

What happens is that electronic components, and especially the integrated circuits that form the bulk of most microcomputers, have a 17% tariff placed against them. Complete computers have a 6.5% tariff. The result is obvious.

As a high proportion of the unit cost of microcomputer hardware is in the chips that go to make it - the processor, memory I/O and 'glue' circuits - the cost of buying the components in this country (plus the tariff) adds up to more than paying someone abroad to make the machine and then importing it completed (plus a lower duty rate).

The final irony of this anomaly is that the tariff on electronic components ends up 'protecting' an indigenous semiconductor manufacturing industry that needs no protection at all. To show how really on the ball the Government is, the duty was never intended to protect the modern semiconductor industry, but the old UK electronic components industry, when it was trying to compete across a broad spread of product types from transistors to capacitors, resistors and switches.

Times have changed, however, and the tariffs haven't. The indigenous semiconductor industry is actually doing well. Having stopped trying to compete in general purpose bits and pieces it specialised, and the world has since beaten a path to its door. Ferranti, for example, is a world leader in gate array devices - ask Clive Sinclair, the ZX81 would cost twice the price, and the Spectrum would be a brute without Ferranti's devices.

The other tariff was set when men were men and computers were as big as the Matterhorn and twice as expensive. Anyone who could afford to buy one of those could afford the duty because, for them, money was printed by Waddingtons. Today it has changed totally. Computers are genuine consumer items and games programmers are getting to be like pop stars. Price is still irrelevant, but for an entirely opposite reason.

What is strange is that the tariffs continue to exist. Nascom complained about them years ago, and what was the result? Well, Nascom went to the wall and was taken over (OK, so it wasn't all the fault of the tariffs but I suspect they played a part).

What is interesting is that our cuddly Minister for Information Technology Kenneth Baker, has at last decided to do something about doing something about it all. What is more interesting is that his move comes as a reaction to some weighty and concerted pressure from the industry itself, which is pretty good for a Government that came to power with the stated aim of creating the right environment for companies such as those found in the micro business.

The pressure came from the British Microcomputer Manufacturers Group (BMMG) which was formed last year to support and promote the interests of the many small UK makers of microcomputers. Leading lights have been Comart, perhaps biggest of these 'small' companies, and Comart boss, David Broad, has been instrumental in getting the industry some sort of hearing with the Government.

Both the Group and individual companies have complained about the tariff nonsense before, but now the Minister has decided to look into the problem. There is probably no connection between this and the fact that both Acorn Computers and Sinclair Research are seriously considering joining the group. If Maggie's digital knight is complaining, then maybe there is something to this problem.

Whatever the reason for the Minister's actions, it is to be hoped that they prove fruitful. It is hard enough as it is for any company to make, and continue making a good living for itself and its staff in such a cut-throat world market. It would be nice if the Government actually gave a hand now and then.

end