The economy of Great Britain was affected after the Second World War due to the extent of the recession. This made the growth of the economy to be very slow and between the years 1960 to 1973, the annual growth rate was 2.9%. In 1974, the GDP fell by 1.1% due to the oil crisis that hit the country hence the recession. As a way of dealing with the crisis in the country, the government resulted to the financial sector. They mainly concentrated on the financial sector ignoring the major manufacturing sector hence the growth of the service industry. The service industry has grown significantly since the 1990s hence it has constituted as the major sector in Britain. The much emphasis on the financial sector led to the downfall of the manufacturing industry.
The decline of the manufacturing industry in Britain was a business strategy that was seen by Britain's government to deal with the recession that was affecting the country and as a way of bringing about the growth of the economy. This strategy has been very effective in its services since its adoption; the economy of Britain has been growing significantly. The fact that the manufacturing industry declined in its productivity does not mean that it is no longer active. This therefore means that the service industry has overtaken the manufacturing industry in terms of growth and employment but it has not died completely; it is still finding its way in to the market. It is marked in history that Britain was the origin of the industrial revolution but most of the largest banking institutions are today found in Britain.
Manufacturing industry
The manufacturing industries in Britain were the major contributors of the economy's GDP before they declined during the 1940s. The development of the manufacturing sector could be attributed to the advancement in the technology in the 19th century. Britain was one of the most developed countries in terms of industries before the 1940s recession which saw the downfall of the manufacturing sector. The manufacturing industry continues to decline despite the fact that it was the greatest sector of the economy that recorded the highest output before the 1960s.
Most of the heavy industries in the country were run by the government and at one point; it was unable to respond to the needs of the world market. This saw the closure of many state industries because they were unable to compete with the demands of the world market while others were sold to the private owners. E.g. the car industry in Britain has over the past years recorded a decline in the number of workers that are employed as well as a decline in its productivity (Naill 2004). This is not only present in the car industry but also in almost all the manufacturing industries in the country. This therefore leaves the service industry as the major employer and the most dominant industry in Britain.
The manufacturing industry contributes 2% of the economy's GDP with the agricultural industry employing 2% of the country's work force. The decline in the manufacturing sector is not only evident in terms of employment but also in terms of productivity. The productivity of the agricultural sector has steadily declined since 1940s to date. The heavy steel industry that was employing so many labourers before has steadily reduced in terms of its employment and output. In other cases, it has been replaced by electronics and aero scope industries which are light industries and they tend to produce goods of high value compared to the low value goods that the steel industry produces and its low level of employment that is there currently.
The manufacturing sector was brought down by the recession that took over the economy and which made the government to result to the service sector which mainly majored in the financial services like banks. This recession saw over two thirds of those who worked in the manufacturing sector lose their jobs (Dow 2000). The economy was also affected by the most recent recession which also saw more people lose their jobs in the manufacturing sector. Between 1992 and 2007, the financial sector recorded the highest growth. Recession saw most of the workers loose their jobs while other's salaries were reduced greatly and some of the workers resolved to leave the manufacturing sector due to the poor payment in search of jobs in the service sectors which seemed to have taken over the economy (Yeandle 2009).
The pay of the workers in the manufacturing sector has worsened since 1987 with so many lay offs and other's pay being frozen; this was done by almost all the manufacturing industries in Britain. This mainly affected the lives of the workers and their families because the cost of living was rising but their pay was declining and hence most of them were forced to leave the manufacturing sector in search of jobs in the service sector which was coming up very quickly and effectively (Naill 2004). The situation worsened even to date because the manufacturing industry employs only one person out of ten people.
Some of the factors that may be affecting the productivity in Britain may be such factors like the increase in taxation and the government's regulations on the industries. These may have discouraged most of the private investors leading to the decline of Britain's manufacturing industries. Britain being the origin of the industrial revolution has now lagged behind other countries in terms of the performance of its manufacturing sector but it still provides the best financial services even for foreign investors. Some of the manufacturing industries that were present include the steel industry and the car manufacturing industry which was one of the biggest in the world. This industry is more unionized than the service industry.
Service industry
Some of the most prominent service sectors in the Britain include banks, insurance and other financial facilities which are very many in the country. The liberalisation of so many service industries led to the growth of these industries. The growth of the service sector in Britain has been very important because it has led to significant growth of the economy. When the service industry took over in the economy, the GDP has been improving and sustainable growth has been made possible for the economy. The financial sector has therefore proved to be important in the economy of Britain and it is therefore a suitable business strategy for the country.
Most of the major and biggest banking institutions are found in the United Kingdom and they contribute greatly in the employment of the people most of whom have been laid off from the manufacturing sector. London is one of the greatest employers because it has the most service industries among them being the education sector, the media industry, entertainment and culture industry (Naill 2004). Britain's employment in the tertiary industry is therefore greater than the employment in the other sectors like the manufacturing sector which may be an indication of growth. London currently has more than five hundred banks and it has so many other businesses that contribute in a very great way to the country's economic growth.
In 2008, the country was affected by the global financial crisis that affected the economies of the world. This saw some of the major banks in Britain being nationalised. This also assisted in the rise of the service industries because of the nationalisation of most of the major banking institutions in Britain. The nationalisation of such banks brought about the growth of the financial sector in Britain which is part of the service industry. These financial institutions have been growing and they contribute to 80% growth of the economy. The service industry also employs 80% of the country's population which includes the insurance companies, banks and business organizations (Inman 2009).
The reason therefore for the increase in the employment of the service industry can be noted due to the rise in the productivity of the sector meaning that when a sector becomes more productive, it is likely to absorb more workers by creating more opportunities for them. The rise in the level of employment of the service industry can therefore be attributed to the rise in the productivity of the service industry. Other industries have grown as a result of the growth of the service industries. Some of them include the transport sector which has grown as a result of the growth of the financial services because of the need of transport of the workers to their destinations of work in the service industry. These service industries have therefore led to the growth of the economy because of the rise of other sub-service industries that have resulted due to the rise of the major service industries (Dow 2000).
Sources indicate that the economy of Britain worsened due to government borrowing; this affected the manufacturing sector because it was owned by the government. The rise of the banking industry was a government strategy of stimulating the recovery of the economy. This strategy seemed very effective because it led to the growth of the economy through the service sector; this resulted in the neglect of the manufacturing sector (Dow 2000). The construction industry is noted to be growing but it is as a result of the growth in the service sector. The rising need of offices for the service industry has brought about the rise of productivity in the construction sector so as to meet the need for housing. Most businesses as well as banks in London are international. They provide excellent international services like the exchange markets and insurance services.
The rise of the service industry in Britain is an indication that it is among the developed economies in the world. Other service industries include hotels, restaurants, transport, communications, retail traders, and storage industries, financials services by banks and insurance industries, real estate management agencies, education and defence industries.
De-industrialization of Britain
Britain has not de-industrialized because despite the fact that its major manufacturing industries like the car and the steel industries no longer employ great numbers of people like they used to, they are still present and very active. They have only declined in terms of employment and in terms of their output towards the economy's GDP and growth. They are therefore active and very important to the economy. Some of the car industries like the engineering and allied industries are being revived toady so as to boost the economic growth of the country. In 2003, this industry contributed 30.8% to the economy's GDP and they are still being revived (Yeandle 2009). The motor vehicle industry also produces the Ford diesel engines and it contributes to a half of the global production. This therefore means that if the manufacturing industry is completely revived, then Britain will be one of the richest countries in the world.
The manufacturing industry is therefore still very active in Britain despite the fact that it has been employing a lesser number of employees in the sector and its productivity has greatly reduced. Some of the industries that have risen up to take the market challenge are the commercial ship builders and the industries that manufacture defense and war ships. This is an indication that the manufacturing industry is still active but it has been mainly affected by some factors that have seen its reduction in its productivity and employment rate. It is still venturing its activities in other sectors like the construction sector which has noted some increase especially in 2004 when it recorded some positive increase in the GDP of the UK economy (Naill 2004).
Despite the fact that Britain has worked very hard to improve its manufacturing industry, the service industry still remains the largest in the economy providing the greatest employment opportunities for the population and still producing the greatest percentage of the country's growth rate. The service industry is therefore the dominant industry in Britain's economy.
The changing economic policies
The changing economic policies in Great Britain have contributed to the changes in the industrial settings with London growing greatly due to these policies. So many investments have also grown in London allowing Britain to grow in terms of its financial services. The balance of payment in Britain has also grown significantly as a result of the growth of the financial services. Most of the growth and increases in GDP that have been recorded in Britain have resulted from the banking sector.
Britain's economy has been affected by the financial global crisis affecting both the manufacturing and the service industry in 2008. The service sector was affected mainly due to the rising costs of commodities, the fear and actual job loss by most people. The manufacturing industries suffered greatly due to the global financial crisis where most people lost their jobs because most of the orders that had been made by the industries were cancelled due to the rise in the costs of the materials (Inman 2009).
The increase in the service industry compared to the manufacturing industry led to less unionization in the country because manufacturing industry leads to increase in the unionization as compared to the service industry. The service industry may also not be majorly affected by the recession as it can be noted from the 2008 global financial crisis. The service industry has not been affected so much as compared to the manufacturing industry that was greatly affected by the financial crisis (Yeandle 2009). The reason behind this may be that some industries in the service industry may be countercyclical i.e. there are actual increases in the rate of employment as a result of the recession due to the increases in demand for some of the services that they provide. This therefore means that service industries may not be affected as the manufacturing industries by global financial crisis.
To deal with the problem of unionization, the country will continue to create more service jobs and ignore the manufacturing sector and this may contribute greatly to the downfall of the manufacturing industry. It is also likely that as globalisation continues to affect Britain, the job losses in the manufacturing industry will continue to be noted while there might be increases in the job opportunities in the service sector which might rise up due to globalisation. This may have been the reason why Britain was not majorly affected by the global financial crisis. The fact that the service industry's institutions were quick in responding to the global financial crisis is also an indication as to why it was not mainly affected by the crisis (Yeandle 2009).
The manufacturing sector may have also been affected by the reduced rate of employment as the result of recession which has reduced its ability to employ more workers and increased the ability of the service industry to employ more workers. Some services like healthcare centres have been employing more workers as a result of the recession. This therefore means that as more workers are displaced in the manufacturing sector, they will be absorbed in the service industry which has been dominant in Britain.
Conclusion
The service industry is therefore very dominant in Britain and there is a likelihood that it will continue to be dominant. This is because of the effects of the rising global crisis that has mainly affected the manufacturing sector.
References
Ferguson and Naill 2004, Empire, the rise and demise of the British world order and the lessons for global power, Basic Books publishers.
Dow 2000, Major recessions: Britain and the world, 1920-1995, Oxford University Press.
Inman 2009, reports of recovery much exaggerated: UK, The Guardian Publishers.
Alexander, Danev, Horne, Jeremy, Knapp and Yeandle 2009, Global Financial centre, City Of London Corporation.
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