In response to a request from a participant in the forum discussion below When the smart money got into/out of manufacturing I have tried to answer the questions: "Why the British had to get out of fabs and end up just with design/IP a la ARM ?" and "Why fabs still survive (if not exactly thrive) in the UK's traditional rival France?"
The detailed reasons are complex, generalizations are usually faulty but I will have a go at putting down my perspective as an observer of the electronics industry from the U.K. since 1984.
A primary reason that fabs failed to thrive in the U.K. is that while the Second World War helped create the U.S. as a global economic superpower it more or less bankrupted the U.K. with implications that were heavy in the 1950s and early 1960s and that continue to this day. A second reason is a long-established arts and humanities versus science division in U.K. society.
I think it is still the case that science and technology are not sufficiently well represented amongst the political and wealthy establishment in the U.K. But maybe that is just the science graduate in me talking.
In the distant past the owners and managers of UK companies usually had a non-scientific background. The likes of ARM, Wolfson, CSR, Vodafone and several others are now glorious but relatively recent exceptions.
Back in 1960s U.K. technology-based company management treated engineers as willing serfs who did not need and should not be given too much money. It was a "make do and mend" mentality left over from the Second World War, and many electronics companies continued to be closely aligned to military interests and defense was the early application for electronics.
These companies often could not comprehend or cope with:
1) international competition
2) the continuous exponential increase in the cost of participation in electronics