of Britain’s biggest problems is that its trade is unbalanced: UK companies still rely too much on European markets, which will be sluggish at the best of times, and insufficiently on emerging markets, which will continue to grow at a very fast rate over the next few years, China’s current slowdown notwithstanding.
The crisis in the Eurozone has been bad for the UK but at least it is forcing many firms to look further afield for growth. The proportion of UK goods exports going to Eurozone countries fell to 43.6 per cent in July, the lowest share since records began in 1988, according to an analysis of the official data by Open Europe. Just 48.6 per cent of the UK’s exports of goods went to the EU in July, with the rest of the world accounting for 51.4 per cent. Even these figures exaggerate the importance of European demand: a sizeable chunk of the goods sent to the Netherlands is subsequently shipped off again, often to all over the world. Non-EU exports of goods have now been greater than exports to the EU for three consecutive months. Over the three months to July , the UK exported around 3.9 per cent, or £1.4bn more to non-EU nations.
Crucially, it is not just about goods: the UK’s July global trade deficit in goods was £7.1bn but a very large share of that was offset by a £5.6bn surplus in services trade. The latter, as I have long argued, is essential to the UK’s long-term economic prosperity. London and the south east, in particular, sell a huge amount of financial and business services to the rest of the world, including banking, fund management, accountancy, consulting, IT, architecture, education and much else besides. The government’s job ought to be to make the UK economy more competitive, not to try and work out which sectors will be the best exporters. There are only two certainties: services – not just manufacturing – will play a key role; and the EU’s importance to Britain will keep on declining.
REGIONAL GROWTH NONSENSE
When the private sector fails, and especially if it rewards itself for doing so, it is rightly panned by politicians. But when ministers fail, they just move on and award themselves an even larger budget – or in this case, create a new, state-owned bank for themselves.
Take the regional growth fund fiasco, revealed yesterday by the House of Commons’ Public Accounts Committee. Two years after the fund’s launch, just £60m of the £1.4bn in funding has actually been made available, with a trivial effect on jobs. It’s been an embarrassing, unmitigated disaster.
So why are no heads rolling? The good news is that Vince Cable’s latest toy is merely a repackaging of existing schemes, not a genuine “bank” (as defined by the FSA), which means it could end up no more relevant and hence no more likely to do silly things than the ill-fated growth fund.
Speaking of accountability, it is good news that the job of the next governor of the Bank of England is being advertised publicly. But detailing a somewhat obtuse job specification that rules out most of the possible candidates is not enough. The governor is the most powerful non-elected official in the UK. There ought to be more openness at every round. For a start, once all the applications are in, the government should publish a shortlist of the top five candidates, explaining why they have been selected for a second round. Will it have the courage to go down this road, and explain and sell to the public this most vital of appointments? We shall soon find out.