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Introduction

The service sector of the economy covers a large range of activities including the wholesale and retail trades, hotels and restaurants, transport and communication, financial services, real estate and business activities and government and other services. Such industries represent a large and expanding sector of the economy. Indeed, for at least two and-a-half decades since 1980 they have been the only area of activity in which there has been net job creation of any substance. In the UK they now provide the great bulk of jobs and contribute about three-quarters of GDP against 50% in 1970.

Lancashire has participated in this structural shift towards services though until relatively recently this tendency was much slower than in the nation at large where employment in services already exceeded employment in manufacturing as early as the 1920s. In immediate post-war years barely a third of Lancashire's employees were engaged in service activities. It was not until 1971 that local services industry employed more people than manufacturing and not until 1975 did they account for more than half of the employee workforce. Apart from the early 1950s when the economy was still adjusting to civilian production and the old staples were working flat out to feed export markets, the post-war growth of services was fairly steady and incremental, being under-pinned by the expansion of the welfare state and education. From the mid-1980s, market or producer services in such areas as retailing and financial and business activities came to the fore. More recently, "public" services, notably in areas like health, social welfare and education have contributed towards rapid jobs growth in services (Figure 1). Such service sector growth has contributed greatly not only to general wealth creation but also to the long-term secular rise in female economic activity and part-time/flexible forms of employment as well as to growth in self-employment and small business development.

Figure 1 Services Employment Change, Lancashire, 1950-2005

Source Ministry of Labour/Department of Employment/ONS - ERII Employment Records

As a general overview, Table 1 illustrates changes in service employment in the Lancashire sub-region over the 55 years to 2005 by broad industrial sectors. Over this period Lancashire recorded a total net employment increase in the order of 80,000 employee jobs (+15%). Whilst this growth was rather less that that over the UK as a whole, it was nonetheless a considerable achievement considering that over the same time span there was a net loss of 174,000 (-63%) manufacturing jobs. Overall, in the order of 270,000 new service jobs were created 1950-2005, a gain of about 143%. The only other broad sector of activity to show a net gain in employee jobs over this extended period was construction and most of these jobs have been added over the past five-years following an unprecedented (and probably unsustainable) upturn in construction activity across the sub-region.

Within the services sector, not all components of activity participated in the employee job growth to the same extent. Notably, the Transport, Storage and Communication sector actually shed a net 16,000 (-39%) largely in response to increased productivity and from the rapid growth in car ownership that created a large shift away from rail and bus public transport. Growth in Public Administration and Defence too, was relatively modest though to some extent this represents a more recent fall reflecting local site rationalisation and restructuring amongst a number of central government agencies. In other related "public" services like Health, Social Work and Education, jobs creation was on a large scale though recently a large slice of this occurred through private provision. Most spectacularly, employee jobs in the Real Estate and Business Activity sector expanded by nearly 1,700%, albeit from an initial relatively small and possibly under-enumerated base.

The Size of the Service Sector

The most recent count of jobs in Lancashire, the 2005 Annual Business Inquiry, enumerated over 457,000 employee jobs in services, or more than three-quarters of all Lancashire employees. The sector's importance is such that it now makes the dominant contribution to the sub-region's overall growth. However, despite its absolute size as a group and its clear role as a driver for the overall pattern of local employment, services remain slightly "under-represented" in the local economy: its 76% share of employee jobs in 2005 compared with nearly 83% in Great Britain and 82% in the North West Region. There is also a wide variation in the proportions of service industry jobs across Lancashire district authorities ranging from a "high" of 89% in Blackpool and 88% in Preston to 60% in Pendle and 58% in Fylde (Figure 2). The three districts with the lowest proportions of service sector jobs – Fylde, Pendle and Ribble Valley continue to be noted for their substantial employment concentrations in the 'Other Transport Equipment' manufacturing sector, primarily within the aerospace industry.

Figure 2 Employee Jobs in Service Industries, 2005, as a Percentage of All Employee Jobs

Source ONS - Annual Business Inquiry 2005

The Structure of Lancashire Services

The local group of service industries encompasses an extremely wide range of activities, occupations and types of organisations. From a broad perspective the largest single division is Health and Social Work employing over 84,000 people across the sub-region, or nearly one in seven of all Lancashire employee jobs. Other large employing services are Real Estate/ Business Activities (69,000 jobs); Retail Trades and Repairs (67,000); Education (64,000); Hotels and Restaurants (41,0000); Public Administration and Defence (35,000); Wholesale and Commission Trades (26,00; and Transport and Communication (24,000). By comparison, the largest single manufacturing sector in Lancashire, Other Transport Equipment (mainly aerospace), employs 16,000 people.

It is difficult to generalise on the characteristics and performance of most service activities. Information on the sector, except for employment, remains difficult to collect because of its fragmented nature and small average size of establishment. Official government data, despite improvements over recent years, are often patchier and appear later than much other economic information. It encompasses a very heterogeneous group of economic activities, throwing together services provided by private business and voluntary organisations with government activities, often having little in common except that their output tends to be rather intangible. Employers range from the large "public" organisations (both local and national) providing services in administration and regulation, education, health and welfare and transport, and private sector companies like multiple retailers and hotel chains, banks and other financial institutions scattered throughout the County, through establishments providing a myriad of industrial, technical, business, consumer and personal services, to the independent retailer, professional practice, charity society, fast food joint or hairdresser. In the main and unlike manufacturing which continues to be dominated by full-time male employees, women, of whom 52% work on a part-time basis, hold 59% of all jobs in services.

Figure 3 Employmee Jobs in Service Industries, 2005

Source ONS - Annual Business Inquiry 2005

Compared with the nation, under-representation in Lancashire service sectors is particularly marked in many of the "white collar" and generally higher value added private sector or market activities. These include the financial services and many of the business services such as real estate activities, computer services, leasing, technical and professional services and research and development (Figure 3). Between them the financial and business services comprise 13.4% of all employee jobs in Lancashire – a substantial share but still well below the 21% that is the national average. Many of these activities have seen some of the strongest job growth rates over recent years. To a lesser extent under-representation was also apparent in some of the transport activities and in areas of "other" services, which includes theatres, museums and sporting activities etc. The broad service functions with a somewhat stronger presence in Lancashire compared with Great Britain were in "public" activities and included Health and Social Work (particularly in hospital activities), Public Administration (largely central government related) and Education. The slightly above-par local presence in the Hotels and Restaurants sector largely reflects the importance of tourism in Blackpool but the relative importance of this sector has fallen back somewhat over recent years.

Major Service Sectors in Lancashire

Table 2 shows the largest employing classes in Lancashire out of the 210 or so service class headings identified in the Standard Industrial Classification (SIC,2003). Of these larger employing services there are few which stand out as being particularly specialised within Lancashire – rather the reverse is the case. Of note, however are compulsory social security activities (attributable to Dept of Work and Pensions establishments on the Fylde Coast and in the Preston area) and retail sale via mail order houses. Both of these sectors have been subject to some restructuring over recent years and have seen a net fall in local jobs. To a lesser extent, some local specialisation is also evident in a mixed bag of other services that include justice and judicial activities, call centre activities, social work with accommodation, hotels, bars, hospital and other human health activities and a number of education activities.

Service Industry Employment Change

Service industries have spearheaded national jobs growth over the past couple of decades and such employment has served to mitigate numerically, if not always directly, job losses elsewhere in the economy. Much of this job creation has been barely noticed because it has been concentrated in small establishments and apart from particular developments such as the opening of a large new supermarket or the more recent phenomenon of "call centre" growth, rarely makes the news headlines. Lancashire has participated in this expansion and indeed new service job creation has been one of substantial local success, over the longer-term broadly matching, the national out-turn. At first, the pattern was for many new recruits to be female, working on part-time or temporary contracts. As the economy has improved many of these jobs have become permanent and full-time as employers have been persuaded by the sustained up-turn to make longer-term commitments.

Service industry growth in Lancashire slackened in the early 1980s but never suffered the trauma of manufacturing industry, and picked up again very strongly from the middle of the decade when job creation exceeded that nationally. The post-1990 recession exposed problems of over-capacity in many (especially private or market) services and employment growth faltered. Lancashire had previously failed to share fully in many of the most buoyant private sector growth areas over the 1980s and may have gained some negative benefit from this subsequently, not being affected by the downturn as much as the nation at large. Indeed, whilst service employee job growth in Great Britain all but stalled between 1989 and 1993, an estimated 40,000 service jobs were created in Lancashire with growth continuing strongly through to 1995.

After 1995 the local picture has been somewhat mixed with the sub-region at first lagging national service growth patterns. Some of the local sectors that had contributed significantly to earlier growth themselves began to experience some consolidation and even reversal as restructuring and rationalisation programmes were implemented and new information technologies began to become more embedded in service delivery. Similarly, the large scale restructuring of manufacturing industry over much of the 1990s which indirectly via out-sourcing of many previously in-house activities fuelled much of the private services expansion, also appeared for the time being, to have run its course. The more recent acceleration in service industry employee jobs growth has been largely within "public" service activity stemming from increased government expenditure, particular in areas like health and education.

Because of changes in the statistical series it is not possible to be precise about the longer-term growth rates in services. However, taken overall for the period 1984-2005 there was a net increase in service employee jobs in Lancashire of probably between 180,000-185,000. This was a remarkable turnabout compared with historical trends when Lancashire tended to lag national patterns by a wide margin. Generally, the period has seen a change in the composition of the service sectors with a shift from some of the more basic services such as distribution, transport and public administration towards more sophisticated activities like the financial and business services. The nature of services is also continuing to change as the information and telecommunication revolution extends production and delivery possibilities. The markets for certain services are also being widened and, accordingly, becoming more open to competition. These trends are also tied to the growth of new consumer services and the increased tendency in both business and government towards out-sourcing non-core activities previously provided from within the organisation itself (e.g. payroll, cleaning, security, catering, information technology, logistics, etc). To a degree therefore, some of the growth in service employment has been a statistical illusion, merely representing a reclassification of jobs from a manufacturing to a service heading and have not been "new" as such.

Service Employment Change by District

Recent trends in service industry employment within Lancashire are illustrated in Table 3. Between 1998 and 2005 the number of service sector employee jobs in the sub-region grew by nearly 60,000 or 15%. This was slightly below the national average growth rate but nonetheless was a very solid performance by historical standards and was roughly on a par with the wider regional; growth pattern. Central Lancashire remained the star performer with service job numbers rising by more than a fifth over the period. Preston, Lancashire's largest single work-centre, matched the national growth rate but the numbers recorded in both Chorley and South Ribble expanded at double the Great Britain rate. East Lancashirehas long been somewhat "under-represented" in service industries but still generated nearly 16,000 new jobs 1998-2005 with the pace of increase being strongest in Ribble Valley. Whilst it remains the most services orientated part of the County, recent job trends in North Lancashire have rather under-performed that nationally, particularly in the case of Blackpool and Wyre, in part stemming from a degree of rationalisation in a few key sectors like public administration, retail and some of the financial/insurance sectors.

Service Industry Employment Change by Sector

Within the services sector growth in job numbers 1998-2005 was widely distributed though there were certain key performers that accounted for a large slice of the increase (Table 4). Foremost amongst these were the "public" services of education and health and social work which between them generated and astonishing 36,000 jobs, together with other business services (17,000). Growth in education and other business services in Lancashire was far stronger than nationally. Other dynamic areas included real estate, computer services, recreational, cultural, etc services and other miscellaneous (mainly personal) services. On the downside, there were employee job reductions in the sale, etc of motor vehicles, support transport services (e.g. tour operators), and in parts of the financial sector with, in most instances, local job reductions exceeding or contrary to those nationally.

Figure 4 Distribution of Service Industry Employee Jobs by Wards, 2005

Source ONS - Annual Business Inquiry 2005

Figure 5 Distribution of Service Industry Employee Jobs by Middle-Layer Super Output Areas, 2005

Source ONS - Annual Business Inquiry 2005

For further details, please contact:
Peter Kivell
Tel 01772 534157
Email Peter.Kivell@lancashire.gov.uk