Financial sector grows to 30% of UK economy

The business and financial services sector has swelled to account for almost one-third of the UK economy, official figures published yesterday showed.

The business and financial services sector has swelled to account for almost one-third of the UK economy, official figures published yesterday showed.

Banks, insurers and computer services firms contributed almost twice as much as the beleaguered manufacturing sector to the economy in 2002, after boosting their share of total economic output to 30.5 per cent.

The Office for National Statistics said the total output of the business and financial services sector surged 12 per cent year on year to £282.4bn - more than twice as fast as the country's total output, which rose 5 per cent to £926.3bn. The manufacturing sector contributed just 15.9 per cent of that, continuing the inexorable decline that saw it first fall below 20 per cent in 1999.

Retailers and wholesalers are poised to overtake manufacturing in terms of their economic input, contributing 15.8 per cent in 2002, up from 14.6 per cent in 1992, the report showed.

Doug Godden, the CBI's head of economic analysis, said: "These figures show a significant change in the structure of the UK economy, particularly the marked decline in manufacturing. [The sector] accounts for the majority of UK exports and the extent to which it has been eroded may be storing up balance of payments problems."

John Butler, a UK economist at HSBC, said the explosion of cheap imports from countries such as China and Asia on the back of sterling's strength had helped to feed demand for services. "Getting cheap goods from Asia has kept inflation low, which has boosted purchasing power so UK consumers have gone on a big spending binge - on many services.... It's another illustration of how much the UK economy has become a service sector economy."

The growing trend for eating out - helped by rising purchasing power - catapulted the hospitality sector into the country's top 10 industries for output growth over the decade. While household spending on all food sector products rose 61.5 per cent during the 10 years to 2002, spending on catering products consumed outside the home surged 85 per cent, the ONS said.

Agriculture's contribution to economic output - measured as "Gross Value Added" - halved to 0.97 per cent in 2002 from 1.8 per cent in 1992, the report said. The fastest growing industry over the 10-year period was computer and related services, reflecting the technological advances made during the period.