In all, the TUC forecasts South East England will produce 40.1 percent of the UK's gross domestic product by 2022, of which London will provide 25 percent (or 62.5 percent of the South East's total economic share). This represents a rise of 2.5 percentage points from 2015, and over seven percent from 1997.
Without a change in industrial strategy the UK's 2 richest regions will have 40% of GDP by the 2022 election. https://t.co/R5hQcoOobM— TradesUnionCongress (@The_TUC) April 28, 2017
The Congress projects the most significant falls in the share of the economy come in 2022 and will be suffered in Yorkshire (dropping 0.5 percentage points to just 6.1 percent), the North West (down 0.4 to nine percent%) and Scotland (falling 0.4 to 7.2 percent).
Given the importance of the City of London's offshore financial center to the region, the Tax Justice Network believes the TUC's forecasts are a vivid demonstration of the "Finance Curse" in action — organization directors John Christensen and Nicholas Shaxson argue the City of London has been a major contributing factor to the dramatic decline in British manufacturing since the 1970s, and the impoverishment of non-South East regions of the country.
The emphasis on finance in the UK has, they believe, resulted in flows of foreign capital into the UK going straight to the City, for the purpose of mergers and acquisitions and real estate purchases rather than investment. Moreover, it has produced a "brain drain" effect in many industries, with upper tier university graduates being enticed by finance, and eschewing other valuable sectors of the economy.
The UK's bloated financial sector has also helped to disguise the damage the industry itself has caused, by smoothing over declining wages and falling levels of employment via borrowing. When downturns and recessions occur, the long-term damage inflicted on other sectors of the economy by a myopic national focus on finance are revealed — but those sectors are harder to resuscitate than finance, and may end up being irrecoverable.
The decline of non-financial sectors of the UK economy has gone into hyperdrive since 1992, with major industries such as agriculture and manufacturing declining year-on-year, while sectors such as property have risen dramatically.
While this pattern is by no means unique to the UK — most resource-dependent countries have suffered similarly, to varying degrees — the reaction of UK politicians and economists is perhaps exceptional in world terms. The Tax Justice Network note many have proposed the answer to this gaping structural economic imbalance is yet further dependence on financial services, and increasing policy bias towards the capital to an even greater degree — transforming London into an effective Singapore-on-Thames, and directing an ever-higher proportion of infrastructure spend to the city.
Manufacturing sector gross value added (%) to economy 1995-2015 selection of member states. Note DE stability & UK decline.(src Eurostat) pic.twitter.com/umcB7kJUvO— Tomas Wyns (@TomasWyns) March 14, 2017
"A development strategy based on increasing dependence on the City will exacerbate an already unsustainable situation. The outcomes will include slower growth and more crowding out of other industries, a continuation of the brain drain accompanied by weak job creation in downstream sectors (largely in the ‘gig economy'), rising inequality and low levels of human development, and a tendency towards state capture and authoritarianism. In the face of long term stagnation, historically low productivity levels, an elusive search for growth, huge public and private debt overhangs, the time is ripe to consider new paths," TJN said in a statement.
Even if UK politicians make substantive structural amendments to the UK economy, it may be too late to stave off another recession — whether national or global. While markets are skeptical about such a prospect, some analysts have suggested there is a significant risk of a major downturn in the future. In April, investment firm Saxo ranked the risk at 60 percent within 24 months, and warned of a significant "perception-versus-reality gap" — present economic conditions should arouse caution among consumers, businesses and governments alike, but economic actors appear distinctly unaverse to risk.
Moreover, analysis produced by macroeconomic consultancy GnS Economics that same month, concluded that "from a purely mathematical perspective," the world is closing in on a global recession.