Government approach to rebalancing is unbalanced

Posted on 20 Aug 2012 by The Manufacturer

A new TUC report says that the UK is becoming ever more reliant on financial services despite government rhetoric about rebalancing the economy.

The report from the Trades Union Congress (TUC) was released on Friday. It reviews the reasons for the 2008 economic crash and states that these conditions, including an over reliance on financial services and growing wage inequalities, are still in place today.

Tony Burke, Unite Assistant General Secretary and TUC Executive Committee/General Council member
Tony Burke, Unite Assistant General Secretary and TUC Executive Committee/General Council member

Following the release of the TUC report Tony Burke, assistant general secretary at Unite the Union and a TUC Executive Committee member commented: “The Coalition government promised to rebalance the economy making manufacturing a priority, which in turn would provide growth and job creation.

“However the report shows that has been little or no progress towards rebalancing the economy towards manufacturing in some cases the situation has got worse.”

The TUC report focuses on:

  • The UK’s poor record of investment over the last 30 years and shows that the proportion of the economy accounted for by exports and investment is currently no better today than it was five years ago at around 13%.
  • Continued over-reliance on the financial services sector. Recent growth figures showed business and financial services growing by 0.8% on last year, while manufacturing contracted 3.1% over the same period.
  • Regional labour market trends and progress on closing the North-South divide. After peaking in March 2011, the gap in employment rates between the North East and South East has closed to 8% – though this is still bigger than when the coalition came into power in May 2010, when it was 7%.
  • The proportion of national wealth going into wages. Wage stagnation, particularly for lower and middle-income families led to an over reliance on credit and household debt and credit during the boom years. But the share of national wealth going to wages has continued to fall, with real wage falls causing the biggest squeeze in living standards for nearly a century. The Office for Budget Responsibility expects this to continue until 2016.

Mr Burke concluded: “Despite the continuing good news from the UKs automotive sector, rebalancing the economy is just not happening. The recent reduction in unemployment via an “Olympic blip” shows that we are living in a “part time Britain” with the growth in forced self employment and part time work mainly in the service sector making the case for a Plan B.”