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The travails of manufacturing and the decline in oil and gas output have made the UK even more dependent on financial services as it tries to pay its way in the world
The industrial strategy of the coalition government in late 2011 is the same as it was when Gordon Brown was about to become prime minister in June 2007. When David Cameron says that his red line for Thursday's European summit is that no harm should come to the City of London, it is like watching the clock being turned back to the heady days before the crisis. Brown ended his long stint at the Treasury with a Mansion House speech in which he said Britain needed "more of the vigour, ingenuity and aspiration that you already demonstrate that is the hallmark of your success".
That model of the economy went down the tubes six weeks later, and it became plain as Britain sank into its most grievous recession since the 1930s just how dependent the economy had become on its over-leveraged financial services sector. The new coalition government promised change. It pledged itself not just to austerity but to a rebalancing of the economy that would make the City less pivotal to the country's well-being.
George Osborne got quite carried away by this prospect in his 2011 budget. "We want the words: made in Britain, created in Britain, designed in Britain, invented in Britain, to drive our nation forward," the chancellor said at the climax of his speech.
Politicians say this sort of stuff all the time, of course, but there were some grounds for optimism. In early 2011, the global economy looked set for robust growth and British exporters had a competitive advantage over their rivals of a 25% drop in the value of sterling since 2007.
There has, however, been no march of the makers. Wednesday's manufacturing data shows that, far from being in the vanguard of economic revival, Britain's factories are leading the retreat. Manufacturing output has been sliding since the spring, and fell by 0.7% in October, the latest month for which data is available. There are one or two bright spots: production of capital goods is still growing, which suggests that some hi-tech firms are still prospering; output from food and drink companies is up, because even when the overall economy is struggling people still have to eat.
But the underlying state of manufacturing is poor. Output is 7% below where it was at its most recent peak in 2007, and would presumably have been lower still had it not been for the falling pound. The UK's trade deficit in goods continues to widen as it has done inexorably since the early 1980s, only this time without the cushioning effect of North Sea oil and gas production. Wednesday's data from the Office for National Statistics shows that the fields are rapidly running dry: North Sea output is down by 30% since 2008.
The travails of manufacturing and the decline in oil and gas output has made the UK even more dependent on financial services as it tries to pay its way in the world. Britain's surplus in its trade in services – of which financial services makes up a big component – offsets more than half the deficit in trade in goods. This is the argument used by the City when it lobbies ministers for help in blocking things it doesn't want – an FTT, a splitting up of banks into retail and investment arms, more European regulations. The message is simple: there is only one goose capable of laying any golden eggs, so do you really want to kill it?
We have been here before. In the 1920s, Winston Churchill said he wanted "finance less proud and industry more content", but hobbled manufacturing by bowing to the City's insistence that Britain should be put back on the gold standard. Likewise Cameron and Osborne can see the dangers in having all the nation's economic eggs in one basket, but as manufacturing continues to head south expend large amounts of political energy ensuring there is no diminution in a sector they say they want to see become relatively less important. Nothing has changed.