Tonight:
5°c
Twice this week I've run up against the changed nature of the UK economy.
The first was in the City at the champagne-fuelled opening of the new Green's Restaurant & Oyster Bar. Owned by Simon Parker-Bowles and Lords Vestey and Daresbury, the offshoot of Green's in St James's is located at Cornhill, bang opposite the Bank of England, in what used to be the headquarters of Lloyds Bank.
It still bears all the hallmarks of a bank premises. The oyster counter is based in the banking hall, complete with original grilles, pillars and tiled floor bearing the symbol of the Lloyds famous black horse. Upstairs, the former offices have been turned into a restaurant, with the meeting rooms made into private dining areas.
Lloyds had outgrown the premises and the new owner of HBOS resides in a gleaming, modern tower in nearby Gresham Street. Green's is not alone. Its close neighbour is 1 Lombard Street, another restaurant that has taken over what was previously a bank.
Then, on Wednesday night, I was at a dinner and sat next to a senior diplomat from the Chinese embassy in London. For want of something to say, I asked if he'd been on holiday. “Oh yes,” he replied, in perfect English, “we went to South Wales, where we toured an old ironworks and a coal mine.”
We laughed about how in China there were no abandoned ironworks and coal mines, that they were all operating at full pelt, helping to generate output that is currently growing at seven per cent. While that would be a wonderful performance for this country, the Chinese official was disappointed: he would like to see GDP hitting double-digit growth again.
This is what Britain has become: a land of restaurants and industrial heritage parks (and if the empty plants are not spruced up with an interactive visitors' centre to show people how things used to be they can always be converted into trendy loft apartments and bijou studios). In the City, the banks carry on growing in size and when they move out, wine bars and restaurants move in — a process that has been aped with bank consolidation and outsourcing up and down the British High Street.
On a recent trip up north, to Cheshire and Cumbria, it was impossible to ignore the number of eating places that had opened up. Every pub offered food, while some laid claims to be of “gastro” standard, with ubiquitous handwritten menus on blackboards and slate interiors. And they were packed. It's as if the whole of Britain does nothing these days except wallow in the past in some giant, fancy-dress-themed park, eat and drink by the bucketload, and wander round the aisles of the nearest Tesco and Primark.
It's a view that is borne out by the latest figures. Service sector activity grew at its fastest pace in nearly two years in August, according to the Purchasing Managers Index. While that boosts hopes that the recession may be ending, it highlights just how reliant upon services the economy has become. The index rose to 54.1 in August from 53.2 in July, the highest since September 2007 and beating forecasts for a reading of 53.9.
The danger in this increasing domination has been brought home to us all with shocking force over the past two years. Financial services took an almighty pasting — and we had little left to fall back upon. Likewise, much of our spending was fuelled by the erroneous belief that house prices would keep on rising and that we could, therefore, keep on borrowing.
What's worrying is that there's little sense of an urgent need to change. The contented folk crowding around the tables were sleek and prosperous-looking — seemingly property owners continuing to brandish their plastic credit. As we rush to grasp at green shoots, there is a danger in lessons not being learned. In the City, there are sighs of relief — the banks are up and running again, investors are back, the fat commissions are returning. Estate agents are reporting increases in house prices and activity -small but a step in the right direction.
Something is happening and it all looks promising. We can relax — the good times are just around the corner. That, though, ignores an emptiness at the economy's heart. Indeed, it's as if there are two systems — one that is a celebration of consumption, driven by bonuses and retirement packages, and the other that sees three million on the dole and teenagers in families that have never known, and might never know, full-time employment.
I think of China with its rush to move forward. It's far too easy to say it's got the labour force to ensure that every manufacturing contract going is China's for the taking. China may beable to churn out cheap goods by the sea-container load. But it's also the world leader, for example, in solar technology. It's been busy buying up the sources of raw materials that go into the manufacture of solar panels and energy production. Likewise Germany. Five years ago we were number one in wind turbines. Not any more — Germany is now streets ahead.
There is a void, too, at the centre. The Government gives the impression of being at a loss as to how to give us a more balanced economy. Of course, we can't compete with the likes of China for low wages. But we can design and innovate, we can lead in research and development. We're busy pushing more and more students through universities, for them to be employed as waiters and bar staff. For those who are unable or unwilling to go into higher education, the Government's own national apprenticeship scheme, fronted by Lord Sugar but otherwise given lukewarm attention, has proved to be an unmitigated disaster.
Britain used to have apprentices but the schemes were wound down in pursuit of short-term returns and the drift towards financial services. For much of its rule, Labour didn't want to know about manufacturing, preferring to bask in the takings from a booming banking industry that has come to account for a whopping 40 per cent of the corporate profits of UK plc.
We may not make much and we certainly don't invent enough. But we do good history tours, dining and shopping. What we're not prepared to do is to invest properly in avoiding the inevitable hangover: unless we do, I fear that those Chinese visitors will be touring the ruins rather than buying our products in years to come.
