The much publicised slump in service sector activity in the UK highlights a real stumbling block to economic recovery. What most people fail to realise is that the service sector simply services other elements of the economy and doesn't bring in much revenue from abroad. Only by bringing in revenues from overseas can a country's economy grow. Now for those who say that the financial services sector bucks this trend by bringing in enormous amounts of revenue from overseas (how often do we have to hear about London being the financial capital of the world?) let's think carefully about that. What good has that done for the UK as a whole? Not a vast amount is the answer as the wealth it creates stays within a very small area. The concept of Trickle Down has failed.
What any country needs to do is focus on what it does well and what it can do better than others so that people are prepared to pay for it - competitive advantage. Yes, financial services is one area the UK does well in but there could be so many more if only the ability for businesses to set-up and start trading wasn't so hamstrung by red-tape. Only business driven growth can work in the long-term which means a drastic reduction in the size of the state - maybe that could be the subject of a future post.
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