In this chapter we review the changing economic structure of nations as they mature, noting in particular the declining significance of industrial output and employment as compared with the service sector.
Whilst comparisons are made throughout with international experience, the data in some tables refers to the UK by way of illustration. Alternative explanations of industrial decline are examined, such as economic ‘maturity’, low-wage competition, the advent of North Sea oil, ‘crowding out’ by the non-market public sector and low UK productivity vis-a-vis its competitors.
We consider whether the changes observed in the UK are a cause for concern, or merely a reflection of changes experienced in other advanced industrialized countries.The popular view of the UK as an industrial economy, a manufacturing nation, is now inaccurate. Over the past 50 years the structure of the economy has been transformed. Manufacturing now contributes only around 12% of total output and employs over 6 million fewer people than in 1964. One of the most prominent of today’s industries, North Sea oil and gas, did not even exist 35 years ago, and service activities now dominate the economy in terms of both output and employment. There are even suggestions that the UK is becoming a ‘postindustrial’ economy, i.e. one in which information-handling activities are predominant. We shall consider the causes and consequences of these changes, and in so doing point out that structural change has implications for other important economic issues.