Service sector economy to collapse
Anyone who can remember the Thatcher era, will remember that the great mantra at the time was that we were moving to a service sector economy. With steel works and mines closing we witnessed great swathes of devastation cut across many parts of the country. Indeed with steel works, mines and ship builders the closure would render entire communities with 90 percent unemployment.
Over time many of these local economies recovered as incentives to open service based businesses were introduced. Ten years later the economy boomed on the back of ‘being the means to service’ rather than ‘being the means to produce’.
Theories abounded that the ‘new economy’ would mean that the UK would be insulated from any future economic shocks. Indeed the UK seemed to have found secret of economic immunity - small business became the ‘new black’ and we all got on with our lives raking in cash.
Except for one thing, it was really a mirage. The service sector economy was based on a house of cards. People weren’t really getting that much richer, they just had access to more debt. As markets were flooded with easy credit, sewn with reckless abandonment by a new generation of banks and money lenders of all kinds, people just borrowed and spent more, convinced that their primary asset, their house would keep increasing in value forever, and anyway the cost of repayment was marginal with interest rates so low, so who cared?
So now, as the financial world and hence the economy starts to unwind we’re seeing the service sector economy start to collapse like a house of cards - caught in yet another ‘perfect storm’.
With a rash of banks announcing halved profits over the next ten days we’ll see them being picked off one by one as the results roll in. Over on the house price front we’ve seen yet another report of the tenth consecutive drop in prices with the number of sales reaching 1930’s proportions.
This has far reaching consequences; with estate agents closing at a rate faster than 40 offices a week across the country, they are increasing fees to sell stagnant housing - so with your house in free fall you’re now going to have to pay more for the pleasure of losing money. Of course this won’t save the estate agents and so there’ll be a lot of ex-estate agents looking for jobs - somewhere.
The restaurant trade is suffering badly, as people splash out on a takeway rather than splash out on a more expensive restaurant meal. Pubs are suffering massive decline - blaming the smoking ban - but in reality admitting that they can’t compete with low cost supermarkets.
The city of London is off course going through a massive hemorrhage at the moment with as many as 100,00 high earners being thrown onto the job market. Many of these jobless will not ‘sign on’ as unemployed, either because of stigma, or because the payments they’ll receive aren’t going to even begin to cover their exposure.
As these individuals cut back it will be the service sector economy that suffers most - ironically the precipitated demise of the service sector economy will fueled by the demise of the service sector itself. It’s happening already and it’s happening faster than we realize - when the steel works closes, it creates headlines, when your local bank cuts back on staff or your restaurant cuts staff who notices? As with all things there will be a point where it becomes apparent .. so we suggest you look for the signs now. Check out the empty shops on your high street … and be very scared.