Matthew 7:24 and the UK economy

04 July 2012
Today's new is that the UK service sector remains flat. Personally I think flattened, as in pancake, is a more appropriate word. I have written previously about the hazards of a service-heavy economy, and how the UK's is built on sand, but what the FT states correlates well with that I have both heard and seen on the ground in the last 2 or so months. And it is not pretty.

What struck me recently is the extent at which the problem is not just the service sector. Visiting a coach-craft sub-contractor a while ago, what struck me was who the other customers were, and it was obvious from what vehicles were being produced that it was pretty much all public sector acquisition. There were 1 or 2 exceptions, but since their identity is not relevant to the story I will not be mentioning names. Same story with construction work, both around the M25 and along Bristol's main roads. The ultimate is an advert on Jack FM about a transport company which has "the highest level of official government clearance", which is worth Jack Shit to anyone who is purely private sector.

From talking to people who either run their own (small) businesses or are in the process of setting ones up, there seems to be an attitude which borders on having written off the UK market. Last week a meet-up with an old friend drifted onto the topic of businesses, and a telling remark was how UK operations were just about keeping above the water. To my surprise they had broken into Middle Eastern markets (I was talking about my own business trips to the region), and that was already accounting for much of their profits. Friends & Family ventures also included targeting Chinese lovers with money to burn, energy in Chile, and telecoms in New Zealand. The only start-up I know that could be argued as actually targeting the UK is a Software as a Service outfit, and even then they are only using UK rack-space for reasons of physical accessibility.

The fundamental problem is that the UK does not have much in terms of a real private-sector economy, and this has now come home to roost. Without a bubbling financial sector to support it, the public sector has gone from unsustainable to criticality, and the costs of fighting barriers-to-entry are frighteningly close to the costs of crossing national boundaries.