Thirty years ago manufacturing in the UK accounted for around 30% of GDP, now it is around 10%. The reverse is true for financial services, they have grown from 10% to 30% in the same period. An interesting symmetry.
The mantra about the importance of manufacturing and an export led recovery was born in the period when Britain made things – it is a mantra that has not caught up with reality. Britain’s GDP dependence upon financial services makes this week’s headlines about a 1% drop in manufacturing during February irrelevant. 1% of 10% is only 0.1% of GDP!
The real significance in the decline in ‘making things’ lies in the contrast with what is really creating the illusion of growth (such as it is) in the economy – and that is the process of quantitative easing. In other words printing money.
As this video points out, printing more money does not make any more goods or services appear, it just spreads the value of existing goods and services among a larger number of pounds. Things cost more. An experience of wealth comes from the goods and services, not from the money that buys them.
Unless you are a banker of course, who gets a commission and fees on that extra money – and, oh yes, also gets to park it in his safe at no interest.