Cambridge Syllabus Notes

1.2 Business Structure – Economic Sectors (9609)

Learning objective

Distinguish between the public and private sectors and identify the types of businesses that operate in each of the five economic sectors.

1.2.1 The five economic sectors

Economic activity is grouped into five sectors. Each sector contains businesses that produce similar outputs and require similar skills.

Sector	Typical outputs / activities	Key characteristics	Approx. % of UK workforce* (2023)	Approx. % of UK GDP* (2023)
Primary	Agriculture, forestry, fishing, mining, oil & gas extraction	Resource‑based, labour‑intensive, heavily affected by natural conditions	3 %	2 %
Secondary	Manufacturing, construction, utilities (electricity, water, waste)	Transforms raw materials into finished goods, capital‑intensive, medium‑skill mix	15 %	19 %
Tertiary	Retail, transport, finance, health, education, hospitality, tourism	Service‑oriented, high employment, wide skill range, customer‑driven	68 %	69 %
Quaternary	IT, research & development, consultancy, media, higher education	Knowledge‑intensive, high qualification levels, innovation focus	12 %	8 %
Quinary (extra material)	High‑level decision‑making, policy development, senior management, non‑profit leadership	Strategic, often non‑profit or top‑executive roles; not examined at AS level	—	—

*Figures are rounded UK averages for 2023; they illustrate typical sector size and are useful for exam comparisons.

1.2.2 Public sector vs. private sector

The main differences lie in ownership, purpose, funding, and the regulatory environment.

Aspect	Public sector	Private sector
Ownership	Owned/operated by central, regional or local government bodies.	Owned by individuals, families, shareholders or private groups.
Primary objective	Deliver public services, promote social welfare, achieve policy goals.	Generate profit for owners/shareholders.
Funding	Taxation, government grants, borrowing, occasional user fees.	Sales revenue, private investment, bank loans, equity finance.
Regulation & accountability	Subject to extensive public‑sector legislation, audits, parliamentary scrutiny.	Regulated for health, safety, competition and consumer protection; greater operational flexibility.
Typical examples	NHS, police forces, state schools, municipal water utilities.	Apple Inc., Tesco, family‑run bakery, private law firm.

Mixed‑ownership and Public‑Private Partnerships (PPP)

Mixed‑ownership: State and private investors hold shares in the same organisation (e.g., a railway franchise jointly owned by the government and a private consortium).
Public‑Private Partnership (PPP): A contractual arrangement where the private sector designs, builds, finances and/or operates a public service or infrastructure, sharing risk and capital with the public sector.
Exam‑style evaluation points:
- Advantages – access to private finance, specialised expertise, faster project delivery, risk sharing.
- Disadvantages – possible loss of public control, profit motive may conflict with public interest, higher long‑term costs if contracts are poorly managed.

1.2.3 Types of businesses found in each sector

Both public and private organisations can operate in every economic sector. The table below summarises typical examples.

Sector	Public examples	Private examples
Primary	State‑run farms, government‑controlled fisheries, national parks management.	Family‑owned farms, privately held mining companies, independent fishing enterprises.
Secondary	Government‑owned steel plants, public‑housing construction agencies, municipal water treatment works.	Automobile manufacturers, private construction firms, electronics assemblers.
Tertiary	Public transport operators, NHS hospitals, state‑run banks (e.g., Bank of England’s lender‑of‑last‑resort role).	Retail chains, private hospitals, insurance companies, travel agencies.
Quaternary	Government research laboratories, public universities, national statistical offices.	Software development firms, private consultancy agencies, commercial R&D institutes.
Quinary (extra material)	Central government ministries, senior civil service, public policy think‑tanks.	CEOs of multinational corporations, private non‑profit foundations, executive boards of large firms.

1.2.4 Sector‑shift: why the relative importance of sectors changes

Over recent decades many economies have moved from primary‑ and secondary‑dominant structures to service‑led economies. The main drivers and consequences are summarised below (≈150 words).

Drivers

Technological change – Automation reduces labour in manufacturing; digital platforms create new quaternary services.
Globalisation – Off‑shoring of low‑skill manufacturing; export of high‑value services.
Demographic shifts – Ageing populations increase demand for health and social care (tertiary).
Government policy – Subsidies for renewable energy, investment in research, or privatisation of utilities.

Consequences

Change in skill‑mix: higher demand for knowledge‑workers, lower demand for low‑skill manual labour.
Profit‑margin variation: service firms often have lower fixed costs but face intense competition; high‑tech quaternary firms can achieve higher margins.
Strategic implications: firms may need to up‑skill staff, invest in R&D, or diversify into emerging service markets.
Employment patterns: shift from manufacturing jobs to retail, health, and IT roles.

Suggested diagram

A line chart showing the percentage contribution of each sector to UK GDP from 1990 to 2020 (primary & secondary declining, tertiary and quaternary rising). Data can be taken from the ONS “UK sectoral composition” tables.

1.2.5 Key points to remember

The public sector exists to deliver services essential for the public good, irrespective of profitability.
The private sector seeks profit and is driven by market demand, competition and shareholder expectations.
Both sectors can be found in any of the five economic sectors; ownership and objectives are the distinguishing factors.
Mixed‑ownership arrangements (PPP) blend public oversight with private finance – a common exam topic.
Understanding sector‑shift drivers helps explain why businesses change strategy, invest in new technology, or retrain staff.

Diagram idea: “Five‑sector model” – vertical axis lists Primary, Secondary, Tertiary, Quaternary (and Quinary as extra). For each sector split the box into a left‑hand “Public” side and a right‑hand “Private” side, populating each with the example bullet points above.

the public and private sectors and businesses within those sectors