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Opinion

After Brexit and Covid, services will be just as vital as manufacturing

Jobs with the Royal Mail are still prized, so why shouldn’t others be in the UK service industry? David Henig sets out the importance of services in the post-Covid world

Why don’t we value services – and those delivering them? The political mantra is build back better. The basic premise is that we’re going to exit Covid into a new age of skilled manufacturing jobs presumed to return from China. A simple and superficially appealing prospect.

Sadly, as with too much of modern politics and economics, it’s far too simple to be realistic, and distracting from real issues around the global economy and future of work. Even if there was ever a golden age of mass manufacturing jobs there won’t be a second. Not because of Brexit, or consumer goods made in China, but because production is increasingly automated. That’s why manufactured products are now so affordable.

We see the same pattern in the US and across Europe, the share of manufacturing employment falling consistently for 50 years, while the level of output rises modestly or at worst is flat. We shouldn’t ignore the sector, but nor can we place too much weight on it. Not when we have a better alternative.

Globally there is a clear relationship between the wealth of a country and the share of services in its economy. The UK is an exemplar, over three quarters of our total economic output comes from services, and, depending on exact definition, probably over half our exports. If we want to build a better economy we should start there, and ask what is so wrong with services jobs that mean we hark back to a former age of factory working.

To take an example, consider the warehouse and logistics hub for online businesses such as Amazon, Sports Direct or Ocado that are a major growth area. Problematic working conditions are frequently reported, with average wages lower, full-time contracts rarer, and advancement opportunities practically non-existent compared to similar manufacturing sites. This gives us a clue to the low status of services.

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Yet sorting and delivery work can’t be considered inherently low-status given jobs with the Royal Mail are still prized. You’d suspect reasons include stable employment terms and the presence of trade unions. A growth sector with a low-cost, zero-hour, zero-employer-responsibility culture may be right for individual companies but, in undercutting good jobs, not for the whole economy.

The services sector is of course hugely diverse, from the arts to law, research to delivery, retail to care, health to education and so on. This diversity is another barrier; it isn’t easy to explain, and there isn’t a one-size-fits-all model of employment.

Flexible employment models may be an advantage for experienced professionals with extensive contacts, at least outside of Covid times. But for those new or returning to the labour market such jobs can appear as nothing but a temporary wage.

Combined with outsourcing in the name of cost control it frequently seems the least skilled pay for the reduced costs of provision. That looks both unfair and also bad in specific areas which lack regular employment opportunity. Instead of embarking on the forlorn hope of bringing back manufacturing to these areas, why not bring good new services jobs?

To remind ourselves, these are sectors in which the UK has our greatest economic and trade strengths. A fellow trade expert described the UK as frighteningly competitive in international trade in services, and that isn’t just banking. True, there are new Brexit barriers in all sorts of ways to those who want to work across the EU, but we’ll still be strong. For example, our higher education and broadcasting are world-renowned, even if that isn’t shared in the UK.

The country earns billions every year, yet we still talk more about manufacturing.

Maybe a full-time worker can see the value they add making a car, but a precariously employed delivery driver doesn’t see their role. But that old cliché of the cleaner at Nasa in the 1960s saying he was putting a man on the moon applies. No job need have low status.

We should build a narrative of UK superiority in services, coupled with pride working in them. This means valuing the services sector and those working in it as at least equal to manufacturing. It does mean the government going beyond talking skills or rebalancing into tackling a corporate culture which regards too many parts of the country as a pool of labour to be exploited.

The left could also understand the importance of private-sector services and that shorter working weeks might not be the answer either.

There are policy options available including higher minimum wages, less outsourcing, or restrictions on zero-hour contracts and forced self-employment. But ultimately we need cultural change, to consider services, and those delivering them, as important as manufacturing. Not least as services are also automating and that could lead to further problems with employment.

As a trade specialist, I see the global patterns, the UK’s strengths and weaknesses. It is frustrating when the domestic conversation feels so distant from these. ‘Bring back manufacturing’ can be seen as an attempt to understand an economy hugely changed in 50 years.

It just isn’t the right framing. Let’s instead hear about ensuring UK services, and conditions for those working in them, are the best in the world.

David Henig is director of the UK Trade Policy Project at the European Centre for International Political Economy (ECIPE)@DavidHenigUK

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