Thursday, 31 March 2016

UK 80% services and rising..

In the light of the Port Talbot mess, we find today that Services as a percentage of the UK economy has reached 80%.

We really are officially post-industrial now, which is amazing when you consider in the long scheme of history we only really just invented the industrial revolution and have given up on it already. Who would have thought even 30 years ago that the economy would turn out like this.

Indeed, shuffling bits of paper IS our economy.

I am reminded of the quote from the now defunct Xerox where an ex-CEO said:

"The definition of middle management is sending half-finished documents via email to each other, forever" or something like that.

But this is now officially the UK. Crazy policies around energy costs and farming subsidies/non-subsidies as well as Marxist unions and the drive of globalisation have ended our role as providers of real products.

There is much to be said for an Intellectual Property led economy and creatively led economy. On the other hand, as we are rapidly discovering, there are far more losers than winners in the new economy.

Non high value services, retail, leisure, packaging etc are all minimum wage stuff. High value lawyering and accounting etc is very well paid.

Losing manufacturing, inevitable as it may seem, will lead to a much worse division incomes overtime. How Governments deal with this will be very interesting in the next 20 years or so.


Anonymous said...

As someone put it to me a decade or so ago -'we(UK) have become a one-way bet on financial services.'

Steven_L said...

Looking at the average Chinese factory worker would suggest manufacturing aint all that well paid. I've heard a lot of people bemoan 'we don't make anything anymore' over the years. If I can be bothered I usually tell them to be careful what they wish for and enquire whether they aspire to stitch Nikes together for a dollar or two a day.

Electro-Kevin said...

A pity then that we have more strong, fit and pushy young men here than ever. And more arriving by the day.

Anonymous said...

Having known more than a few financial advisers, lawyers, bankers, and bods selling their snake oils in all sorts of fields (knowledge industry and consultants) corporate auditors and accountants - God damn, er.... bless them all.
I can honestly say with heavy heart that, I prefer the sharks and salties in the business world of SME's, and that, we're a dying breed, I know.
When, a knowledge based economy is based on ill educated kids, with little or no actual knowledge and the economy is made up of 100% paperwork/clip counters.............we are Fooked oop beyond all recognition FOBAR. As more and more, computers AI etc does the menial stuff: why are we importing bodies by the 100's of thousands - that we don't need?

Who the fuck is going to provide the moolah to keep 'em all topped up - when the whole circus; of fiat currency, impenetrable black hole banks steeped in dodgy debt and QE experiment implodes?

Financial cometh, it surely will.

Scan said...

Working in construction, the utterly brilliant Money for Nothing scheme (known officially as BREEAM) is charging ahead at full chat. Changing nothing materially (except waste bins and cycle spaces) this colossal paper shuffling exercise is a wonder to behold, even for those of us who have to deal with it on every project. I asked our BREEAM Consultant (fresh from Nursery School) what happens to all the information we hand over. Does someone collect it? collate it? Does someone decipher what it all means or assess how successful policies are?: "I'm sure someone does something with it".

"How Governments deal with this will be very interesting in the next 20 years or so." They won't. Obviously.

hovis said...

Do services continue when there is no underlying thing for them to service in the UK? - i.e. what is our competative advantage in services over other places ? Not too much I'd wager.

What passes for modern native English language may not be enough.

Electro-Kevin said...

"The moment you start talking about the current account of the balance of payments, people’s heads start spinning.
In essence it is a snapshot of all Britain’s commercial relations with the rest of the world, its physical trade, its trade in services (often referred to as invisibles) and flows of capital in and out of Britain.
Should a panic button be hit because this figure zoomed up to £32.7billion or 7 per cent of the nation’s total output in the final quarter of 2015?
Probably, but not yet. It does highlight a vulnerability for the pound on foreign exchanges. Policymakers struggle to come up with reasons for the shortfall.
The Bank of England’s deputy governor Ben Broadbent thinks it has something to do with the banking crisis, which among other things has led the withdrawal of big UK players such as RBS from global operations.
The ONS suggests it may be down to falling oil and commodity prices and struggling conditions in the eurozone.
I have my own explanation but no data to back it up.
The sale of so many of Britain’s emblematic companies, from Cadbury to Boots and the airports, means that investment income is flowing out of the UK and supporting the current accounts of foreign countries.
In much the same way as we have lost corporation tax income, jobs and intellectual property, so too is our capital account being diminished.
The Treasury or the OBR should take a detailed look."

Alex Brummer is sounding like me today.

Britain bases her creditworthiness on - among other things - our house prices. Fine if they can be sold in quick time without their prices dropping.

I think those that say 'Britain for sale' has been a good thing are wrong. Very wrong.

CityUnslicker said...

love all your comments; very astute collection of them.

andrew said...

Agree with most of the comments but

... investment income is flowing out of the UK...

Not quite, but the end result is - if anything - worse

So $foreign_company bought $UK_listed_company which made $stuff that was controlled in the UK

Most of the shareholders may well have been foreign.
Looking at the ones in the UK we went off and bought shares in $other_company

Two things tend to happen

1 $foreign_company is better at 'tax minimisation' as it is a multinational, so our UK tax income drops
2 $foreign_company has no cultural loyalty to the UK so the factories etc in the UK will be moved to $lower_cost_country over time and the jobs disappear.

Whis is bad enough in and of itself.

Where $UK_listed_company has lots of capital tied up in physical goods, it is likely they are old machinery that can be replaced with cheaper and better in $lower_cost_country and the retraining cost is lower.

The thing is that no-one will really notice - possibly ever

In removing the bricks from the bottom of the Jenga tower, it may be no-one really notices as you can just get the $stuff from $lower_cost_country
Hurrah for a globalised economy.

The unmeasurable thing you will lose is the lone person in the factory where $stuff is made idly looking off into the distance thinking 'we could do that better'

... Except you can measure it in the sense there is much less of a mittlestand of industrial companies in the uk and that one bloke is where they start from.

I want to stay in the EU because in 30 years time the UK will need the same generous level of support Greece is receiving at the moment


DJK said...

Government policy is to not only discourage people from saving, but to actively encourage people to liquidate their pension pots and spend them now. I suppose this gives a short term boost, but as pension savings reduce, pension funds are forced to sell companies to foreigners, or house owners sell to foreigners, all to let the oldies cash out. The world may be awash with capital, but I don't think it's so awash with capital looking for a sterling income to match sterling liabilities. But without British savings, how can capital intensive British companies survive or expand?

DJK said...

And we're told that the balance of trade doesn't matter, since we can export services. I suppose for most people that means they become actors in a heritage theme-park, or cleaners for non-doms. The educated can become tutors to the children of newly wealthy Chinese, and lawyer can sell their services to solve disputes between Russian oligarchs. Or perhaps we should encourage our children to emigrate, so that the UK can become like one of those third world countries that rely on remittances from abroad?

Sebastian Weetabix said...

One of the oddities of this country is that the entire elite political class is deliberately educated to be dilettante bullshitters via the PPE degree. None of them understands science, engineering or mathematics, or can even run a project. They have done nothing concrete and yet ascend effortlessly without an original thought in their heads to the pinnacle of our politics.

We elect these bastards so I suppose we deserve everything we get.

Electro-Kevin said...

SW - One has to be a smoothy to ascend so effortlessly. Nothing more, nothing less.

It may be bullshit but it's dilettante bullshit, which doesn't have lumps in it. The good news is that it's easier to swallow and there's plenty of it.

Anonymous said...

Or perhaps we should encourage our children to emigrate, so that the UK can become like one of those third world countries that rely on remittances from abroad?

It's not just the children. Whole families and their own offspring, expensively educated via the UK system, have left to go to Oz, NZ and strangely South Africa. This is not a "crisis" that pop up every hour on the hour at the BBC, these are people who have measured the UK and it's values and found it wanting.

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