The rebalancing of the UK economy appears to be taking place primarily within the services sector. Public administration and financial services have contracted significantly in terms of output and employment in the past four years, but this has been more than offset by strong growth in professional, business and support services and the health sector.
“The UK economy may not be rebalancing towards manufacturing, but there is a range of evidence that the successful industries within the services sector are tapping into the growth of overseas demand”
Most significantly, services growth seems to be increasingly focused on exports. The UK is the second largest exporter of services in the world behind the United States, and export-oriented service industries account for at least a third of our GDP. And the UK is now running a services trade surplus of 5% of GDP.
There is no reason why this services-led UK recovery cannot be sustained, as long as the UK remains a competitive and attractive business location and macroeconomic policy successfully heads off financial imbalances and counters inflationary threats. A dynamic and flexible services sector which can compete effectively and grow export markets is an asset to the UK economy.