Manufacturing up, financial services down

A glimmer of good news at last – the closely watched Markit Purchasing Managers Index, which monitors factory gate activity, was back in positive territory for the first time in three months during September, hitting 51.1, compared with 49.4 in August. A score of 50 or above represents growth so this is hardly a heady expansion, but a good deal better than the 48 or so which economists had been predicting.
 
Meanwhile, in the financial sector, things are looking pretty bleak, as fears over what is going to happen to the eurozone as well as in the USA continue to depress market sentiment. Shares in Europe’s 16 leading banks tumbled this morning, as a Greek default loomed ever larger. Belgian bank Dexia has been shut out of the interbank lending markets altogether because of the level of its exposure to Greek debt.  
 
So, no surprise then that a survey of 84 leading employers in the sector by the CBI and PwC suggests  as many as 8,000 jobs could be lost in finance over the next three months. That would bring the total number of finance jobs lost since the end of 2008 to 90,000.
 
So, is this what that much-talked-about phenomenon ‘rebalancing’ looks like? Well, if the rise in manufacturing looked sustainable then maybe. But closer analysis seems to suggest that the spurt has been partially brought on by firms rushing to complete backlogged work, and that the future look less happy as new export orders are in decline. Oh, and employment is still waning too.
 
But no one said it was going to be easy (except perhaps for a few misguided politicians). The idea that you can have a ‘painless’ rebalancing (ie boost activity, jobs and profits in one sector without reducing it in another) always seemed rather optimistic. And, to look on the bright side (there is one if you peer hard enough), all those people who used to work in finance are now potential entrepreneurs. If only a small proportion of them do end up going into business on their own account, that would be a good long-term outcome.
 
As for those manufacturing figures: well, any good news is welcome.  But here at MT we think that if rebalancing is going to happen then it is going to take more than a modest recovery in factory output. What we need is more action in a whole variety of sectors, including high tech, the creative industries and services. And that for this to happen requires a healthy, but not bloated or overly dominant, financial sector too. And in the current circumstances, that all looks like a pretty tall order…