Writing while watching Made in Britain part 3

Just for fun I'm tapping away as Evan Davis warbles away on BBC2 in the third part of Made in Britain, talking about the service sector, so called. Apologies if this post is therefore a little staccato, but I'll type as I react rather than trying to put a smoother piece together after the fact.

So first things first, Evan has started by referring to the UK as a 'unique experiment' - total rubbish if you look at the service content of most developed economies. For the numbers see Dirk Pilat's paper on structural change in the OECD economies from 2007 (I think, will check later).

Very interested in the overall trade balance debate, 100 billion pounds trade deficit on goods ... what did we export in services last year? Come on Evan, show us the numbers ...

Evan's example of a service is a classic- Inmarsat satellite communications. This is not intangible, it is a service completely dependent on manufactured goods, massively complex and high quality goods, with an engineering team keeping the satellites ticking over correctly. The interconnection between manufacturing and services is clear ... ah there is Evan saying that all services need manufactured goods, and he sneakily says that manufacturers use services as well. Correct but not a parallel.

The point is not services versus manufacturing! Again and again people make this error - it is about the interplay of the two and how companies can use a mixture of both to attain a strong position in a value chain, capturing as much value as they can that is created across the value chain from end to end.

The real discussion is about labour intensity, wages, automation, linkage between elements of the value chain, in all a much more complicated discussion than manufacturing versus services.

Deep breath.

OK so here's a real bug bear for me, the structure of the statistics is misleading. The standard industrial classification codes come from the 1930s in the US, and the 1940s in the UK. They hard wire a split between making and services which we inherit and continue to stumble over. There are significant parts of reported services which are done by manufacturing so called companies. There really needs to be a reconsideration of the structure of the statistics, beyond the missed opportunity of the Allsop review of a number of years ago.

Ah the exporting of services question ... but again lets note while Evan has given us the hard number for goods trade deficit, he has not given us anything contextual for services. Quoting a number of 2 billion in exports to Dubai is smoke and mirrors.

Is a service based economy sustainable?

Again Evan what are the numbers for what we have exported in services?

Now we are back to the City, our financial services strength ... Oh and tourism! A host nation. Hmmm, some taxes from the foreign nationals of high powered companies who are very good at structuring their tax exposure! And there goes another throw away of "running into billions of pounds". Love the fact that the estate agent is wearing his shoes while Evan has the silly blue shoes on ... Oh sorry looks like he's in socks!

The butler to the world's elite! Not sure we would all agree to that characterisation.

Potential landmine here, the selling of our universities. And he's just described them as businesses. Not sure my tv will survive the whole episode. Sorry but ignoring the role of universities in the innovation system, producing knowledge and graduates for UK companies, is mad. If we make universities factories for foreign graduates what happens to our research base?

Back to the City ... Here comes the collapse ... Interesting example of ICAP, but for Evan to say no risk is slightly misleading. Critique of the City? Burden on the economy ... Paul Wolley saying that it is too easy for the bankers to appropriate the profits, through complexity in financial instruments that is unnecessary and costly. Second charge, that the banks live on subsidies. Because of the public guarantee leading to lower costs of borrowing for the banks. Interesting part of the programme, and for once Davis is doing well at being even handed.

And finally the numbers on service exports 160 billion, well below our need for trade balance overall.

Into a call centre we go on a bland industrial estate in Sunderland. The issue here is relative wages to other jobs, not whether the task itself is different. And lots of the issues on services are coming out - high staff turn over, stress rather than physicality, and inequality in earnings (as shown by regional inequality).

So the wrapping up begins, and the important point of reinvention and evolution of the economy is well made. But the overall tone of manufacturing and services as being in competition with one another, that niche manufacturing is sustainable, that our knowledge will keep is ahead, all of these things soft soap the stresses in the economy and the significant challenges coming from emerging nations.

All in all great to have a programme discussing these big issues, but it is a programme that is out of date with industrial reality and overly optimistic that we will continue to invent and innovate our way to growth.

Apologies again if that was too staccato, will put a link into the iPlayer for the episode so you can read along.

Best

Finbarr