But any rapid structural shift raises the question: are we going too fast?I think the answer is no, but it is right to be concerned. The final graph shows the level of capacity utilisation over the last 30 years. We are now down at the bottom of the cycle but we are not nearly as low as in previous cycles So there is less spare capacity now than you might expect. Might that mean that as demand picks up, as it eventually will, that we will be short of it?That depends on whether capacity is appropriate. There is no point in being able to build things that people don’t want to buy and most things can be imported. Objectively, the bottlenecks in UK capacity are in areas like medical services, transport and housing, not conventional manufactured products.This leads to the even bigger question underlying the whole debate: how big a manufacturing sector does a modern economy need?You certainly don’t need a large manufacturing sector for jobs: we can see that very clearly Nor do you need one for growth Indeed rather the reverse.

The two slowest-growing of the large economies, Japan and Germany, have relatively large manufacturing sectors Nor do you need one for stability. Much better not to be too dependent on the swings of international trade to maintain overall demand.But there is one nagging worry. Do we need one for the balance of payments? The UK is unusual in having exceptionally strong invisible earnings. Roughly half our foreign currency earnings come from things other than manufactured exports: financial services, earnings from foreign investments, etc. But when these are all added together and the bill that the Government foots for EU membership, sending British troops abroad and other payments, the overall account still seems to be in deficit equivalent to 2 per cent of GDP. (Seems to be because there is a black hole in the international payments accounts: all the deficits added together are larger than all the surpluses.)Some deficit on current account is both acceptable and inevitable. It is acceptable because it seems reasonably easy to finance.

And it is inevitable because a balance of payments has to balance. If a country attracts net inward investment – as the UK does – then it will inevitably have a surplus on its capital account. That is a mathematical certainty.The issue is whether the current account deficit is too large and might become a source of instability were, for example, the inflow of investment funds to weaken. The position does not feel fragile at the moment – the pound is adequately strong, the inflow of funds seems directed towards real investment – but it requires watching.The other issue that might become a concern is whether the build-up of public spending is too rapid and may become a source of instability.