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Services have grown to a record share of Britain’s total exports but are increasingly concentrated in London, according to new research that shows the challenges of delivering the government’s “levelling up” agenda.
The figures from the Resolution Foundation showed services sectors accounted for 56 per cent of exports in the third quarter of 2023, up from 30 per cent in 1997.
The capital accounted for a rising share, reaching 46 per cent in 2021, up from 38 per cent in 2016, the Resolution Foundation said on Tuesday.
Emily Fry, a Resolution Foundation economist, said services exports were one of Britain’s “secret economic success stories”. But, she added, “sadly, major cities outside London have failed to share in this growth”.
The government’s levelling up policy to tackle regional inequalities was a key plank of the Conservatives 2019 election manifesto. As the party prepares for the election this year, it is facing criticism that the plan has failed to raise the prospects of left behind areas.
The capital’s economy has been growing faster than other parts of the country since the Covid pandemic, according to separate official data. This helped push the income gap between Londoners and the rest of the UK population to a record high in 2021, separate ONS showed.
Services exports from the capital grew 47 per cent to £152.2bn between 2016-21 — more than double the UK average rate — the Resolution Foundation said.
The think-tank said the London-centric nature of Britain’s services exports success was far from inevitable and “must be addressed”. In France, the services export share in Bordeaux and Lille grew faster than in Paris between 1995 and 2018, it noted.
Exports from other major UK cities, such as Greater Manchester and Birmingham, grew by just 11 per cent and 3 per cent between 2016-21, respectively.
London’s strong export performance was broad-based and no longer heavily reliant on the financial sector, the research noted.
The capital’s information and communication services exports rose by an average of 15 per cent per year between 2016 and 2021, meanwhile, professional services were up 12 per cent per year. Both sectors registered stronger exports growth than financial services, which grew by 8 per cent per year.
Fry said the UK had a wide range of strengths in services, from world-class universities to accountants and entertainment industries.
“Getting more of our major cities to sell this to the world would boost both local living standards and national economic growth,” she said.
The government this week reinstated its commitment “to levelling up every corner of the UK” by “investing billions to support community regeneration projects, connecting 25.7mn premises with gigabit broadband”.
It added that “over 50 per cent of England is now covered by a devolution deal”.
The UK is the world’s second-biggest services exporter after the US, according to international trade data. Services exports are also a growing part of global trade and forecast to rise from 25 per cent of world trade in 2020 to 28 per cent by 2035.
Britain is “well-placed to capitalise on this economic tailwind in the decade ahead”, the Resolution Foundation said.
It added that politicians were often laser-focused on goods trade, but trade in services would increasingly important for Britain’s future economic prosperity.
