The growing contribution of services to the UK’s trade account is one of the most important long-term trends. This should not be seen in terms of the relative decline of manufacturing industries, but rather as the inevitable consequence of economic growth.

Whether as individuals or businesses, developed economies tend to use more services, such as health, leisure or banking, as the economy grows and as our tastes and needs become more sophisticated.

Trade in services has brought significant economic benefits to the UK. The surplus (usually) helps to offset the traditional deficit on our trade in goods.

Since 1995, the surplus has exceeded £10 billion annually, climbing to a record £54 billion in 2008. This means the UK exported £147 of services for every £100 that was imported, evidence of a significant comparative advantage in these activities.

The UK holds a strong international position in services and is the world’s second largest exporter.

In 2008, the value of all services exports was £170 billion. This means that we traded £68 of services for every £100 of goods, compared to just £36 twenty years earlier.

Source: ONS

Spending by tourists is one of the largest elements of our international transactions in services.

With our growing appetite for foreign holidays and business travel, the UK has been running up large deficits in this area recently. In 2008, this amounted to nearly £18 billion (three times the size of the deficit a decade earlier), while government services registered a deficit of £2.0 billion. Transport services recorded a small surplus of £0.5 billion in 2008 following a string of deficits.

Fortunately, these areas were more than covered by the historical surplus generated by the financial services sector and by the growing contribution made by other professional and business services (such as legal, management consultancy, marketing and technical services).