Easier to find servants than entrepreneurs

The first of a new series dispelling the economic nostrums on offer from the political parties; TORY MYTH Britain is the Enterprise Centre for Europe
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It is the Government's favourite mantra, one of the most irritating and empty phrases ever coined by a speech writer. "Britain is the Enterprise Centre for Europe." Not only does it sound like an over-literal translation from a foreign language, a phrase from one of those glossy promotional brochures that overseas tourist boards like to hand out. It is also untrue.

Well, this conclusion does perhaps involve loading the phrase in question with more meaning than it can bear. Does it mean that Britain has more entrepreneurs than anywhere else in Europe? Or that entrepreneurs from around Europe like to take their holidays here?

This might be logical, but ministers' repetition of the phrase suggests that they want it to signify something more important. It indicates a belief that the British economy is more successful than most because of its entrepreneurship. Unfortunately there is not much evidence that this is so.

The rate at which small businesses start up looks impressive, but their failure rate is almost as high. Not many small companies grow up into big ones. Think of some of Britain's best-known and most successfulentrepreneurs.Anita Roddick's Body Shop is one of them. More than 20 years old now, it is only the 302nd biggest company listed on the stock market.

Richard Branson runs Virgin, one of the biggest private companies in the UK, and one of the best-known internationally. There is no doubt that it is one of Britain's biggest entrepreneurial successes. But the airline Virgin Atlantic makes up most of the business and accounts for most of the profit. The more exciting and innovative Virgin businesses are tiny.

The recent huge international successes might not be Continental, but they are not British either. The giants of enterprise, such as America's Microsoft and Netscape, or Genentech and Amgen, completely outshine the small British technology firms.

Research by Warwick University's Centre for Small and Medium Sized Enterprises shows that in a six-year period the number of new businesses that survived amounted to only 1 per cent of the total number of all companies. This puts Britain behind Austria, Belgium, Germany, Ireland, the Netherlands and Switzerland as an enterprise centre.

That leaves, as the most solid footing for the Government's claim, the notion that overseas investors like to build their factories in this country rather than on the Continent. Inward investment in the UK has indeed been running at record levels. One catch, however: we have to gloss over the fact that outward investment by British companies has also reached a record level, with the UK investing twice as much abroad as abroad is investing here.

The UK's success in attracting foreign investors also relies on the lure of labour that is cheap for its level of productivity and skill. Others can play the same game, with Ireland and Spain inside the EU and the Czech Republic and Poland on Germany's eastern border offering stiff competition on the same territory.

Besides, to focus on the activities of foreign manufacturers gives an entirely misleading impression of the force driving the British economy. Britain is Europe's domestic service capital.

Yes, servants. When it comes to domestic staff, the UK has been creating jobs like nobody's business. Fallen City star Nicola Horlick is not alone in employing nannies and cleaners. According to official statistics, domestic service has been the fastest-growing sector of the economy since the trough of the recession five years ago, up by more than a third in terms of activity. This puts it ahead of various other rapidly expanding and possibly entrepreneurial industries such as air transport, computer services and telecommunications.

What's more, experts predict it will continue to be the fastest-growing area of employment. Warwick University's Institute for Employment Research predicted recently that the main areas of employment growth between now and 2001 will be professional occupations and administration on the one hand, and "personal and protective services" on the other.

This latter category is a mixed bag of jobs which includes domestic service, but also carers, private security guards and people serving fast food. It is the McJobs bit of the economy, with much of the work part-time or temporary, and almost all of it low-paid.

There are already more employees in this category, at 2.75 million out of a workforce of nearly 26 million, than in the professions, working in factories or working as salespeople. The report predicts that employment in personal services will grow by more than 4 per cent a year compared with declining employment in a majority of the other occupational categories.

According to Rob Wilson, editor of the Warwick University study, one explanation for the trend is the shrinking importance of manufacturing, which now makes up less than a quarter of the economy in this country. That means that whatever new jobs there are will be in the service industries. But within services, he says, "the way work is organised has tended to polarise between occupations requiring higher qualifications and unskilled jobs".

Britain's increasingly Upstairs, Downstairs economy could pose real social problems. As Dr Wilson points out, an increasing number of households are existing on very low pay. The UK has already seen since 1980 the biggest rise in earnings inequality in the industrialised world, making it the undisputed inequality centre for Europe.