Updated: UK economy still dependent on financial services

The government is failing to re-balance the economy and the UK is becoming even more dependent on financial services, says a new report on the economy from the TUC, which is published this week.

The report says the economic crash was caused by a series of imbalances in the economy with low levels of investment, over-reliance on financial services, a North-South divide and ever growing wage inequalities that ensured there was no pay growth for low and middle-earners for five years – even though there had been an economic boom.

The TUC says these imbalances are shockingly still prevalent and are holding back UK growth.

The Coalition government promised to rebalance the economy making manufacturing a priority, which in turn would provide growth and job creation.

However the report shows that has been little or no progress towards rebalancing the economy towards manufacturing in some cases the situation has got worse.

On the four key issues the report focuses on:

  • The UK’s poor record of investment over the last 30 years and shows that the proportion of the economy accounted for by exports and investment is currently no better today than it was five years ago at around 13%.
  •  The over-reliance on the financial services sector, which was close to overtaking manufacturing in terms of output on the eve of the crash, continues. The recent growth figures showed business and financial services growing by 0.8% on last year, while manufacturing contracted 3.1% over the same period.
  • The report also analyses regional labour market trends to judge progress on closing the North-South divide. After peaking in March 2011, the gap in employment rates between the North East and South East has closed to 8% – though this is still bigger than when the Tory lead Coalition came into power in May 2010, when it was 7%.
  • The report looks at the proportion of national wealth going into wages.  Wage stagnation, particularly for lower and middle-income families led to an over reliance on credit and household debt and credit during the boom years. But the share of national wealth going to wages has continued to fall, with real wage falls causing the biggest squeeze in living standards for nearly a century. The Office for Budget Responsibility expects this to continue until 2016.

Despite the continuing good news from the UKs automotive sector, rebalancing the economy is just not happening. This week’s reduction in unemployment via an “Olympic blip” also showed that we are living in a “part time Britain” with the growth in forced self employment and part time work mainly in the service sector making the case for a Plan B.

The only way to get growth back into the economy is for the Government to develop a joined up manufacturing strategy to kick start growth and create decent jobs through a national investment bank and support for strategically important industries; targeted support for SME’s; a national procurement policy through Government purchasing power and investment in skills and training.

You can download a copy of Unite’s Strategy for UK Manufacturing.

Click here for news item from The Manufacturer


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