What do you expect in a service based economy?

The UK’s finance sector is one of the world’s largest, producing over 7 per cent of
national economic output. World-leading in terms of technological innovation,
expertise and global reach, it employs around 1.1 million people across the UK;
is responsible for a roughly £60 billion trade surplus in financial services,
equivalent to around 3 per cent of GDP; and contributes more than £24.4 billion
to the Exchequer in taxation.88 Half of the world’s financial firms have their
European headquarters in London; around 78 per cent of European capital
markets and investment banking revenues come from the UK; and 46 per cent
of equity in the whole of the EU is raised in the City of London.89 This is, on any
account, a hugely successful part of the UK economy.
Yet the UK performs very poorly by international standards on investment.
Investment is the engine of any economy; it drives both productivity and income
growth. But at around 17 per cent of GDP, the rate of public and private investment
in the UK economy is around 5 per cent below the OECD average. This gap has
widened over the past 50 years; indeed, the UK investment rate has been falling
for most of the past 30 years (see figure 3.5). A similar gap exists for private
sector investment alone: corporate investment in fixed assets (not including
construction) fell from 11 per cent of GDP in 1997 to just 8 per cent in 2014 – well
below the rate of capital depreciation, meaning that the stock of business capital
is actually falling. The comparable rate of corporate investment in the US in 2014,
for example, was 12 per cent.

How many very expensive steel mills do you need to invest capital in to build the world’s premiere financial marketplace?

Are these people really this damn incompetent?

5 thoughts on “What do you expect in a service based economy?”

  1. ‘Are these people really this damn incompetent?’

    Why, yes, yes they are.

    ‘the rate of public and private investment’

    Government (‘public’) doesn’t invest, it spends. It inefficiently takes money out of the economy, then puts some of it back in the economy somewhere else. Usually, the wrong place.

  2. “well below the rate of capital depreciation, meaning that the stock of business capital is actually falling”

    Because most businesses do not expect to get a return on capital invested sufficient to justify the risk of the investment.
    Why? Government regulations

  3. Off the top of my head, the last time the UK government invested in anything was in building the national grid in the 1930s. Spending tax money putting common infrastructure in place to allow a common UK-wide market to develop.

  4. @ jgh
    Magnox, and later AGR, nuclear power stations; NSHEB; Dinorwig pumped-storage. Maybe you’re not old enough to remember them…
    But you’re not far off!

  5. Blair & Brown invested £12 Billion in an NHS IT system

    How wonderful. Is it helping increase NHS efficiency?

    Nope, it no longer exists.

    Blair, Brown & Prescot invested £x Billion in regional Fire Control HQs – another white elephant.

    Gov’ts waste tax-payers money on vanity investments HS2, Hinckley C, renewable energy and DFID being current examples.

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