The final change was in the tertiary sector, where the amount employed had increased by 50%, from 11,178,000 to 16,527,000, between 1964 and 1995. Increasing its percentage of GDP in the UK.
Therefore we can conclude that there has been an increase in employment output in the tertiary sector and a decrease in the primary and tertiary sectors.
There has also been a shift over the years from public to private sector production, which creates competition, causing lower prices and benefiting the consumer, while contributing to the multiplier effect.
There are many causes for this structural change in the UK economy.
There have been changes in resource availability, such as the availability of oil and coal. Due to this limited availability there was a sharp increase in price, causing the demand to fall, and the demand for substitutes to increase. As a result there was a decline in output and employment. A prime example is steel, the substitute being aluminium.
International competition had a dramatic affect on UK structure. Changing consumer tastes, the creation of new products and the changing comparative costs result in the redistribution of economic activity around the world. For example the Japanese were able to produce more reliable motorcycles at a cheaper cost and therefore there was a decline in the UK motorcycle industry, because Japan had a comparative advantage.
The membership of the EU meant some inevitable restructuring of the UK economy, in accordance with European comparative advantages, as there were no trade restrictions within the EU (free trade, no import duties). This lead to an increase in economic activity in the tertiary sector for the UK, where it has a comparative advantage in banking and finance, (due to specialisation).
The maturity argument states that our changing economic structure simply reflects the changing pattern of demand that follows from economic development. This statement argues that consumer demand in a mature economy such as the UK shifts away from goods and towards services.
The capital stock in the UK grew more slowly than that of West Germany and France, throughout 1960-1985. Allowing those countries to have a comparative advantage in the manufacturing industry, thus causing deindustrialisation and an increase in tertiary services.
Due to the decline in primary and secondary industries, the UK will now import more, adding to the UK current account deficit. This is a record of trade between countries. It is better for the UK if exports exceed imports, limiting the supply of sterling to the rest of the world, increasing its demand and value strengthening the UK pound. This will allow cheaper imports for the UK.
This is not the only disadvantage of importing more, but also, if the UK imports all agricultural products, then if the countries from which the UK imports its goods from stop supplying then they will have no agricultural products, potatoes etc. Therefore the government has to subsidise farmers to produce.
However consumers benefit from the imported goods, because they will be cheaper than domestically produced goods, if those countries have a comparative advantage.
Over the years there has been heavy investment in capital, reducing the human labour force, and causing unemployment. This is because technology and new machinery increase a firm’s productivity, while reducing labour costs. This benefits the consumer by lower prices but causes an increase in government spending, because of those people on the unemployment benefit.
Also causing unemployment, inflation. If deindustrialisation is so advanced that the economy is not capable of producing goods to match those patterns in market demand, then there may be implications not only for imports to increase but prices too. Any increase in aggregate demand will meet a shortage of domestic suppliers. Therefore import substitution will be encouraged and so will the rise in prices by domestic suppliers. This will increase the price to consumers causing inflation and unemployment.
