Once upon a time, the UK economy was dominated by heavy industries such as steel making, coal mining, mass car production and shipbuilding, but under the leadership of Mrs Thatcher’s conservatives in the 1980s, these activities were eclipsed by the rise of the service sector, dominated by the London’s role as, arguably, the world’s leading financial centre. Often, the demise of UK heavy industry is portrayed as the outcome of a class struggle between workers and bosses, but the truth is that overseas competition meant that products could be produced abroad less expensively, so globalisation really killed UK heavy industry.
In any event, the UK economy today is dominated by the service sector and it has enjoyed two years of growth, helping to make the UK economy one of the fastest growing developed economies in the world. Growth in the sector continues to accelerate, according to a recent Markit Purchasing Manager’s Index (PMI) survey. The November reading came in at 58.6, up from an October reading of 56.2 – a reading above 50 indicates that the sector under study is growing. This is in contrast to a similar study in the Eurozone which showed growth had slowed from 52.3 to 51.1 over the same period. It needs to be recalled that the Eurozone PMI figure is an average for the bloc of 18 nations which use the single currency. The Eurozone economy is estimated to have a GDP of $12 trillion, making it second in size only to the USA. By comparison, UK GDP is of the order of $2.5 trillion.
Other data from Markit suggests that whilst manufacturing growth is accelerating, the growth in construction is falling back. Taken as a whole, Markit is suggesting that the UK economy will grow by 0.6% in the final quarter, marginally stronger than originally forecast (0.5%). The Bank of England expects full year growth for the UK to come in at 3.5% in 2014, easing back to 2.9% in 2015.