UK economy: it's rebalancing - but not as we know it But we should not give up on the idea of the rebalancing of the UK economy. It has been happening - but not in the way policy-makers originally expected. An analysis published by PwC next week will show that rather than rebalancing between manufacturing and services, the UK economy has experienced a rebalancing within the services industries. Services make up about 80pc of output and employment in the UK, spanning a very diverse range of activities - including financial and business services, transport and communications, health, education, social care, retail, hotels and catering. There have been significant shifts between these component industries over the course of the recovery. Some of these services sectors - travel and transport, business and financial services, information technology, education and the creative industries - are important drivers of export revenue. The UK is the second biggest exporter of services in the world behind the United States. Our exports of services account for over 12pc of GDP, compared to around 6pc in other large European economies and just 4pc in the United States. Export success in the services industries may not be as visible as in manufacturing industry. But it is one of the hidden "jewels in the crown" of the UK economy. Within the services industries, export-oriented activities are generally growing much stronger than sectors dependent on the domestic market. The most striking example is business, professional and support services. This is the largest single category of UK services exports, making up nearly 30pc of the total. Output in this sector has grown by over 20% in the four years of economic recovery so far - three times the average growth rate of the services industries. On the back of this export success, our trade surplus in services has reached nearly £80bn in the last 12 months, around 5pc of GDP. A decade ago it was just 1-2pc of GDP. That improvement has come despite a decline in foreign earnings from financial services in the aftermath of the banking crisis. Business services, travel and transport have been the main sectors contributing to this increasing trade surplus in services. There are other ways in which the services sector is supporting the rebalancing of the UK economy. Over the recovery, the private sector has created 1.5 million jobs - predominantly in services - greatly offsetting the reduction of about 500,000 in public sector employment. Non-financial businesses have been growing at the expense of financial services, where output and employment have been falling over the recovery so far - though the most recent CBI/PwC survey of the sector points to the start of a turnaround. The UK economy is rebalancing - but not as we expected. Rebalancing is happening within the services industries rather than in favour of manufacturing industry. As long as this is accompanied by export success and rising employment, as it has been so far, we should welcome and support Britain's services-led recovery. Andrew Sentance is a former member of The Bank of England's Monetary Policy Committee and is currently senior economic adviser at PricewaterhouseCoopers