| Economy of the United Kingdom |
| Currency |
1 Pound Sterling (£) = 100 pence (p) |
| Fiscal year |
April 1 – March 31 |
| Trade Organizations |
EU, WTO and OECD |
| Statistics |
| GDP Ranking (2005) |
4th by nominal volume; 13th by nominal volume per capita; 6th by volume adjusted for PPP; 16th per capita adjusted for PPP. |
| GDP PPP(2004) |
$1.736 trillion |
| GDP growth rate (2005) |
1.8% |
| GDP per Capita (2005 est.) |
$30,309 |
| GDP by sector (2003) |
agriculture (0.9%), industry (26.5%), services (72.6%) |
| Inflation rate (2005) |
1.9% |
| Pop below poverty line (2002) |
17% |
| Labour force (2003) |
29.6m |
| Labour force by occupation (2002) |
services (74%), industry (25%), agriculture (1%) |
| Unemployment rate (2005) |
4.7% |
| Main Industries |
machine tools, electric power equipment, automation equipment, railroad equipment, shipbuilding, aerospace, motor vehicles and parts, electronics and communications equipment, metals, chemicals, coal, petroleum, paper and paper products, food processing, textiles, clothing, and other consumer goods |
| Trading Partners |
| Exports (2005) |
$312.03bn |
| Main Partners (2004) |
USA 15%, Germany 11.4%, France 9.7%, Ireland 7.4%,Netherlands 6.3%, Belgium 5.5%, Spain 4.8%, Italy 4.4% |
| Imports (2005) |
$359.68bn |
| Main Partners (2004) |
Germany 14.1%, USA 8.7%, France 8%, Netherlands 7.2%, Belgium 5.5%, Italy 4.9%, China 4.1%, Ireland 4% |
| Public Finances |
| Public Debt |
35.5% of GDP |
| External Debt (1998) |
N/A |
| Revenues (2003) |
$688.9bn |
| Expenses (2003) |
$746.1bn |
| Economic Aid Donor (2004) |
$4.2bn |
The United Kingdom, a leading trading power and financial centre, has the fourth largest economy in the world in terms of market exchange rates and the sixth largest by purchasing power parity (PPP) exchange rates. Its economy is the second largest in Europe (after Germany), and the UK is a member of the European Union and the G8. Its capital, London, is the largest financial centre in the world. The British economy is also characterised as an Anglo-Saxon economy.
It is made up of (in order of how much they contribute), the economies of England, Scotland, Wales and Northern Ireland.
Since the 1980s, and particularly under the Government of Margaret Thatcher, many state enterprises that were nationalised in the 1940s have been privatised.
GDP growth slipped in 2001–2002 as the global downturn, the high price of the Pound Sterling, and the bursting of the "new economy" bubble hurt manufacturing and exports. However the UK economy is one of the strongest of the larger European Union economies; inflation, interest rates, and unemployment remain low. British GDP is expected to grow by 1.75 % in 2005, Chancellor of the Exchequer Gordon Brown attributed this slower growth mainly to the high price of oil and the European slowdown, however the UK is a net exporter of fuel which means the UK should not be adversely affected by higher oil prices. The weaker growth is due mainly to a leveling off of house prices and the subsequent slowdown in consumer spending.
Energy resources
The UK has large coal, natural gas, and oil reserves; primary energy production accounts for 10% of GDP, one of the highest shares of any industrial nation.
Due to North Sea oil, during the 1990s the UK became a net hydrocarbon exporter, and the second largest producer of oil in western Europe after Norway. In June 2004 hydrocarbon exports fell below imports for the first time, although they are not expected to do so permanently for some years.
Around about 80% of UK electricity is currently generated from fossil fuels; nuclear power and an increasing contribution from wind turbines make up the bulk of the remainder. The UK is the world's 8th greatest producer of carbon emissions, producing around 2.3% of the total generated from fossil fuels. The government is a signatory to the Kyoto Protocol and has launched a Climate Change Programme to reduce emissions significantly beyond the Kyoto commitments.
Due to the island location of the UK, the country has great potential for generating electricity from offshore windfarms, wave power and tidal power, although these have not yet been exploited on a commercial basis.
Industries
Agriculture and fishing
Agriculture is intensive, highly mechanised, and efficient by European standards, producing about 60% of food needs with only 1% of the labour force. It contributes around 2% of GDP. Around two thirds of production is devoted to livestock, one third to arable crops. The main crops that are grown are wheat, barley, oats, potatoes, sugar beets, fruits and vegetables. The livestock which are raised are cattle and sheep. Agriculture is heavily subsidised by the European Union's Common Agricultural Policy and it is not known how large a sector it would be if free market rules applied. The GDP from the farming sector is argued by some to be a small return on the subsidies given.
The UK is one of the world's leading fishing nations. Its fleets bring home fish of every kind, ranging from sole to herring. Kingston upon Hull, Grimsby, Fleetwood, Great Yarmouth, Peterhead, Fraserburgh, and Lowestoft are among the coastal towns that have large fishing industries.
Manufacturing
In 2003, the latest year for which comparable statistics are available, the manufacturing industry accounted for 16% of national output in the UK and for 13% of employment, according to the Office for National Statistics. This is a continuation of the steady decline in the importance of this sector to the British Economy since the 1960s, although the sector is still important for overseas trade, accounting for 83% of exports in 2003. The regions with the highest proportion of employees in manufacturing were the East Midlands and West Midlands (at 19 and 18 % respectively). London had the lowest at 6 %.
Engineering and allied industries comprise the single largest sector, contributing 30.8% of total Gross Value Added in manufacturing in 2003. Within this sector, transport equipment was the largest contributor, with 8 global car manufacturers being present in the UK – BMW (MINI, Rolls Royce), Ford (Premier Automotive Group), General Motors (Vauxhall Motors), Honda, Nissan, PSA, Toyota and Volkswagen (Bentley) with a number of smaller, specialist manufacturers (including TVR, Lotus and Morgan) and commercial vehicle manufacturers (including Leyland Trucks, LDV, Alexander Dennis, JCB and Manganese Bronze) also being present. A range of companies like Brush Traction manufacture railway locomotives and other related components. Associated with this sector are the aerospace and defence equipment industries. The UK manufactures a broad range of equipment, with the sector being dominated by BAE Systems, who manufacture civil and defence aerospace, land and marine equipment (including the wings for the Airbus fleet) and Rolls Royce who manufacture aerospace engines and power generation systems.
Another important component of Engineering and allied industries is electrical, audio and optical equipment, with the UK having a broad base of domestic firms like Amstrad, Alba, ARM, Wolfson, Linn, Nallatech and Axeon, alongside a number of foreign firms manufacturing a wide range of TV, radio and communications products, scientific and optical instruments, electrical machinery and office machinery and computers.
Chemicals and Chemical-based products are another important contributor to the UK's manufacturing base. Within this sector, the pharmaceutical industry is particularly successful, with the world's second and third largest pharmaceutical firms (GlaxoSmithKline and AstraZeneca respectively) being based in the UK and having major research and development and manufacturing facilities there.
Other important sectors of the manufacturing industry include Food, Drink, Tobacco, Paper, Printing, Publishing and Textiles. With major comapanies such as Unilever, Cadbury Schweppes, Tate and Lyle, Diageo, British American Tobacco, Imperial Tobacco, EMAP, HarperCollins, Reed Elsevier, Ben Sherman, Burberry, French Connection and Umbro being amongst the largest present.
Services
The service sector is the dominant sector of the UK economy, normally a sign of an advanced economy.
Retailing
The UK has a mixture of large shopping facilities with both large 'out of town' stores and in town shopping centres in existence. Local shops and 'convenience stores' continue to play an important role in retailing, though brand operators have continued to gain ground in recent years, with notable complaints being raised about operators such as Tesco which has moved into town centre facilities (through brands such as its Tesco Express and Tesco Metro) as well as operating its larger hypermarkets. The retail market remains highly competitive and accounts for £249bn (about 22 %) of GDP. Retail sales grew by 1 % in 2005, the lowest since World War II.
Financial services
London is the world's largest financial centre, with financial services based around two districts 'The City' (the City of London) and the Docklands (particularly around Canary Wharf). The City houses the London Stock Exchange (shares and bonds), Lloyds of London (insurance), and the Bank of England. The Docklands began development in the 1980s and is now home to the Financial Services Authority, as well as several important financial institutions (such as Barclays Bank and Citigroup). There are now over 500 banks with offices in the City and Docklands, with the majority of business in London being conducted on an international basis, with established leads in areas such as Eurobonds, Foreign exchange markets, energy futures and global insurance. The Alternative Investments Market has acted a growth market over the past decade, allowing London to also expand as an international equity centre for smaller firms.
The United Kingdom had £21bn of financial exports in 2005, contributing significantly towards the Balance of Payments. The UK has had an expanding export business in financial service, which has been influenced by a mixture of unique institutions, light regulation, and a highly skilled workforce.
Edinburgh also has a long established financial industry, the fifth largest finanical centre in Europe, with many large firms based there, including the Royal Bank of Scotland (the second largest bank in Europe), HBOS (owners of the Bank of Scotland) and Standard Life Insurance. The Scottish Stock Exchange is part of the London Stock Exchange, but maintains a distinct culture.
Tourism
Tourism is the 6th largest industry in the UK, contributing £76bn pounds to the economy. It employs 1,800,000 full-time equivalent people — 6.1% of the working population (2002 figures) [1].
Gambling
Gambling in the UK in all its forms currently makes up only a small part of the economy. Gambling forms which are taxed include casinos and the National Lottery, as well bookmakers. The gambling industry is set to expand with proposals for a "super-casino" in Birmingham. The plans have yet to be ratified.
Currency
The relatively good economic performance has complicated the Blair government's efforts to make a case for Britain to leave the Pound Sterling and join the Euro. The British Prime Minister has pledged to hold a public referendum if membership meets Chancellor of the Exchequer Gordon Brown's "five economic tests". The tests are:
- Are business cycles and economic structures compatible with European interest rates on a permanent basis?
- If problems emerge, is there sufficient flexibility to deal with them?
- What impact would entry into the Euro have on the UK's financial services industry?
- Would joining the Euro create better conditions for firms making long-term decisions to invest in Britain?
- Would joining the Euro promote higher growth, stability and a lasting increase in jobs?
When assessing the tests, Gordon Brown concluded that while the decision was close, the United Kingdom should not yet join the Euro. In particular, he cited fluctuations in house prices as a barrier to immediate entry. The tests will be reassessed in the future. Public opinion polls show that a majority of Britons are opposed to joining the single currency at this time.
Exchange rates
(average for whole 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. Note the effect of Black Wednesday in late 1992 by comparing the averages for 1992 with the averages for 1993.
| Year |
£/USD |
£/XEU |
|
USD/£ |
XEU/£ |
| 1990 |
£0.5633 |
£0.7161 |
|
$1.775 |
1.397 |
| 1991 |
£0.5675 |
£0.7022 |
|
$1.762 |
1.424 |
| 1992 |
£0.5699 |
£0.7365 |
|
$1.755 |
1.358 |
| 1993 |
£0.6663 |
£0.7795 |
|
$1.501 |
1.283 |
| 1994 |
£0.6536 |
£0.7742 |
|
$1.530 |
1.292 |
| 1995 |
£0.6338 |
£0.8200 |
|
$1.578 |
1.220 |
| 1996 |
£0.6411 |
£0.8029 |
|
$1.560 |
1.245 |
| 1997 |
£0.6106 |
£0.6909 |
|
$1.638 |
1.447 |
| 1998 |
£0.6037 |
£0.6779 |
|
$1.656 |
1.475 |
|
| Year |
£/USD |
£/EUR |
|
USD/£ |
EUR/£ |
| 1999 |
£0.6185 |
£0.6595 |
|
$1.617 |
€1.516 |
| 2000 |
£0.6609 |
£0.6099 |
|
$1.513 |
€1.640 |
| 2001 |
£0.6943 |
£0.6223 |
|
$1.440 |
€1.607 |
| 2002 |
£0.6664 |
£0.6289 |
|
$1.501 |
€1.590 |
| 2003 |
£0.6123 |
£0.6924 |
|
$1.633 |
€1.444 |
| 2004 |
£0.5460 |
£0.6788 |
|
$1.831 |
€1.473 |
| 2005 |
£0.5500 |
£0.6842 |
|
$1.821 |
€1.463 |
- Source: OANDA.COM [2]
Regional variation
The strength of the UK economy varies from region to region. GDP, and GDP per capita is highest in London. The following table shows the GDP (2002) per capita of the 12 NUTS:2 areas, with data supplied by Eurostat.
Two of the richest 10 areas in the European Union are in the United Kingdom. Inner London is number 1 with a €66 761 GDP per capita; Berkshire, Buckinghamshire and Oxfordshire are number 7 with a €34 251 GDP per capita.
Property Market
The UK Property market has been booming for the past seven years and in some areas property has trebled in value over that period. The increase in property prices has a number of causes — greater growth, a well managed economy, low interest rates, large number of immigrants from eastern europe and the growth in property investment and specifically buy-to-let.
The UK property market peaked in July 2004 and has been static or falling in the capital and some other areas but still rising in others. This has led many to start worrying about the possibility of a house price crash as many feel that they are at the end of a major British property bubble.
A house price crash would be very damaging at the present time due to debt at record levels. Increasing numbers of bankruptcies and home repossessions are worrying many economists, who think that a correction in house prices would lead a country into a lengthy recession.
Taxation and borrowing
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% |
- (Source: HM Treasury Public Finances Databank)
- (* — Projected)
Other statistics
GDP % GDP for selected years, 2002 — 2006 est.:
| Year |
GDP
in billions of USD PPP
|
% GDP Growth |
| 2002 |
1575.906 |
2.0 |
| 2003 |
1640.829 |
2.5 |
| 2004 |
1736.377 |
3.2 |
| 2005 |
1825.837 |
1.9 |
| 2006 |
1910.818 |
2.2 |
Income distribution
lowest 10%
highest 10% |
(1986)
2.4%
24.7% |
| Consumer prices inflation |
RPI: 3% (2004), CPI: 1.6% (2004) |
Labour force composition
services
government
manufacturing/construction
energy
agriculture
|
(2004)
46%
28%
24%
1%
1% |
| Industrial growth |
-0.3% (1999) |
| Electricity production |
395.9 TWh (2003) |
Electricity production composition
fossil fuel
hydro
nuclear
other |
(2001)
73.8%
0.9%
23.7%
1.6% |
| Electricity consumption |
337.4 TWh (2003) |
| Electricity exports |
2.959 TWh (2003) |
| Electricity imports |
5.119 TWh (2003) |
| 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 |
See also
External links
The content of this page is retrieved from http://en.wikipedia.org/wiki/Economy_of_the_United_Kingdom under GFDL
