London is capturing an ever-bigger share of the UK’s record service sector exports and government action is needed to ensure other big cities keep pace with the capital, a report says.
The Resolution Foundation said London accounted for almost half of the UK’s service sector exports, with its share of the total rising from 38% to 46% between 2016 and 2021.
Glasgow was the only other big city with a rise in its share of services exports, although it only exported 5% of what London did in 2021.
Between 2016 and 2021, London’s services exports have grown by 47% to reach £152.2bn, the report said. Exports from the UK’s second- and fourth-largest services-exporting cities – Greater Manchester and Birmingham – also grew, but at much slower rates of 11% and 3% respectively.
Britain’s economy is becoming increasingly dominated by services, which account for about 80% of national output and 56% of exports. In the third quarter of 2023, exports of services stood at £119.9bn while exports of goods were £94.3bn.
The Resolution Foundation said the concentration of services exports in London contrasted with France, where growth in Bordeaux and Lille had been faster than in Paris.
The report said policymakers needed to understand services exports were far more broad-based than banking for Britain’s big cities to improve their performance. In London exports of information and communications technology were up 15% between 2016 and 2021, while exports of professional services grew by 12%. Banking exports were up by 8%.
The thinktank said major cities outside London had the potential to sell more services overseas but they needed “vastly” more public investment in public transport and housing, and a major expansion of city centres to accommodate more firms and high-skilled workers.
Emily Fry, an economist at the Resolution Foundation, said services exports were one of Britain’s secret economic success stories. “Sadly, major cities outside London have failed to share in this growth, and the capital now accounts for almost half of all Britain’s services exports.
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“Britain needs to build up, rather than talk down, services as a route to future economic prosperity. Tradable services aren’t just about banking, and should not be something that just happens in the capital.
“We have a wide range of strengths in services – from world class universities, to accountants and entertainment industries – and getting more of our major cities to sell this to the world would boost both local living standards and national economic growth.”