Explaining the Impacts of Globalisation on Service Economies in the Uk

Topics: Economy, Economics, London Pages: 7 (2655 words) Published: May 16, 2013
Explain the impacts of globalisation on service economies in the UK In explaining the impacts that globalisation has had upon service economies in the UK, the concepts, 'globalisation' and 'service economy' must first be defined. MacKinnon & Cumbers (2011) defined globalisation as "… the increased connections … in flows of goods, services, money, information and people across national and continental borders.". The globalisation process may be decomposed into constituent processes in order to explain the impacts it has had, which will be discussed more later. In turn, a service economy is one, or part of one, that is based on trade in services. A service is characterised by its intangibility, inseparability (the simultaneous production and consumption of services), heterogeneity and perishability over time and space (Regan 1963; Rathmell 1966; Shostack 1977; Zeithaml et al 1985, cited in Wolak 1998). Alternatively, services are economic activities which have no direct involvement with agriculture, mining, or manufacturing (OECD 2000). Both macro and meso-scale impacts will be examined, starting with the macro; how the service sector as a whole has changed and how globalisation may have fundamentally changed the concept of what a service might be. Inequality as a result of globalisation will then be discussed with particular reference to the North-South divide, before examining market structure changes in terms of levels of competition in the service sector. Finally, meso-scale impacts will be considered, emphasising wage differences in the UK's service sector. Figure [ 1 ]: Percentage share of employment in the UK by sector, 1980-2008 Source: ONS 2009, cited in Faulconbridge 2010

The most profound impact has been the expansion of the service sector since the onset of globalisation in the mid-20th century. Figure 1 shows the increase in service employment from 1980 - 2008. Further to this, the %GDP generated by the service sector in this same period rose by approximately 20% (OECD 1996, cited in Julius & Butler 1998), closely mirroring the data in figure 1. Explanation for this can be found in the international division of labour (IDL) that has occurred, in which agriculture and manufacturing have moved abroad to areas that have a comparative advantage over the UK in these sectors. Bryson (2008) referred to this process as the first global shift. The result is, as Figure 1 shows, that as agriculture and manufacturing decline in the UK, services 'fill the gap' that they have left behind. But what led to the first global shift? Offshoring, the act of transferring (predominantly lower-skilled) operations to least-cost locations abroad, is a relatively new concept which has occurred with globalisation (Coe et al 2007). In particular, the rise of Transnational Corporations (TNCs) that are involved with multiple economic sectors, has created a pronounced IDL with East Asia as a dominant choice of location for outsourcing and offshoring. An example of this is Primark Ltd, a subsidiary of Associated British Foods plc. Primark's retail stores -the service part of its operations- are predominantly in the UK, but it sources its products (manufacturing that would otherwise be done in the UK) from East Asia (Primark 2011). This split encapsulates one way in which services in the UK have grown; at the expense of other sectors. Another explanation for the expansion is the liberalisation of the UK economy. As globalisation took hold, the view that free trade was the most efficient way to trade became dominant, a philosophy termed neoliberalism (Peet et al 2011). The result was the formation of trade blocs and international organisations, for example the development of the European Union into what it is today. Flows of capital, labour and goods between constituents of the EU are uninhibited by tariffs and quotas, leading to a disproportionate increase of trade in services between the UK and Europe as the costs of trade fell....
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