Services such as banking, consultancy, law, education and retail make up around four-fifths of the UK economy. But output in these sectors is often invisible or intangible, and hard to measure.
And the UK sells a lot of services overseas. Ranked only after the US, the UK is the second biggest exporter of services in the world. But it is known as the invisible trade because it’s hard to see exports and imports of services.
Could making the invisible parts of the economy more visible show us that the economy is in better shape than we thought? And that our trade position isn’t as bad as it appears?
The OECD estimates that intangible investment, including in human capital (a person’s education, training and skills) and software, is as important as investment in tangible machinery and equipment in the UK.
Jonathan Haskel of Imperial College Business School says that if investment in private R&D were counted in GDP, then national output would be increased by around £15bn. Along with better measurement of other intangible investment, he finds that UK GDP has been under-measured by about 1%.