“Don’t kill the City goose that lays the golden egg” ran an editorial in London’s Evening Standard recently, warning that a overly punitive approach to the financial services sector would result in disaster for the economy just as bankers’ Christmas bonuses were being decided.
This was the week in which George Osborne and Vince Cable were meant to meet with the banks for so-called “showdown talks”, with the meeting delayed due to the adverse weather – and presumably now rendered rather toothless by Cable’s subsequent fall from grace.
The Evening Standard article suggested that the City was a greater contributor to corporation tax revenue than North Sea oil and gas and that the 1.3 million employees in financial services paid almost £25 billion in employment taxes: the argument in the piece ran that while it was fun to bash bankers in the wake of the financial crisis, we shouldn't undermine their contribution to the economy and make London a less attractive place to do business.
Manufacturing bosses reading the article, however, would have been less than thrilled at its contention that “ministers are deluding themselves and the electorate if they suppose they’re going to recreate British manufacturing”. Rebalancing the economy, the mantra of politicians, was a chimera, and financial services should be trusted to drive growth going forward into 2011.
This point of view does not recognise the contribution that engineering and manufacturing have made to growth this year, with manufacturing production outstripping the rest of the economy by some distance.
Indeed, sluggish growth in other sectors since the end of the recession is expected to continue into the new year, while manufacturing continues to outperform other areas of the economy. Chief economist at Markit Chris Williamson says: “Manufacturing is still growing at a strong pace… and is likely to lead the economy going into 2011, taking advantage of rising demand in key export markets such as the US, Germany, France, China and the Middle East.”
This is cause for good cheer among engineering firms – who would also note that London is not the whole country – as the end of the year approaches. We need another unsustainable credit bubble like a hole in the head: but what we do need is British firms producing goods in markets such as low carbon energy which are set for worldwide, exponential growth in the coming years. It’s this that will help drive economic growth, and hopefully lead to a more sustainable future for the UK and other nations.
Best wishes for a peaceful – and prosperous – new year.