THE SERVICE ECONOMY

The writing was on the wall for British manufacturing by the early 1970s. It had acquired an unhealthy reputation for poor quality and compared unfavourably with emerging competitors in developing countries.  By the time Margaret Thatcher moved into Downing Street, the country had started swapping dirty fingernails and overalls for air-conditioned offices and shirt/tie combinations from Next. The de-industrial revolution was underway; the service economy was born.

Rumour has it that bad things happen in threes.  True enough.  My house was burgled, the coffee machine stopped making coffee and the oven revolted, all in the same week.  On the upside, misfortune presented an opportunity to experience how well the service economy has developed in the intervening decades.

How many companies does it take to service a coffee machine?

After waving goodbye to the nice police lady, I called my insurance broker. The broker helpfully gave me the claim line number at the insurance company.  After 38 minutes of being reminded how important my call was, a claims advisor answered.  She advised me that a loss adjustor would be in touch.

The next day, the loss adjustor called and then popped round.  Having taken my list of what had been stolen, he commissioned a ‘jewellery replacement advisor’ (a separate firm) and an ‘electricals replacement advisor’ (another separate firm) to value what we’d lost.  Weeks have passed.  Advisors are advising but we’re no closer to a settlement with the insurer and my wife’s now been late twice; they stole her watches.

Then the coffee machine went on strike.  Gaggia, the company that made it, went bust and was bought out by Phillips.  I called the Phillips service department. There, a customer service advisor asked me all kinds of questions before transferring me to another company that would arrange the repair.  I was then asked the same questions again until, eventually, I was advised that someone else would call to arrange collection. All I had to do was pay in advance.  I did.  Eventually, someone phoned.  She was from the company whose job it is to arrange collection.

What her company actually does is manage another firm of couriers that will collect the item, then take it somewhere where it will be repaired and then bring it back.  They won’t return it until the lady calls in advance to arrange.

The oven was a different story.  I found the card for a local engineer in my local café. He fixes ovens and other domestic white goods. He lives a mile from me.  Today, he drove over with his toolbox and some spare parts in his van.  He repaired the oven and I paid him. Then he went to fix someone’s faulty tumble dryer in a nearby road.  His charge was modest, but then he’s only supporting himself and his family, not a chain of other businesses with their hands out looking for their cut.

How many businesses does it take to settle an insurance claim or repair a coffee machine?  The cost and the trouble can be debilitating and hugely expensive.  Service has allowed itself to become too complicated, too complex.  It’s no wonder we’re tempted to throw away and buy new.

Despite the growth of the service economy, we’ve all but lost sight of local tradesmen.  The outsourcing chains that have sprung up have grown much too long to be efficient. There are too many businesses and too many people in the way.  Very few are adding any read value, yet each person in the chain needs to get paid and each business has a cost base to offset and a profit to turn.

This means that my insurance premium, and most likely yours, is employing more people than we ever thought possible.  Like the society it supports, the UK service industry has an obesity crisis on its hands.  It’s no wonder that large parts of the service chain have begun to make their way to lower cost economies overseas.  Maybe it’s time for the UK economy to think about what it might do next?

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  • Patrick Murphy

    Maybe we’ll go back to making stuff, like we used to (except better).

    Banking seems to be a bit of a disaster and we’re not particularly good at sport. I did read that British artists were propping up album sales in the US so maybe we could try busking instead? My boy is already learning to play guitar. All he needs now is a hat.

    On a more serious note, what you’re describing above sounds like outsourcing gone wrong. Functions might be outsourced but the responsibility and ownership of the customer relationship should always stay in-house. One notable trend during the downturn has been “in-sourcing”, with many businesses bringing functions back in-house. So maybe we will remember what we were once good at, except this time, do it better.