The City’s continued strength has helped push services to a record share of total exports, new research shows, but the relative weakness of the rest of the country has seen the UK slip internationally.
According to the Resolution Foundation, London’s services exports have grown by 47 per cent between 2016 and 2021, hitting £152.2bn.
This rapid growth has helped push services as a share of the UK’s exports to 56 per cent in the third quarter of last year, nearly double its equivalent level in 1997.
The rapid growth in the services sector also reveals the changing nature of the City, with exports in ICT and professional services – such as accounting and consultancy – outpacing growth in banking.
Between 2016 and 2021, ICT exports grew by 15 per cent while professional services grew 12 per cent. Banking, the City’s traditional core strength, grew eight per cent.
The figures reinforce the view that the City is diversifying away from its traditional strength in finance. Recent data from the Office for National Statistics (ONS) shows that the number of finance jobs have remained roughly constant over the past decade while other sectors have seen rapid growth.
In 2021, the City’s finance sector employed 189,000 people, slightly below the 196,000 employed in the sector a decade earlier.
Jobs in the information and communication sector meanwhile have more than doubled to 118,000 in the same period. Similarly professional and technical activities have swelled to 172,000 in 2021 from 110,000 in 2011.
The Resolution Foundation noted that there is further room for growth, with services expected to make up a growing part of global trade. Services exports are forecast to rise from 25 per cent of total trade in 2020 to 28 per cent in 2035, the think tank said.
“Global trade growth is services trade growth,” Emily Fry, economist at the Resolution Foundation, said. “And services exports are one of Britain’s secret economic success stories”.
Despite London’s rapid growth, the UK’s share of global services trade has slipped from 8.8 per cent around the financial crisis to 7.3 per cent in 2021.
This reflects the significantly slower rates of growth among the UK’s other major services centres. Manchester’s services exports only expanded by 11 per cent over the same period while Birmingham’s grew by just three per cent.
The think tank said that the UK’s “London-centric” nature of the services sector needed to be addressed.
In order to boost output in the UK’s other major cities, the Resolution Foundation called for more investment in housing and public transport as well as a “major expansion of city centres” to accommodate more firms.
“Tradable services aren’t just about banking, and should not be something that just happens in the capital,” Fry said.
