Test Your Knowledge 🔒Play Lemonaire 🔒Play Last Stand

The UK Economy » Changes in the UK Economy

What you'll learn this session

Study time: 30 minutes

AQA spec: 3.2.2

Why the UK has lost many of its traditional industries
How globalisation and government policies changed the UK economy
What a post-industrial economy is
The growth of IT, services, finance, research, science parks and business parks

🔒 Unlock Full Course Content

Unlock This Course

The UK economy has changed a lot

The UK economy has shifted towards services and high-tech jobs

The UK was the first country in the world to industrialise. Two hundred years ago, mines, mills, shipyards and steelworks employed millions of people. Today, most workers have jobs in offices, shops, hospitals, banks and schools.

These changes have affected, and will keep affecting, where people work and which regions grow. This lesson looks at why the economy changed and where it is heading.

Key terms:

Traditional industry: an older industry, such as coal mining, steel, shipbuilding or textiles, that grew during the Industrial Revolution.
Deindustrialisation: the decline of a country's manufacturing and traditional industries, so fewer people work in them.
Globalisation: the growing connection between countries through trade, travel, communication and business.
Government policy: a decision or plan by the government that affects the economy, such as taxes, spending or laws.
Post-industrial economy: an economy where manufacturing is much smaller and most jobs and wealth come from services, finance, research and technology.

Causes of economic change

The spec names three causes of economic change. Together they led to deindustrialisation.

🏭 Decline of traditional industry

Coal, steel, shipbuilding and textiles all shrank. Easy coal seams ran short and cheaper coal came from abroad. Factories and yards closed, and many towns lost their biggest employers.

🌎 Globalisation

Companies can now make goods almost anywhere. Wages are lower in many Asian countries, so it became cheaper to make clothes, steel and electronics there and ship them to the UK.

🏛 Government policies

Governments chose how much to support industry. From the 1980s they cut back help for struggling industries and let some close, because they were losing money.

Deindustrialisation and the decline of traditional industry

Deindustrialisation did not happen in one place only. It hit coalfields in South Wales, the North East and Yorkshire. It hit steel towns such as Sheffield and shipbuilding areas on the Clyde and the Tyne.

The effects were often harsh:

Large numbers of people lost their jobs at the same time.
Shops, pubs and small firms that depended on workers' wages also closed.
Some areas stayed poor for many years because new jobs were slow to arrive or needed different skills.

Machines also played a part. Modern factories need fewer workers than old ones, so even industries that survived often employ fewer people than before.

How the three causes link

Take a steelworks. Foreign steel is cheaper because of globalisation. The government decides not to pay out large sums to keep it open. The works closes and the town loses its jobs. Most real examples involve more than one cause.

Globalisation in more detail

Globalisation works in both directions. UK firms moved factories overseas to cut costs. Some also moved services, such as customer helplines, to countries like India. At the same time, foreign companies set up in the UK and bring jobs with them.

It means the UK now competes with the whole world. Industries that cannot match the price or quality of overseas rivals tend to shrink. Industries that sell skills, design or financial services to the world can grow.

Government policies

Science parks bring high-tech jobs to the UK

Government decisions shaped the economy in several ways:

Ending support: subsidies (money from the government to keep an industry going) for loss-making industries were reduced or stopped.
Selling off: state-owned industries were sold to private companies.
Encouraging new business: tax breaks, grants and cheap land were offered to firms that set up in struggling areas.
Paying for education and research: money for universities and training helped to build skilled workforces.

Moving to a post-industrial economy

As traditional industry shrank, a post-industrial economy grew. Services now make up the large majority of UK jobs and output, around four-fifths of the economy. The main areas of growth are below.

💻 Information technology

Software, web design, data and online services. Many firms now sell through websites and apps, which creates jobs in coding and digital marketing.

💼 Service industries

Jobs that help people rather than make things: retail, health care, education, tourism, hotels and leisure. This is by far the biggest part of the economy.

💰 Finance

Banking, insurance and investment. London is one of the world's leading financial centres, with the City of London and Canary Wharf full of banks and insurers.

🔬 Research

Scientists and engineers in universities and companies develop new medicines, materials and technology. Highly skilled workers and good universities are the key.

Science parks and business parks

Key terms:

Science park: a group of high-tech and research companies on one site, usually close to a university.
Business park: a site of modern offices and light industry, usually on the edge of a town or city, with good road links and plenty of parking.

Science parks place firms next to universities so they can share ideas, staff and research. The Cambridge Science Park is an example. It is home to many technology and medical research firms.

Business parks are built on cheaper land at the edge of towns. Firms like them because there is space, rents are lower than in city centres, and the roads are less busy. They are often next to a motorway junction.

Both types of park have landscaped surroundings and modern buildings. This attracts skilled workers and gives companies a good image.

Worked example

Question: give two reasons why a new software company might choose a science park rather than a city-centre office.

Answer: it is close to a university, so the company can recruit skilled graduates and share research (1). It can share ideas and research with other high-tech firms on the same site (1).

Common mistakes

1. Saying all industry has gone. The UK still makes things, such as aircraft parts, cars and medicines, but employs far fewer people doing it.

2. Writing about only one cause. Good answers link the decline of traditional industry, globalisation and government policies together.

3. Mixing up science parks and business parks. Science parks are about research and links to universities. Business parks are mainly about offices and easy access.

Exam-style question

(a) State what is meant by deindustrialisation. [1 mark]

(b) Explain how globalisation has caused economic change in the UK. [3 marks]

Model answer

(a) The decline of manufacturing and traditional industries so that fewer people work in them (1).

(b) Globalisation lets companies make goods in countries where wages are lower (1). Cheaper imports mean UK factories cannot compete and close (1). This reduces manufacturing jobs, while firms that sell services and skills to the world grow (1).

(c) Post-industrial economies rely on research, technology and services, which need skilled workers (1). Science parks put research firms next to universities so they can share ideas and recruit graduates (1). Business parks give modern offices on cheaper land at the edge of towns, with good road access (1). Both have attractive surroundings which draw in skilled staff and give firms a good image (1).

Exam tip

In part (b), use a chain of linked points: cause, then result, then effect on jobs. Words like "so", "which means" and "therefore" help you earn all three marks.

Test Your Knowledge