I'm not an economist - I'm just struggling to understand the recession like everybody else. So I'm interested in precisely how big a part of our economy is comprised by the financial sector. A commentator called Bob B has left this helpful quote in the comments on S&M's latest take on this.
"An analysis of the eleven broad industrial sectors shows that in 2006, the financial intermediation and other business services sector provided the largest contribution (31.0 per cent) to gross valued added at current basic prices, at £364.7 billion out of a total of £1,177.2 billion. The distribution and hotels sector contributed 14.4 per cent, the manufacturing sector accounted for 13.0 per cent and the education, health and social work sector 12.8 per cent." [ONS Blue Book 2008, chp.2]
Gross Value Added is only available at industry level: to convert it into GDP one must first add taxes and then deduct subsidies, both of which are only calculated at economy level.
So, on this measure at least, finance and business services are about a third of the economy, whilst manufacturing and the welfare state services each comprise a little over an eighth of the economy. But employment patterns - and tax yields - have a different pattern.
Remember that finance and business services is a very wide category. The City is just a fraction of it. It's also high street banks and single lawyers and accountants.
ReplyDeleteWhen I walk around Oakham, I pass loads of banks, small lawyers and accountants, but no factories.No-one thinks the Oakham economy unusual or unbalanced.
Chris,
ReplyDeleteI'll always bow to you, or to any real economist, when discussing the meaning of economic statistics. But I do note that in terms of employment ONS say 1 in 5 work in finance...so the relative importance of the financial sector can be made to seem larger or smaller depending on the measure one uses.
But I'd like to probe this issue of whether we have a 'balanced' economy a bit further.It isn't a question of me thinking 'industry good, finance bad'. It's more about a sense that we may have reached a tipping point and can't expect our financial services sector to remain so dominant, in international terms, for ever and a day. Obviously, the City isn't going to collapse - but if I'm right it is going to decline. So we as country need to find a different balance of things to do
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