Study on Industrial Policy and Services (Part 1)
This Final Report has been produced as part of the “Study on Industrial Policy and Services” commissioned by the European Commission Directorate General for Enterprise and Industry, within the context of the framework contract on Sector Competitiveness

Studies (ENTR/06/054).
The Final Report is published in two parts. The first part, which is covered in this document, provides the main background analysis of industry-service interactions and cross-cutting policy themes and issues, together with the Executive Summary. The second part, covered in a separate document, provides a review of six selected service sectors that are heavily used by industry, together with a synthesis of the main findings from the sectoral analysis.

Executive summary:
One of the main structural changes in recent decades has been the shift in employment towards services in highly developed economies. This should not, however, be equated with de-industrialisation. It reflects the deepening international division of labour and a disaggregation of previously integrated vertical value chains. As a result, the cost, quality and productivity of certain service sectors, have an impact on the competitiveness of industry. In addition, the competitive advantage of manufacturing firms is increasingly derived from the value contributed by service processes associated with their core
activity, with competition shifting away from how companies build their products towards how well they serve customers before and after they produce and sell products.
As a consequence, industry and services are inextricably linked. However, from an economic, statistical, and policy perspective, industry and services have largely been treated as independent of each other.
In the 2007 Mid-term review of industrial policy, the Commission introduced an initiative on “industry and services” to conduct a detailed screening and competitiveness analysis of the service sectors and their impact on industrial competitiveness and, if necessary, further sectoral monitoring. The outcome would be the identification of all obstacles to improved competitiveness, and possible market failures, which might justify actions to address specific problems in individual industrial and/or service sectors.