Brexit opponent Guy Hands says there could be a tipping point where “the reason for being in London disappears” Photo: Jason Alden/Bloomberg
Thomas Sampson, associate professor at the London School of Economics, says the rapid growth reflects comparative advantage, meaning the UK can produce the services it sells at lower opportunity costs than its trading partners.
“The UK economy tends to thrive in providing highly skilled services, in particular in things like financial services, professional services and the like, the full range of business services,” he says.
“Because in Greater UK specialization in these industries, we have seen that this is reflected in the high rates of exports of services. In terms of goods, over the decades we have seen a gradual decline in the UK manufacturing base, and this has obviously slowed down such exports.”
The Power of London
The nature of services exports means that London is far behind the strength of the country, with a 63% trade surplus in this area in 2018.
While the British outperformed foreign competitors in the sale of services, the UK also benefited. from the tide, which improved the standard of living worldwide and expanded the middle class.
“As China, India and some sub-Saharan African countries get richer, they will want to spend more on television, education, etc., satisfying their food and car needs,” Thwaites says. .
“Development is a story of transition to services.”
All of these factors mean that services could soon move from about half of exports to goods.
“I wouldn’t be surprised to see that over the next decade or two, we are moving services to make up the majority of UK exports,” says Mr Sampson.
Such a shift would be a reflection of Britain's strengths and a reversal of Hands' warning of national decline. However, it is up to policy makers to ensure that the benefits are felt throughout the country.
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