Is it really the City that needs Trade Support?

Kaveh Pourvand, 27 March 2013

The United Kingdom recorded a gargantuan goods trade deficit of £100bn in 2012. This was offset by a healthy surplus of £76bn in services, making the net current account deficit in goods and services £24bn. The government rightly recognise that running continuous current account deficits is not sustainable and that something should be done about it. Yet a keynote measure announced in the budget last week suggests that the government does not have its priorities straight.

The government is creating a new Financial Services Trade and Investment Board (FSTIB). It will be chaired by a senior Treasury official and its management will include representatives from UK Trade and Investment (UKTI), HM Treasury, and City trade group TheCityUK. It will have the ‘authority and expertise to identify trade and investment priorities, and to support UK firms in pursuing these vigorously across the globe’. The government is also creating a new unit with UKTI, to help drive the work of FSTIB forward.*

There is clearly a lot of scarce civil service time being allocated to FSTIB. No doubt the financial services industry will appreciate this. But it is far from clear why the government wants to focus this support on financial services. In 2012 the industry generated a £39bn trade surplus, or 51 per cent of

the total services surplus. One doesn’t need advanced degrees in statistics to see that the weak link in our trading performance is not financial services but manufacturing. While the idea of greater co-operation between the government, civil service and business to boost our trading performance is good (many of our leading competitors do it), the focus of these efforts should be on the manufacturing sector. One doesn’t fix a broken window by fortifying the adjacent window.**

*See Pages 46-47 of the Budget 2013 document.

**Some Civitas policy recommendations for boosting manufacturing exports can be found here.