Exports of services are an under-appreciated aspect of the UK economy but are an economic ‘jewel in the crown’ — and an increasingly vital enabler of the much-needed rebalancing away from consumer spending.
Prior to the financial crisis, the UK put in a sparkling performance in exporting services, thanks largely to its strength in finance. We were hit hard by the downturn but now, led by business services, the UK’s services exports are poised for a robust recovery over the next five years.
With demand likely to rise in its main export markets, the UK’s share of world trade in services is also set to rise once more. What’s not in prospect is a return to the double-digit growth seen pre-crisis. We’re forecasting annual growth of 7.2% in services exports in 2012-18, accelerating to about 8% towards the end of this period. This expansion will increase the UK’s surplus in services exports to 6% of GDP by 2018, helping to move the UK’s current account back towards balance.
The UK ranks second only to the US among services exporters globally. It’s time to stop understating our strength in exporting services — and accept it’s something we’re best at.
Peter Spencer, Chief Economic Advisor, EY ITEM Club
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