Economy of the United Kingdom

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Economy of the United Kingdom
Canary Wharf at night, from Shadwell cropped.jpg
Canary Wharf business district in London
Rank 6th (nominal) / 8th (PPP) (2nd in Europe)
Currency Pound sterling (GBP)
1 April - 31 March
Trade organisations
European Union, OECD and World Trade Organization
Statistics
GDP $2.497 trillion (PPP, 2014)
$2.828 trillion (Nominal, 2014)[1]
GDP growth
Increase Q2 2014: 0.8% (3.2% Qtr on same Qtr Yr ago) 2013: 1.7%[2]
GDP per capita
$39,941 (22nd, PPP, 2014)
$43,830 (23rd, Nominal, 2014)
GDP by sector
Agriculture: 0.7%
Construction: 6.3%
Production: 15.2%
Services: 77.8% (2013 est.)
CPI: Decrease 1.6% (July 2014)[3]
RPI: Decrease 2.5% (July 2014)
0.5%
Population below poverty line
5.6% with household income below 10% of UK median income (2010-11 est.)[4]
Steady 0.34 (2010-11)[4]
Labour force
30.643 million (May 2014)[5]
Labour force by occupation
Agriculture: 1.5%
Industry: 18.8%
Services: 79.7% (2011 est.)[6]
Unemployment 6.4%, 2.08 million (June 2014),[7]
Average gross salary
£2,308 / €2,756 / $3,729 monthly (2011) (9th highest)
£1,730 / €2,064 / $2,793 monthly (2011) (6th highest in the world)
Main industries
Decrease10th[8]
External
Exports Increase$813.2 billion (4th; 2013 est.)
Export goods
Main export partners
 Germany 11.3%,
 United States 10.5%,
 Netherlands 8.8%,
 France 7.4%,
 Republic of Ireland 6.2%,
 Belgium 5.1% (2012) [9]
Imports Increase$782.5 billion (4th; 2013 est.)
Import goods
Main import partners
 Germany 12.6%,
 China 8%,
 Netherlands 7.5%,
 United States 6.7%,
 France 5.4%,
 Belgium 4.4% (2012)[10]
FDI stock
Inward: Increase$1.321 trillion (2012)(3rd)[11]
Outward: Increase$1.884 trillion (2013)(2nd)[12]
Decrease-£59.2 billion (2012)[13]
negative increase$9.836 trillion (30 June 2011) (2nd)
Decrease-£182 billion / 9.1% GDP (2012)
Public finances
negative increase£1,270.8 billion (April 2014) (75.6% GDP)[13]
positive decrease+£107.4 billion (2013–2014 FY)[14]
Revenues £648 billion (2014–2015 FY)
$1.06 trillion (2014 est. CIA-WFB)
Expenses £732 billion (2014–2015 FY)
$1.21 trillion (2014 est. CIA-WFB)
Economic aid $10 billion (2012) (donor)
Standard & Poor's:[15]
AAA (Domestic)
AAA (Foreign)
AAA (T&C Assessment)
Outlook: Stable[16]
Moody's:[17]
Aa1
Outlook: Stable
Fitch:
AA+[18]
Outlook: STABLE
Foreign reserves
Increase$95.54 billion (31 December 2012, CIA-WFB)

The United Kingdom has the 6th-largest national economy in the world (and 3rd-largest in Europe) measured by nominal GDP and 8th-largest in the world (and 2nd-largest in Europe) measured by purchasing power parity (PPP). The UK economy comprises (in descending order of size) the economies of England, Scotland, Wales and Northern Ireland. In 2013 the UK was the 4th-largest exporter in the world and the 4th-largest importer, and had the 2nd-largest stock of inward foreign direct investment and the 2nd-largest stock of outward foreign direct investment.[19][20] The UK is one of the world's most globalised economies.[21]

The service sector dominates the UK economy, contributing around 78% of GDP; the financial services industry is particularly important and London is the world's largest financial centre.[22][23][24] The UK aerospace industry is the second- or third-largest national aerospace industry depending on the method of measurement.[25][26] The pharmaceutical industry plays an important role in the economy and the UK has the third-highest share of global pharmaceutical R&D.[27][28] The automotive industry is also a major employer and exporter. The British economy is boosted by North Sea oil and gas production; its reserves were valued at an estimated £250 billion in 2007.[29] There are significant regional variations in prosperity, with the South East of England and southern Scotland the richest areas per capita. London has the largest city GDP in Europe.[30]

In the 18th century the UK was the first country to industrialise[31][32][33] and during the 19th century had a dominant role in the global economy.[34] From the late 19th century the Second Industrial Revolution in the United States and Germany presented an increasing economic challenge, and the costs of fighting World War I and World War II further weakened the UK's relative position. However it still maintains a significant role in the world economy, particularly in financial services[35][36][37] and the knowledge economy.[38][39][40] The UK economy has recovered from the Great recession and is now in expansion territory after the economy returned to pre crisis levels in Q2 2014. The UK experienced a deeper downturn than all of the G7 except Japan. In 2013, the UK experienced its fastest growth since 2007 and is currently the fastest growing major developed economy.[41] It has been forecast that the UK will become the world's 5th-largest economy by 2016. GDP is now 0.2% above its pre-recession peak as of Q2 2014. Current economic growth for 2014 is forecast to be 3.2% [42][43]

Government involvement in the British economy is primarily exercised by HM Treasury, headed by the Chancellor of the Exchequer, and the Department for Business, Innovation and Skills. Since 1979 management of the UK economy has followed a broadly laissez-faire approach.[44][45][46][47][48][49] The Bank of England is the UK's central bank and its Monetary Policy Committee is responsible for setting interest rates. The currency of the UK is the pound sterling, which is also the world's third-largest reserve currency after the US dollar and the euro.[50] The UK is a member of the Commonwealth of Nations, the European Union, the G7, the G8, the G20, the International Monetary Fund, the Organisation for Economic Co-operation and Development, the World Bank, the World Trade Organisation and the United Nations.

History[edit]

1945 to 1979[edit]

Following the end of the Second World War, the United Kingdom enjoyed a long period without a major recession (from 1945 to 1973) and a rapid growth in prosperity in the 1950s and 1960s, with unemployment staying low and not exceeding 500,000 until the second half of the 1960s. According to the OECD, the annual rate of growth (percentage change) between 1960 and 1973 averaged 2.9%, although this figure was far behind the rates of other European countries such as France, West Germany and Italy.[51]

However, following the 1973 oil crisis and the 1973–1974 stock market crash, the British economy fell into recession and the government of Edward Heath was ousted by the Labour Party under Harold Wilson, which had previously ruled from 1964 to 1970. Wilson formed a minority government on 4 March 1974 after the general election on 28 February ended in a hung parliament. Wilson subsequently secured a three seat majority in a second election in October that year.

The UK recorded weaker growth than many other European nations in the 1970s; even after the early 1970s recession ended, the economy was still blighted by rising unemployment and double-digit inflation, which exceeded 20% more than once after 1973 and was rarely below 10% after this date.

In 1976, the UK was forced to request a loan of £2.3 billion from the International Monetary Fund. The then Chancellor of the Exchequer Denis Healey was required to implement public spending cuts and other economic reforms in order to secure the loan, and for a while the British economy improved. However, following the Winter of Discontent, when Britain was hit by numerous public sector strikes, the government of James Callaghan lost a vote of no confidence in March 1979. This triggered the May 1979 general election which resulted in Margaret Thatcher's Conservative Party forming a new government.

1979 to 1997[edit]

A new period of neo-liberal economics began in 1979 with the election of Margaret Thatcher who won the general election on 3 May that year to return the Conservative Party to government after five years of Labour government.

During the 1980s most state-owned enterprises were privatised, taxes cut, union reforms passed and markets deregulated. GDP fell 5.9%[52] initially but growth subsequently returned and rose to 5% at its peak in 1988, one of the highest rates of any European nation.[53][54]

However, Thatcher's modernisation of the British economy was far from trouble free; her battle against inflation resulted in a substantial increase in unemployment from 1.5 million in 1979 to over 3 million by the start of 1982, peaking at nearly 3.3 million in 1984. In spite of this, Thatcher was re-elected in June 1983 with a landslide majority, as the Labour Party suffered its worst general election result in decades and the recently formed SDP-Liberal Alliance almost matched Labour in terms of votes, if not seats.

The increase in unemployment was substantially due to government economic policy which resulted in the closure of outdated factories and coalpits which were no longer economically viable; this process continued for most of the 1980s, with newer industries and the service sector enjoying significant growth. Unemployment had fallen below 3 million by the time of Thatcher's third successive election victory in June 1987 and by the end of 1989 it was down to 1.6 million.[55] However, the British economy slid into another recession in late 1990, concurrently with a global recession, and this caused the economy to shrink by a total of 8% from peak to trough and unemployment to increase from around 1.6million in the spring of 1990 to nearly 3 million by the end of 1992. The subsequent economic recovery was extremely strong, and unlike after the early 1980s recession, the recovery saw a rapid and substantial fall in unemployment, which was down to 1.7 million by 1997, although the popularity of the Conservative government failed to improve with the economic upturn.

1997 to 2008[edit]

Unemployment rate, 2002–2012

The Labour Party, led by Tony Blair since the death of his predecessor John Smith three years earlier, returned to power in May 1997 after 18 years in opposition.[56] During Blair's 10 years in office there were 40 successive quarters of economic growth, lasting until the second quarter of 2008, helped by Blair's decision to keep taxes relatively low and abandon traditional Labour policies including public ownership of industries and utilities. The previous 15 years had seen one of the highest economic growth rates of major developed economies during that time and certainly the strongest of any European nation.[57] GDP growth had briefly reached 4% per year in the early 1990s, gently declining thereafter. Peak growth was relatively anaemic compared to prior decades, such as the 6.5% pa peak in the early 1970s, although growth was smoother and more consistent.[54] Annual growth rates averaged 2.68% between 1992 and 2007 according to the IMF,[53] with the finance sector accounting for a greater part than previously.

This extended period of growth ended in 2008 when the United Kingdom suddenly entered a recession – its first for nearly two decades – brought about by the global financial crisis. Beginning with the collapse of Northern Rock, which was taken into public ownership in February 2008, other banks had to be partly nationalised. The Royal Bank of Scotland Group, which at its peak was the fifth-largest in the world by market capitalisation, was effectively nationalised on 13 October 2008. By mid-2009, HM Treasury had a 70.33% controlling shareholding in RBS, and a 43% shareholding, through UK Financial Investments Limited, in Lloyds Banking Group. The recession saw unemployment rise from just over 1.6 million in January 2008[58] to nearly 2.5 million by October 2009.[59]

The UK economy had been one of the strongest economies in terms of inflation, interest rates and unemployment, all of which remained relatively low until the 2008–09 recession. Unemployment has since reached a peak of just under 2.5 million (7.8%), the highest level since the early 1990s, although still far lower than some other European nations. However, interest rates have reduced to 0.5% pa. During August 2008 the IMF warned that the UK economic outlook had worsened due to a twin shock: financial turmoil and rising commodity prices.[60] Both developments harm the UK more than most developed countries, as the UK obtains revenue from exporting financial services while recording deficits in finished goods and commodities, including food. In 2007, the UK had the world's third largest current account deficit, due mainly to a large deficit in manufactured goods. During May 2008, the IMF advised the UK government to broaden the scope of fiscal policy to promote external balance.[61] Although the UK's "labour productivity per person employed" has been progressing well over the last two decades and has overtaken productivity in Germany, it still lags around 20% behind France, where workers have a 35-hour working week.[62] The UK's "labour productivity per hour worked" is currently on a par with the average for the "old" EU (15 countries).[63] In 2010, the United Kingdom ranked 26th on the Human Development Index.

2008 to present[edit]

The labour productivity level of United Kingdom is one of the lowest in Western Europe. OECD, 2012
Inflation-adjusted Gross Domestic Product for the United Kingdom and United States, 2007–2012 (pre-2007 peak=100)
Business investment (blue) and profits (red), both as proportion of gross domestic product, 1997–2012. (Compare to US data) In general, the level of economic output is set by business expenditure.[64]

The UK entered a recession in Q2 of 2008 and exited it in Q4 of 2009, according to figures produced by the Office for National Statistics. The subsequently revised ONS figures show that the UK suffered six consecutive quarters of negative growth, making it the longest recession since records began.[65][66] As of the end of Q4 2009, revised statistics from the Office for National Statistics demonstrate that the UK economy shrank by 7.2% from peak to trough.

Support for the Labour government (led by Gordon Brown after Tony Blair's resignation in June 2007) slumped during the financial crisis of 2008 and 2009, and the general election of May 2010 ended in a hung parliament. The Conservatives, led by David Cameron since the end of 2005, had the largest number of seats, but came 20 seats short of an overall majority. This resulted in a coalition being formed with the Liberal Democrats in order for the Conservatives to take government within four days of the election results being announced. In order to ease the large deficit created under the previous Labour government, the Conservative-led government has made deep spending cuts since taking office. Within three years, this had led to public sector job losses well into six figures, but the private sector has enjoyed strong job growth and by October 2013 unemployment had fallen back below 2.5 million for the first time in four years.

The Office for National Statistics estimates that UK growth in Q2 of 2014 was 0.8%, and that the volume of GDP is 0.2% above its pre-recession peak;[43] but the UK economy's recovery has been more lacklustre than previously thought.[67] Furthermore, The Blue Book 2013 demonstrates that the UK experienced a deeper initial downturn than all of the G7 economies save for Japan, and has experienced a slower recovery than all but Italy.

In Q1 of 2012, the UK economy was thought to have entered a double-dip recession by posting two consecutive negative quarters of growth.[68] However, revised figures by the Office for National Statistics [69] show that in fact the UK economy stagnated in Q1 with growth at 0.0%, thereby not fulfilling the technical requirement of two consecutive quarters of negative growth for a recession.

A report released by the Office for National Statistics on 14 May 2013 revealed that over the six-year period between 2005 and 2011, the UK dropped from 5th place to 12th place in terms of household income on an international scale—the drop was partially attributed to the devaluation of sterling over this time frame. However, the report also concluded that, during this period, inflation was relatively less volatile, the UK labour market was more resilient in comparison to other recessions, and household spending and wealth in the UK remained relatively strong in comparison with other OECD countries.[70] According to a report by Moody's Corporation, Britain's debt-to-GDP ratio continues to increase in 2013 and is expected to reach 93% at the end of the year. The UK has lost its triple-A credit rating on the basis of poor economic outlook. 2013 Economic Growth has surprised many Economists, Ministers and the OBR as the 2013 budget projected annual growth of just 0.6%. In 2013 Q1 the economy grew by 0.5%, in Q2 the economy grew by 0.7%, in Q3 the economy grew by 0.8% and in Q4 the economy grew by 0.7%. 2014 continues this trend, with both Q1 and Q2 growing by 0.8% respectively.[43][71] It is also predicted that the economy will continue to grow in 2014, by as much as 2.8% (up from previous estimates of 2.7%) and surpass the 2008 pre-recession peak by Q3 of 2014.[1] The United Kingdom is the 6th-largest national economy in the world (and 3rd-largest in Europe) measured by nominal GDP.

Government spending and economic management[edit]

Government involvement throughout the economy is primarily exercised by HM Treasury, headed by the Chancellor of the Exchequer. In recent years, the UK economy has been managed in accordance with principles of market liberalisation and low taxation and regulation. Since 1997, the Bank of England's Monetary Policy Committee, headed by the Governor of the Bank of England, has been responsible for setting interest rates at the level necessary to achieve the overall inflation target for the economy that is set by the Chancellor each year.[72] The Scottish Government, subject to the approval of the Scottish Parliament, has the power to vary the basic rate of income tax payable in Scotland by plus or minus 3 pence in the pound, though this power has not yet been exercised.

In the 20-year period from 1986/87 to 2006/07 government spending in the UK averaged around 40% of GDP.[73] As a result of the 2007–2010 financial crisis and the late-2000s global recession government spending increased to a historically high level of 48% of GDP in 2009–10, partly as a result of the cost of a series of bank bailouts.[73][74]

In terms of net government debt as % of GDP, at the end of June 2014 public sector net debt excluding financial sector interventions was £1304.6 billion, equivalent to 77.3% of GDP.[75] In July 2007, the UK had government debt at 35.5% of GDP.[74]

For the financial year of 2013–2014 public sector net borrowing was £93.7 billion.[75] This was £13.0 billion higher than in the financial year of 2012–2013.

Taxation[edit]

The headquarters of HM Revenue & Customs in London

Taxation in the United Kingdom may involve payments to at least two different levels of government: local government and central government (HM Revenue & Customs). Local government is financed by grants from central government funds, business rates, council tax and increasingly from fees and charges such as those from on-street parking. Central government revenues are mainly income tax, national insurance contributions, value added tax, corporation tax and fuel duty.

These data show the tax burden (personal and corporate) and national debt as a percentage of GDP. Samples are taken at 10 year intervals (snapshots, but the rolling averages are very close).

Year Tax Debt
1975/6 54% 43%
1985/6 44% 43%
1995/6 43% 38%
2005/6* 46% 40%
2009/10 57% 68%
(Source: HM Treasury Public Finances Databank)
(* — Projected)

Sectors[edit]

Agriculture[edit]

A combine harvester in use
A combine harvester in use in Scotland

Agriculture in the UK is intensive, highly mechanised, and efficient by European standards, producing about 60% of food needs,[76] with less than 1.6% of the labour force (535,000 workers).[76] It contributes around 0.6% of British national value added.[76] Around two-thirds of the production is devoted to livestock, one-third to arable crops.[76] Agriculture is subsidised by the European Union's Common Agricultural Policy.

The UK retains a significant, though reduced, fishing industry. Its fleets, based in towns such as Kingston upon Hull, Grimsby, Fleetwood, Newlyn, Great Yarmouth, Peterhead, Fraserburgh, and Lowestoft, bring home fish ranging from sole to herring.

The Blue Book 2013 reports that "Agriculture" added gross value of £9,438 million to the UK economy in 2011.[77]

The UK is also rich in a number of natural resources including coal, petroleum, natural gas, tin, limestone, iron ore, salt, clay, chalk, gypsum, lead, silica and an abundance of arable land.

Construction[edit]

The construction industry of the United Kingdom contributed gross value of £86,789 million to the UK economy in 2011.[77] The industry employed around 2.2 million people in the fourth quarter of 2009.[78] There were around 194,000 construction firms in Great Britain in 2009, of which around 75,400 employed just one person and 62 employed over 1,200 people.[78] In 2009 the construction industry in Great Britain received total orders of around £18.7 billion from the private sector and £15.1 billion from the public sector.[78]

The largest construction project in the UK is Crossrail. Due to open in 2018, it will be a new railway line running east to west through London and into the surrounding countryside with a branch to Heathrow Airport.[79] The main feature of the project is construction of 42 km (26 mi) of new tunnels connecting stations in central London. It is also Europe's biggest construction project with a £15 billion projected cost.[80][81]

Prospective construction projects include the High Speed 2 line between London and the West Midlands and Crossrail 2.

Production industries[edit]

Electricity, gas and water supply[edit]

The Blue Book 2013 reports that this sector added gross value of £33,289 million to the UK economy in 2011.[77] The United Kingdom is expected to launch the building of new nuclear reactors to replace existing generators and to boost UK's energy reserves.[82]

Manufacturing[edit]

A Rolls-Royce Trent 900 aircraft jet engine, seen here on an Airbus A380

In 2011 the UK manufacturing sector generated approximately £140,539 million in gross value added and employed around 2.6 million people.[77][83] Of the approximately £16 billion invested in R&D by UK businesses in 2008, approximately £12 billion was by manufacturing businesses.[83] In 2008, the UK was the sixth-largest manufacturer in the world measured by value of output.[84]

In 2008 around 180,000 people in the UK were directly employed in the UK automotive manufacturing sector.[85] In that year the sector had a turnover of £52.5 billion, generated £26.6 billion of exports and produced around 1.45 million passenger vehicles and 203,000 commercial vehicles.[85] The UK is a major centre for engine manufacturing, and in 2008 around 3.16 million engines were produced in the country.[85]

The aerospace industry of the UK is the second- or third-largest aerospace industry in the world, depending upon the method of measurement.[25][26] The industry employs around 113,000 people directly and around 276,000 indirectly and has an annual turnover of around £20 billion.[86][87] British companies with a major presence in the industry include BAE Systems (the world's second-largest defence contractor)[88] and Rolls-Royce (the world's second-largest aircraft engine maker).[89] Foreign aerospace companies active in the UK include EADS and its Airbus subsidiary, which employs over 13,000 people in the UK.[90]

The pharmaceutical industry employs around 67,000 people in the UK and in 2007 contributed £8.4 billion to the UK's GDP and invested a total of £3.9 billion in research and development.[91] In 2007 exports of pharmaceutical products from the UK totalled £14.6 billion, creating a trade surplus in pharmaceutical products of £4.3 billion.[92] The UK is home to GlaxoSmithKline and AstraZeneca, respectively the world's third- and seventh-largest pharmaceutical companies.[93][94]

Mining and quarrying[edit]

A drilling rig in the North Sea

The Blue Book 2013 reports that this sector added gross value of £31,380 million to the UK economy in 2011.[77] In 2007 the UK had a total energy output of 9.5 quadrillion Btus, of which the composition was oil (38%), natural gas (36%), coal (13%), nuclear (11%) and other renewables (2%).[95] In 2009, the UK produced 1.5 million barrels per day (bbl/d) of oil and consumed 1.7 million bbl/d.[96] Production is now in decline and the UK has been a net importer of oil since 2005.[96] As of 2010 the UK has around 3.1 billion barrels of proven crude oil reserves, the largest of any EU member state.[96]

In 2009 the UK was the 13th largest producer of natural gas in the world and the largest producer in the EU.[97] Production is now in decline and the UK has been a net importer of natural gas since 2004.[97] In 2009 the UK produced 19.7 million tons of coal and consumed 60.2 million tons.[95] In 2005 it had proven recoverable coal reserves of 171 million tons.[95] It has been estimated that identified onshore areas have the potential to produce between 7 billion tonnes and 16 billion tonnes of coal through underground coal gasification (UCG).[98] Based on current UK coal consumption, these volumes represent reserves that could last the UK between 200 and 400 years.[99]

The UK is home to a number of large energy companies, including two of the six oil and gas "supermajors" – BP and Royal Dutch Shell – and BG Group.[100][101]

Service industries[edit]

The service sector is the dominant sector of the UK economy, and contributes around 77.8% of GDP as of Q1 2014.[102]

Creative industries[edit]

The creative industries accounted for 7% GVA in 2005 and grew at an average of 6% per annum between 1997 and 2005.[103] Key areas include London and the North West of England which are the two largest creative industry clusters in Europe.[104] According to the British Fashion Council, the fashion industry’s contribution to the UK economy in 2014 is ₤26 billion, up from ₤21 billion pounds in 2009.[105]

Education, health and social work[edit]

The Queen Elizabeth Hospital Birmingham, a major NHS hospital

According to The Blue Book 2013 the education sector added gross value of £84,556 million in 2011 whilst Human health and social work activities added £104,026 million in 2011.[77]

In the UK the majority of the healthcare sector consists of the state funded and operated National Health Service (NHS), which accounts for over 80% of all healthcare spending in the UK and has a workforce of around 1.7 million, making it the largest employer in Europe, and putting it amongst the largest employers in the world.[106][107][108] The NHS operates independently in each of the four constituent countries of the UK. The NHS in England is by far the largest of the four parts and had a turnover of £92.5 billion in 2008.[109]

In 2007/08 higher education institutions in the UK had a total income of £23 billion and employed a total of 169,995 staff.[110] In 2007/08 there were 2,306,000 higher education students in the UK (1,922,180 in England, 210,180 in Scotland, 125,540 in Wales and 48,200 in Northern Ireland).[110]

Financial and business services[edit]

The City of London is the world's largest financial centre alongside New York[22][23][24]

The UK financial services industry added gross value of £116,363 million to the UK economy in 2011.[77] The UK's exports of financial and business services make a significant positive contribution towards the country's balance of payments.

London is a major centre for international business and commerce and is one of the three "command centres" of the global economy (alongside New York City and Tokyo).[22][24][111][112] There are over 500 banks with offices in London, and it is the leading international centre for banking, insurance, Eurobonds, foreign exchange trading and energy futures. London's financial services industry is primarily based in the City of London and Canary Wharf. The City houses the London Stock Exchange, the London International Financial Futures and Options Exchange, the London Metal Exchange, Lloyds of London, and the Bank of England. Canary Wharf began development in the 1980s and is now home to major financial institutions such as Barclays Bank, Citigroup and HSBC, as well as the UK Financial Services Authority.[113][114] London is also a major centre for other business and professional services, and four of the six largest law firms in the world are headquartered there.[115]

Several other major UK cities have large financial sectors and related services. Edinburgh has one of the largest financial centres in Europe[116] and is home to the headquarters of the Royal Bank of Scotland Group and Standard Life. Leeds is now the UK's largest centre for business and financial services outside London,[117][118][119] and the largest centre for legal services in the UK after London.[120][121][122]

Hotels and restaurants[edit]

The Blue Book 2013 reports that this industry added gross value of £36,554 million to the UK economy in 2011.[77]

Public administration and defence[edit]

The Blue Book 2013 reports that this sector added gross value of £70,400 million to the UK economy in 2011.[77]

Real estate and renting activities[edit]

The Trafford Centre shopping complex in Manchester; it was sold for £1.6 billion in 2011 in the largest property sale in British history[123]

The real estate and renting activities sector includes the letting of dwellings and other related business support activities. The Blue Book 2013 reports that real estate industry added gross value of £143,641 million in 2011.[77] Notable real estate companies in the United Kingdom include British Land and The Peel Group.

The UK property market boomed for the seven years up to 2008 and in some areas property trebled in value over that period. The increase in property prices had a number of causes: low interest rates, credit growth, economic growth, rapid growth in buy to-let property investment, foreign property investment in London and planning restrictions on the supply of new housing.

Tourism[edit]

Tourism is very important to the British economy. With over 27 million tourists arriving in 2004, the United Kingdom is ranked as the sixth major tourist destination in the world.[124] London, by a considerable margin, is the most visited city in the world with 15.6 million visitors in 2006, ahead of 2nd placed Bangkok (10.4 million visitors) and 3rd placed Paris (9.7 million).[125]

Transport, storage and communication[edit]

The transport and storage industry added gross value of £59,179 million to the UK economy in 2011 and the telecommunication industry added a gross value of £25,098 million in the same year.[77]

The UK has a radial road network of 46,904 kilometres (29,145 mi) of main roads, with a motorway network of 3,497 kilometres (2,173 mi). There are a further 213,750 kilometres (132,818 mi) of paved roads. The railway infrastructure company Network Rail owns and operates the majority of the 16,116 km (10,014 mi) railway lines in Great Britain though not the rolling stock; a further 303 route km (189 route mi) in Northern Ireland is owned and operated by Northern Ireland Railways. Urban rail networks are well developed in major cities including Glasgow, Liverpool and London. Plans are now being considered to build new high speed lines linking all major cities by 2025.[128]

The Highways Agency is the executive agency responsible for trunk roads and motorways in England apart from the privately owned and operated M6 Toll.[129] The Department for Transport states that traffic congestion is one of the most serious transport problems and that it could cost England an extra £22 billion in wasted time by 2025 if left unchecked.[130] According to the government-sponsored Eddington report of 2006, congestion is in danger of harming the economy, unless tackled by road pricing and expansion of the transport network.[131][132]

In the year from October 2009 to September 2010 UK airports handled a total of 211.4 million passengers.[133] In that period the three largest airports were London Heathrow Airport (65.6 million passengers), Gatwick Airport (31.5 million passengers) and London Stansted Airport (18.9 million passengers).[133] London Heathrow Airport, located 24 kilometres (15 mi) west of the capital, has the most international passenger traffic of any airport in the world.[126][127] and is the hub for the UK flag carrier British Airways, as well as BMI and Virgin Atlantic.[134] London's six commercial airports form the world's largest city airport system measured by passenger traffic.[135]

Wholesale and retail trade[edit]

A Tesco supermarket at Kingston Park, Newcastle upon Tyne

This sector includes the motor trade, auto repairs, personal and household goods industries. The Blue Book 2013 reports that this sector added gross value of £151,785 million to the UK economy in 2011.[77]

The UK grocery market is dominated by five companies – Asda (owned by Wal-Mart Stores), The Co-operative Food, Morrisons, Sainsbury's and Tesco – which together have a market share of over 80%.[136]

London is a major retail centre and in 2010 had the highest non-food retail sales of any city in the world, with a total spend of around £64.2 billion.[137] The UK-based Tesco is the third-largest retailer in the world measured by revenues (after Wal-Mart Stores and Carrefour) and is the current leader in the UK market with around a 30% share.[138]

Currency[edit]

Main article: Pound sterling
The Bank of England; the central bank of the United Kingdom.

London is the world capital for foreign exchange trading. The highest daily volume, counted in trillions of dollars US, is reached when New York enters the trade. The currency of the UK is the pound sterling, represented by the symbol £. The Bank of England is the central bank, responsible for issuing currency. Banks in Scotland and Northern Ireland retain the right to issue their own notes, subject to retaining enough Bank of England notes in reserve to cover the issue. Pound sterling is also used as a reserve currency by other governments and institutions, and is the third-largest after the US dollar and the euro.[50]

The UK chose not to join the euro at the currency's launch. The government of former Prime Minister Tony Blair had pledged to hold a public referendum for deciding membership should "five economic tests" be met. Until relatively recently there was debate over whether or not the UK should abolish its currency Pound Sterling and join the Euro. In 2007 the British Prime Minister, Gordon Brown, pledged at the time to hold a public referendum based on certain tests he set as Chancellor of the Exchequer. When assessing the tests, Gordon Brown concluded that while the decision was close, the United Kingdom should not yet join the Euro. He ruled out membership for the foreseeable future, saying that the decision not to join had been right for Britain and for Europe.[139] In particular, he cited fluctuations in house prices as a barrier to immediate entry. Public opinion polls have shown that a majority of Britons have been opposed to joining the single currency for some considerable time and this position has now hardened further.[140] In 2005, more than half (55%) of the UK were against adopting the currency, while 30% were in favour.[141] The current[when?] government, a Conservative and Liberal Democrat coalition, is opposed to membership.

Exchange rates[edit]

(average for of each year), in USD (US dollar) and EUR (euro) per GBP; and inversely: GBP per USD and EUR. (Synthetic Euro XEU before 1999). Caution: these averages conceal wide intra-year spreads. The coefficient of variation gives an indication of this. It also shows the extent to which the pound tracks the euro or the dollar. Note the effect of Black Wednesday in late 1992 by comparing the averages for 1992 with the averages for 1993.

Year  £/USD  USD/£  C.Var    £/XEU  XEU/£ C.Var
1990 £0.5633 $1.775 £0.7161 ₠1.397
1991 £0.5675 $1.762 £0.7022 ₠1.424
1992 £0.5699 $1.755 £0.7365 ₠1.358
1993 £0.6663 $1.501 £0.7795 ₠1.283
1994 £0.6536 $1.53 £0.7742 ₠1.292
1995 £0.6338 $1.578 £0.82 ₠1.22
1996 £0.6411 $1.56 £0.8029 ₠1.245
1997 £0.6106 $1.638 £0.6909 ₠1.447
1998 £0.6037 $1.656 £0.6779 ₠1.475
Year  £/USD  USD/£  C.Var    £/EUR  EUR/£ C.Var
1999 £0.6185 $1.617 £0.6595 €1.516
2000 £0.6609 $1.513 £0.6099 €1.64
2001 £0.6943 $1.44 £0.6223 €1.607
2002 £0.6664 $1.501 £0.6289 €1.59
2003 £0.6123 $1.633 £0.6924 €1.444
2004 £0.5461 $1.832 2.26% £0.6787 €1.474 1.92%
2005 £0.55 $1.82 3.47% £0.6842 €1.462 1.27%
2006 £0.5435 $1.842 3.79% £0.6821 €1.466 1.11%
2007 £0.4999 $2.001 1.97% £0.6848 €1.461 2.4%
2008 £0.5499 $1.835 £0.7964 €1.226
2009 £0.641 $1.566 £0.8914 €1.123
2010 £0.6474 $1.546 £0.8586 €1.166
2011 £0.6231 $1.605 £0.8684 €1.151
2012 £0.6310 $1.585 £0.8112 €1.233

1 GBP in USD since 1971

Source: OANDA.COM Historical Currency Converter
For consistency and comparison purposes, coefficient of variation is measured on both the "per pound" ratios, although it is conventional to show the forex rates as dollars per pound and pounds per euro.[citation needed]

Economy by region[edit]

A map of the UK divided by the average GDP per capita in 2007 (in euros) showing the distribution of economic activity
Regional contributions to the UK economy in 2011.

The strength of the UK economy varies from country to country and from region to region. Excluding the effects of North Sea Oil and Gas (officially included in the Extra-regio), England has the highest Gross value added (GVA) with Scotland close behind, though Scotland has a higher figure, estimated as approximately £24 000 per capita in 2009, once a geographical share of oil and gas is assigned.[142][143] Scotland had the best rate of per capita growth over the preceding 12 months, declining by 1.4%, ahead of the best performing region of England which was the North West with a decline of 1.9%.[142] GVA per capita figures for 2009 for the four countries of the United Kingdom (excluding oil and gas) are:[142]

Rank Place GVA per capita
in pounds (dollars in parenthesis)
1 England 20,442 ($31,545)
2 Scotland 19,744 ($30,468)
3 Northern Ireland 15,795 ($24,374)
4 Wales 14,842 ($22,903)

Within England, GVA per capita is highest in London. The following table shows the GVA (2009) per capita of the 9 statistical regions of England (NUTS).[142]

Rank Place GVA per capita
in pounds
1 Greater London 34,200 ($52,776)
2 South East England 20,923 ($32,287)
3 East of England 18,591 ($28,689)
4 South West England 18,211 ($28,102)
5 East Midlands 17,349 ($26,772)
6 North West England 17,263 ($26,639)
7 West Midlands 16,788 ($25,906)
8 Yorkshire and the Humber, England 16,569 ($25,568)
9 North East England 15,621 ($24,106)

Two of the richest 10 areas in the European Union are in the United Kingdom. Inner London is number 1 with a GDP per capita of €65 138, and Berkshire, Buckinghamshire and Oxfordshire is number 7 with a GDP per capita of €37 379.[144] Edinburgh is also one of the largest financial centres in Europe.[145]

At the other end of the scale, Cornwall has the lowest GVA per head of any county or unitary authority in England,[146] and it has received EU Convergence funding (formerly Objective One funding) since 2000.[147]

Data[edit]

Gross Domestic Product[edit]

GDP per capita for the four largest economies of Western Europe.[148]

The money Gross Domestic Product (GDP) for the United Kingdom, at market prices, in 2009 was £1,396 billion (or $2,003 billion) according to the Office for National Statistics in February 2010.[149]

Below is a table of the trend of gross domestic product of United Kingdom at market prices estimated by the International Monetary Fund, with figures in millions of pounds sterling. Percentages in the table can be misleading as they are not corrected for the exchange rate.

Year Gross domestic product US dollar exchange[150] Inflation index
(2000=100)
Per Capita Income
(as % of USA)
1925 4,466 £0.21 3 61.79
1930 4,572 £0.21 3 66.08
1935 4,676 £0.20 2 85.67
1940 7,117 £0.26 3 74.28
1945 9,816 £0.25 4 50.93
1950 13,162 £0.36 5 38.26
1955 19,264 £0.36 6 42.54
1960 25,678 £0.36 7 47.86
1965 35,781 £0.36 9 49.96
1970 51,515 £0.42 11 44.04
1975 105,773 £0.45 20 55.54
1980 230,695 £0.42 43 78.57
1985 354,952 £0.77 60 46.84
1990 557,300 £0.56 76 76.62
1995 718,383 £0.63 92 71.84
2000 953,576 £0.65 100 72.29
2005 1,209,334 £0.54 107 90.19

For purchasing power parity comparisons, the US Dollar is exchanged at £0.66

Consumer prices index (2006 to present)[edit]

Below is a table of the trend of CPI of United Kingdom:

Year CPI
2012 2,80
2011 4,50
2010 3,70
2009 2,90
2008 3,10
2007 2,10
2006 3,00

Annual GDP growth rate & Government Deficit (exc. financial interventions) [1990 to present][edit]

Year GDP Change[151] Deficit (Bn £)[152]
1990 1.8% -3.9
1991 -1.3% -18.0
1992 1.3% -40.2
1993 3.5% -50.9
1994 5.0% -45.9
1995 3.5% -38.6
1996 3.5% -29.2
1997 4.4% -15.6
1998 3.6% 0.7
1999 2.9% 12.0
2000 4.4% 16.7
2001 2.2% 8.4
2002 2.3% -19.0
2003 3.9% -34.9
2004 3.2% -37.9
2005 3.2% -42.6
2006 2.8% -32.2
2007 3.4% -36.4
2008 -0.8% -69.0
2009 -5.2% -156.3
2010 1.7% -148.6
2011 1.1% -120.6
2012 0.3% -99.5
2013 1.7%

Other data[edit]

Income distribution
 lowest 10%
 highest 10%
(2010)
1%
31%[153]
Consumer prices inflation RPI: 3.3%[154] (June 2013), CPI: 2.9%[154] (June 2013)
Labour force composition
 services
 government
 manufacturing/construction
 energy
 agriculture
(2004)
46%
28%
24%
1%
1%
Industrial growth 0.6% Q2 2013[155]
Electricity production 374.0 TWh (2011)[156]
Electricity production composition
 Gas
 Coal
 Nuclear
 Renewables
 Other
(2011)
41%
29%
18%
9%
2%[156]
Electricity consumption 318.0 TWh (2011)[156]
Electricity exports 1.272 TWh (2008 est.)[157]
Electricity imports 12.29 TWh (2008 est.)[157]
Agriculture products cereals, oilseed, potatoes, vegetables; cattle, sheep, poultry; fish
Exported commodities manufactured goods, fuels, chemicals; food, beverages (notably Scotch whisky), tobacco
Imported commodities manufactured goods, machinery, fuels; foodstuffs

Alongside official national statistics a number of respected private sector surveys are used to gain an understanding of the performance of the economy. These include the British Chambers of Commerce Quarterly Economic Survey (the largest business survey in the UK)[158] and the Purchasing Managers' Indexes (one of over 30 PMIs that are conducted worldwide).

Trade[edit]

United Kingdom Export Treemap by Product (2012) from Harvard Atlas of Economic Complexity

UK Trade Office for National Statistics shows the extent of import and export activity, which is a key contributor to the overall economic growth in the UK.[159]

Seasonally adjusted, the UK's deficit on trade in goods and services was estimated to have been £2.5 billion in June 2014, compared with £2.4 billion in May 2014.

In June 2014 there was a deficit of £9.4 billion on goods, partly offset by an estimated surplus of £7.0 billion on services. The trade in goods deficit widened by £0.3 billion compared with May 2014.

In June 2014, exports of goods decreased by £0.4 billion to £23.5 billion reflecting falls in oil and manufactured goods. Imports of goods decreased by £0.1 billion to £32.9 billion reflecting falls in imports of oil and aircraft; these falls were offset by increases elsewhere in manufactured goods.

The falls in both exports and imports of goods in June 2014 were attributed to a decrease in trade with countries outside of the European Union (EU).

In Q2 2014 exports of goods decreased by £0.5 billion to £71.3 billion reflecting a decrease in exports of oil. Imports of goods increased by £0.4 billion to £98.7 billion reflecting increases in imports of ships, cars and medicinal & pharmaceutical products.

FDI[edit]

In 2013 the UK was the leading country in Europe for inward foreign direct investment with $26.51bn. This gave it a 19.31% market share in Europe. In contrast, the UK was second in Europe for outward FDI, with $42.59bn, giving a 17.24% share of the European market.[160]

European Union membership[edit]

As a member of the European Union, UK is bound to numerous EU-wide trade and market policies. According to the 2014 report within the "Balance of EU competences" review, majority of the EU trade policies have been beneficial for UK, despite the proportion of the country's exports going to the EU falling from 54 percent to 47 percent over the past decade. The total value of exports however has increased in the same period from £130 billion (€160 billion) to £240 billion (€275 billion).[161] The report on research and development concluded that "The balance of competence for the free movement of goods and IP [intellectual property] works in the UK's interests".[162]

Poverty[edit]

The United Kingdom is a developed country with social welfare infrastructure, thus discussions surrounding poverty tend to be of relative poverty rather than absolute poverty. According to the OECD, the UK is in the lower half of developed country rankings for poverty rates, doing better than Italy and the US but less well than France, Austria, Hungary, Slovakia and the Nordic countries.[163]

The poverty line in the UK is commonly defined as being 60% of the median household income. In 2007–2008, this was calculated to be £115 per week for single adults with no dependent children; £199 per week for couples with no dependent children; £195 per week for single adults with two dependent children under 14; and £279 per week for couples with two dependent children under 14. In 2007–2008, 13.5 million people, or 22% of the population, lived below this line. This is a higher level of relative poverty than all but four other EU members.[164] In the same year, 4.0 million children, 31% of the total, lived in households below the poverty line, after housing costs were taken into account. This is a decrease of 400,000 children since 1998–1999.[165]

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