Friday, 20 February 2009

The Financial Times View of the UK's Future

Or at least their view on Jan 22. I imagine such views are subject to revision ("Events dear boy, events"). There are three things of interest in this article:

1. It raises again the question of quite how big Britain's finance sector actually is - here the FT is predicting a fall from 8% of GDP to 6%. This is more or less in line with Chris Dillow's view, as expressed here. Last year the chairman of Lloyds claimed it was 10%. But it is far lower than the 30%+ claimed for the 'Business and financial services' sector here. So what are these 'business services' which make up the difference? Accountancy and outsourcing type stuff in the main I'd guess: stuff which acts as the manure in which a big pure finance sector can grow, which is why such activities are grouped together with finance in the national accounts in the first place. They're inextricably linked. This matters to my view of the crisis, because it is a key factor in determining how far my hunch that we have to re-balance the economy is politically, as opposed to just economically, relevant.

2. We have Ross Walker, of the Royal Bank of Scotland, warning the private sector’s contraction in contrast to the public realm means “we are likely to end up losing entrepreneurial spirit”.Yeah, right - that's really worked well for the Royal Bank of Scotland, hasn't it? He does at least have the good grace to also acknowledge,“The credit boom went a long way to disguising the mediocrity of the UK”. It's just I don't supposed he'd agree the financial sector was a key part of that mediocrity.(Tom P seems to have found some interesting research suggesting this might be structural, and I hope he expands his point)

3. Sir Andrew Cahn, chief executive of UK Trade & Investment (it's a bit of government) gets to play the part of the happy-clappy booster, saying the fall in the value of the pound will lead to growth in some 'unlikely' sectors. “We have doubled our staff on security because it is a growth area,” he says, insisting that security is not just defence equipment but airport protection systems, protective clothing, and security advice and services at sporting venues.Unlikely? With a huge proportion of our surviving world class manufacturing based around armaments I think it strains credibility to describe this as unlikely. But this seems a strong indication of the unimaginability, in Westminster and Whitehall, of any 'swords into plougshares' type industrial strategy, never mind a Green New Deal.

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