Is making stuff all it's cracked up to be

One of the lazy 'givens' of the post-Crash UK is that the country is sunk, in large part, because we don't make anything anymore. If we were a manufacturing heavyweight a la Germany, China or Japan, we would not have been laid so low by the dissolving of a candyfloss economy. But Margaret Thatcher swept away British industry in the eighties, after decades of post WW2 industrial decline, poor goods and appalling industrial relations. In she ushered the shiny new age of first the services and then the information economy. Our factories and jobs went overseas to countries unencumbered by old equipment and plant, moribund management ideas and, most crucially, redundant notions of decent pay and job protection.

There are a couple of problems with this thesis of course. First, that Britain IS still a manufacturing nation: indeed we are the seventh largest exporter of manufactured goods in the world. To put that in context, the UK is only the world's EIGHTH largest economy by GDP, so we are already punching slightly above our weight; we export more than Euro competitors France, Spain and Italy. And we export in greater quantity than countries much more obviously reliant on an extracting and manufacturing base, and less reliant on services (I'd point you at Russia and Taiwan for two).

So we make stuff and we sell it abroad. And that's the way out of this mess right? Well no. The clever countries, who have industrialised heavily on making stuff (see Germany, Japan and latterly China) are suffering because nobody is buying their clothes and cars. And Germany can complain as much as it likes that it has been hoist by a recession not of its making - much of those countries' booms have been export-led. A lot of those BMWs and Chinese fridges have been bought with money generated by the housing/credit booms in the UK, the US and elsewhere. Demand in their domestic economies has been lagging way behind output, as people have saved rather than spent.

Come to think of it, the US is the world's biggest economy - buyer, seller and exporter, and is based not just on candyfloss credit, financial services and the rest, but on a huge (if eroding industrial base). GM, Ford and Chrysler don't look like digging the US out of the recession anytime soon. So the idea of 'making stuff' to haul us out of the red doesn't look such a sure thing. And that's leaving aside the ecological cost of increasing the broken earth and smokestacks.

So here's a heretical thought. Maybe, with its generation of expertise in banking, financial services, business services and all the other white collar, clean hands industries, Britain could be among the countries BEST placed to profit from the upturn. The world may be going to end during 2009-10, but at some point it will be back ... and at that point its going to be finance and services that will make stuff happen.