The sectors of the UK economy need rebalancing, according to many. This report investigates what a rebalanced economy would look like.

Key findings:

• An important debate has begun between those who believe the UK needs a smaller role for its financial sector and a greater one for manufacturing and technology, and those who believe that services, and in particular financial and business services, will continue to provide the best chance of the country’s recovery.
• The report sets out four possible scenarios for growth including a ‘business-as-usual’ case, a broad-based manufacturing renaissance, a high-tech growth scenario, and a case in which businesses invest heavily in innovation across the economy. 
• Of the four, only the latter two scenarios are plausible; either would generate many benefits for the UK. In all scenarios however, business services continue to be the largest contributor to UK economic growth.
• The report then sets out policy recommendations based on those findings. 

As the new government seeks to rebuild the UK's economy and lead the country into recovery, the concept of economic "balance" has come to the fore.

Recent speeches by the Prime Minister and the Secretary of State for Business, Innovation and Skills have raised the vital question of growth, and put the idea of rebalancing the economy at the front and centre of political debate. In particular, both speeches raised the issue of sectoral rebalancing - what will take the place of the economic growth that for so long was provided by the UK's financial services sector.

This is a controversial subject, with some commentators advocating a relentless focus on promoting manufacturing, and others insist that financial and business services are the only areas in which the UK can prosper.

This report seeks to move the debate forward with data and analysis. It looks at a number of scenarios for a rebalanced economy, and asks two important questions: what is realistic, and what is desirable for the country. It highlights the vital role of innovation and high-tech industries in driving sustainable growth, and looks at what government can do with limited resources to make this happen.

Author:
Shantha Shanmugalingam, Ruth Puttick and Stian Westlake