Economy Of The United Kingdom

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The United Kingdom has the List of countries by GDP (nominal) gross domestic product in the world in terms of market exchange rates and the List of countries by GDP (PPP) by purchasing power parity (PPP). It has the second largest economy in Europe after Economy of Germany. The United Kingdom is one of the world's most Globalization Index countries, ranking fourth in one recent survey. The capital, London (see Economy of London), is one of the three major financial centres of the world, along with New York City and Tokyo.

The British economy is often described as an 'Anglo-Saxon economy'. It is made up (in descending order of size) of the economies of Economy of England, Economy of Scotland, Economy of Wales and Economy of Northern Ireland. The UK has been a member state of the European Union since 1973.

In the 1980s, under the Government of Margaret Thatcher, most state-owned enterprises in the industrial and service sectors, which since the 1940s had been nationalised, were privatised. The Her Majesty's Government now owns very few industries or businesses - Royal Mail is one example.

The British economy has in recent years seen the longest period of sustained economic growth for more than 150 years, having grown in every quarter since 1992. It is one of the strongest EU economies in terms of inflation, interest rates and unemployment, all of which remain relatively low. However, in common with the economies of other Anglosphere, it has higher levels of income inequality than some European countries. The UK also has the List_of_countries_by_current_account_balance, despite significant oil revenues.

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 lags around 20% behind France's level, where workers have a 35-hour working week. eurostat.ec.europa.eu - Labour productivity per person employed The UK's "labour productivity per hour worked" is currently on a par with the average for the "old" EU (15 countries). eurostat.ec.europa.eu - Labour productivity per hour worked

The United Kingdom currently ranks 18th on the Human Development Index.

Recent economic growth The most recent official figure, from the Office for National Statistics, for annual UK GDP growth is 3.3% (2006 Q4 - 2007 Q3).

According to official HM Treasury estimates, British GDP grew by 2¾% in 2006 and is expected to grow by 3% in 2007. Growth is expected to slow slightly in 2008 to between 2% and 2½%. The forecast for 2009 and 2010 is for the economy to return to trend growth of between 2½% and 3%. HM Treasury - 2007 Pre-Budget Report and Comprehensive Spending Review

In October 2007, the IMF forecast British GDP to grow by 3.1% in 2007 and 2.3% in 2008.

Macroeconomic trend This is a chart of trend of gross domestic product of United Kingdom at market prices estimated by the International Monetary Fund with figures in millions of British Pounds Sterling.{| class="wikitable"|-! Year || Gross domestic product || US dollar exchange eh.net - Lawrence H. Officer, "Exchange rate between the United States dollar and forty other countries, 1913 -1999", 2002. || Inflation index (2000=100)|-| 1925 || 4,466 || £0.21 |||-| 1930 || 4,572 || £0.21 |||-| 1935 || 4,676 || £0.20 |||-| 1940 || 7,117 || £0.26 |||-| 1945 || 9,816 || £0.25 |||-| 1950 || 13,162 || £0.36 |||-| 1955 || 19,264 || £0.36 |||-| 1960 || 25,678 || £0.36 |||-| 1965 || 35,781 || £0.36 |||-| 1970 || 51,515 || £0.42 |||-| 1975 || 105,773 || £0.45 |||-| 1980 || 230,695 || £0.42 || 43|-| 1985 || 354,952 || £0.77 || 60|-| 1990 || 557,300 || £0.56 || 76|-| 1995 || 718,383 || £0.63 || 92|-| 2000 || 953,576 || £0.65 || 100|-| 2005 || 1,209,334 || £0.54 || 107|}

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

Industries Agriculture, hunting, forestry and fishing Agriculture is intensive agriculture, highly mechanised agriculture, and efficient by European standards, producing about 60% of food needs with less than 2% of the labour force. It contributes around 2% of Gross domestic product. Around two-thirds of the 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 main livestock which are raised are cattle, chickens (the UK is the second largest poultry producer in Europe after France) and sheep. Agriculture is subsidised by the European Union's Common Agricultural Policy.

The UK retains a significant, although vastly reduced, fishing industry. Its fleets bring home fish ranging from Sole (fish) to herring. Kingston upon Hull, Grimsby, Fleetwood, Great Yarmouth, Peterhead, Fraserburgh, and Lowestoft are among the coastal towns that have fishing industries.

The Office for National Statistics#The Blue Book 2006 reports that this sector added gross value of £10,323 million to the UK economy in 2004. United Kingdom National Accounts - The Blue Book 2006

Production Mining and quarrying The Blue Book 2006 reports that this sector added gross value of £21,876 million to the UK economy in 2004.

Manufacturing In 2003, 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, British motor industry was the largest contributor, with 8 global car manufacturers being present in the UK – BMW (MINI, Rolls-Royce Motor Cars), Ford (Premier Automotive Group), General Motors (Vauxhall Motors), Honda, Nissan, Toyota and Volkswagen (Bentley) with a number of smaller, specialist manufacturers (including Lotus Cars and Morgan Motor Company) and commercial vehicle manufacturers (including Leyland Trucks, LDV Limited, Alexander Dennis, J. C. Bamford, Manganese Bronze and Case-New Holland) 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, which manufactures civil and defence aerospace, land and marine equipment, VT Group, GKN plc and Rolls-Royce Aero Engines who manufacture aerospace engines and power generation systems.

Another important component of Engineering and allied industries is electronics, audio and optical equipment, with the UK having a broad base of domestic firms like Amstrad, Alba (electronics), ARM Ltd, Dyson (appliances), Glen Dimplex, Invensys, Wolfson, Linn Products, 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. The UK is also home to three of the world's biggest brewing companies: Diageo, Sabmiller and Scottish and Newcastle, other major manufacturing companies such as Unilever, Cadbury Schweppes, Tate & Lyle, British American Tobacco, Imperial Tobacco, EMAP, HarperCollins, Reed Elsevier, Ben Sherman, Burberry, French Connection (clothing), Reebok, Pentland Group and Umbro being amongst the largest present.

The Blue Book 2006 reports that this sector added gross value of £147,469 million to the UK economy in 2004.

Electricity, gas and water supply The Blue Book 2006 reports that this sector added gross value of £17,103 million to the UK economy in 2004.

Construction The Blue Book 2006 reports that this industry added gross value of £64,747 million to the UK economy in 2004.

Service industries The service sector is the dominant sector of the UK economy, a feature normally associated with the economy of a developed country. This means that the Tertiary sector jobs outnumber the Secondary and Primary sector jobs. Wholesale and retail trade This sector includes the motor trade, auto repairs, personal and household goods industries. The Blue Book 2006 reports that this sector added gross value of £127,520 million to the UK economy in 2004.

Hotels and restaurants The Blue Book 2006 reports that this industry added gross value of £33,074 million to the UK economy in 2004.

Transport, storage and communication The Blue Book 2006 reports that the transport and storage industry added gross value of £49,516 million to the UK economy in 2004 while the communication industry added a gross value of £29,762 million.

Financial intermediation , one of the world's major financial centresLondon is the world's largest financial centre, with financial services based around two districts: 'The City' (the City of London) and the London 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 London 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, Citigroup and HSBC). There are now over 500 banks with offices in City of London and London 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, International Petroleum Exchange 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 financial 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.

Cardiff, has in recent years seen significant growth in its financial industry, due to new start ups, such as Admiral Group, which have set up their main headquarters in the city. Other cities in the United Kingdom with large financial districts are Manchester and Leeds.

The Blue Book 2006 reports that this industry added gross value of £86,145 million to the UK economy before adjustment of financial services valued at £50,165 million in 2004.

Real estate and lettings 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 — sustained economic growth, an expansion in household numbers (including high immigration into certain regions), low interest rates, the growth in buy-to-let, and restriction in the supply of new housing (through planning permission).

The UK property market initially peaked in July 2004 and had been static or falling in the capital and some other areas until late 2005. This had led many to start worrying about the possibility of a house price crash, many predicting the end of a major British property bubble. However, the property market strengthened considerably in the first half of 2006, showing particular strength in the capital. This has led many analysts to revise previously negative assessments of the market, with most now predicting continued modest growth in prices in the mid-term.

A house price crash would be very damaging at the present time due to record levels of household debt. There are an increasing numbers of bankruptcies and home repossessions which has worried some economists. This has led many to propose that a correction in house prices would lead much of the country into a lengthy recession. In contrast however, first time buyers who currently have assets not consisting of residential property, but with no way of attaining residential property (in some cases at all, and in others without undertaking unsustainable debt amounting to on average up to 5 times their annual salary), would be better off, and able to enter the property market.

The rapid increase in Buy to Let speculators since 2000 of has created an artificial shortage of homes. The effect has been to price many first time buyers out of the market; they have declined from around 50% of sales to 25%, virtually equal to the expansion in Buy to Let. In London a survey in 2006 found that 67% of new properties were sold to Buy to Let speculators. This and planning restriction requiring builders to use brown field sites, has led to rapid growth in one and two bed room apartments in cities such as Manchester, Leeds and Nottingham, creating an over supply of this type of property. Banks have relaxed their lending requirements for Buy to Let buyers from 75% of the value the of property in 2003 to 85%, effectively creating a highly gear investment that relies on rising prices. The perception of a housing shortage, despite there being little evidence of any shortage of property to rent (if not buy), means that most UK buyers believe property prices will always rise and any fall only be small and temporary.

This sector includes letting of dwellings and other related business support activities. The Blue Book 2006 reports that the lettings industry added gross value of £83,037 million to the UK economy in 2004 while other real estate and business support activities added gross value of £175,333 million.

Public administration and defence The Blue Book 2006 reports that this sector added gross value of £55,280 million to the UK economy in 2004.

Education The Blue Book 2006 reports that this sector added gross value of £61,786 million to the UK economy in 2004.

Health and social work The Blue Book 2006 reports that this sector added gross value of £75,817 million to the UK economy in 2004.

Other social and personal services This sector includes value added by private households with employees and extra-territorial organisations. The Blue Book 2006 reports that this sector added gross value of £55,543 million to the UK economy in 2004.

Currency 20 Pound sterling noteThere is a debate over whether or not the UK should leave the Pound Sterling and join the Euro. The British Prime Minister, Gordon Brown, had pledged to hold a public referendum if membership meets the "five economic tests" he set as Chancellor of the Exchequer.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 economic growth, Economic stability and a lasting increase in employment?

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 have shown that a majority of Britons have been opposed to joining the euro for some considerable time. mori.com - Joining the Euro, all companies' polls The Official Opposition (United Kingdom) party, the Conservative Party (UK) party, are opposed to membership.

Exchange rates (average for whole of each year), in USD (US Dollar) and Euro (euro) per GBP; and inversely: GBP per USD and EUR. ( XEU before 1999). Caution: these averages conceal wide intra-year spreads. The standard deviation gives an indication of this. Note the effect of Black Wednesday in late 1992 by comparing the averages for 1992 with the averages for 1993.{]|| ||£/XEU ||XEU/£||Stdev|-|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 || $1.530 || || || £0.7742 || 1.292 |||-|1995 || £0.6338 || $1.578 || || || £0.8200 || 1.220 |||-|1996 || £0.6411 || $1.560 || || || £0.8029 || 1.245 |||-|1997 || £0.6106 || $1.638 || || || £0.6909 || 1.447 |||-|1998 || £0.6037 || $1.656 || || || £0.6779 || 1.475 |||-|}{|class="wikitable"|Year ||£/USD ||USD/£ ||Stdev|| ||£/EUR ||EUR/£||Stdev|-|1999 || £0.6185 || $1.617 || || || £0.6595 || €1.516 |||-|2000 || £0.6609 || $1.513 || || || £0.6099 || €1.640 |||-|2001 || £0.6943 || $1.440 || || || £0.6223 || €1.607 |||-|2002 || £0.6664 || $1.501 || || || £0.6289 || €1.590 |||-|2003 || £0.6123 || $1.633 || || || £0.6924 || €1.444 |||-|2004 || £0.5460 || $1.831 || || || £0.6788 || €1.473 |||-|2005 || £0.5500 || $1.821 || || || £0.6842 || €1.463 |||-|2006 || £0.5426 || $1.859 || 0.0699|| || £0.6815 || €1.467 || 0.0164|} Source: OANDA.COM

Regional variation The strength of the UK economy varies from region to region. Gross domestic product, and GDP per capita is highest in London. The following table shows the GDP (2004) per capita of the 12 Nomenclature of Territorial Units for Statistics:2 areas, with data supplied by Eurostat.{]s|-| align=right| 1|London, England|31 300|-| align=right| 3|[East of England|27 669|-| align=right| 5|[South West England, [England, [England|25 396|-| align=right| 9|[Yorkshire and the Humber, England|23 319|-| align=right|11|[North East England|22 567|}

Two of the [Economy of the European Union#10 Richest areas 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. eurostat.ec.europa.eu - Regional BIP per capita (German)

Taxation and borrowing 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 decriminalised parking enforcement. Central government revenues are mainly income tax, national insurance contributions, value added tax, United Kingdom corporation tax and Hydrocarbon oil 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%|-|} (Source: HM Treasury Public Finances Databank) (* — Projected)

The money Gross Domestic Product (GDP) for the United Kingdom, at market prices, in 2005 was £1,211 billion (or $2,431 billion) according to HM Treasury in March 2006.

{| border="1" cellpadding="2" cellspacing="0" style="border-collapse:collapse;"|+ GDP % GDP for selected years, 2002 — 2006 est.! style="background:#efefef;" | Year! style="background:#efefef;" | GDP
in billions of USD PPP
! style="background:#efefef;" | 1.9% (2005 est.) GDP Growth|- align="right"! align="left"|2002| 1575.906 || 2.0|- align="right"! align="left"|2003| 1640.829 || 2.5|- align="right"! align="left"|2004| 1736.377 || 3.2|- align="right"! align="left"|2005| 1825.837 || 1.9|- align="right"! align="left"|2006| 1910.818 || 2.2|- align="right"|}

{|| Income distribution
lowest 10%
highest 10% || (1999)
2.1%
28.5%|-| 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 || 382.7 TWh (2004)]), tobacco|-| Imported commodities || manufactured goods, machinery, fuels; foodstuffs|}

Other statistics Average total income of Indians is higher than that of any other ethnic group in the UK at per £30,211 annum. Reasons for such high income among Indians is that one in 20 Hindu men in the UK are doctors compared to 1 in 200 Christian men. Besides, Hindus along with Jews and Buddhists are more likely to do high end jobs ( managerial or professional occupations) whereas jews are most likely to be selfemployed. Besides, there's a large Indian business community in the UK, including UK's richest man, Lakshmi Mittal. Together, that pulls the average of Indians higher. However, the unemployment rate for Indian men (7 per cent) was similar to those for White British or White Irish men. Whites, in general, have much lower unemployment rate than the non whites.

Bangladeshis and Pakistanis are the least economically affluent with their male unemployment rates being 20% and 16% respectively. One in seven Pakistani men in employment was a taxi driver, cab driver or chauffeur, compared with 1 in 100 White British men. Over a quarter of Bangladeshi men were chefs, cooks or waiters compared with 1 in 100 White British men. .

{] || £30,211|-| 2 || China || £25,964|-| 3 || White ] African ] Caribbean || £22,902|-| 8 || Bangladeshi || £18,407|-| 9 || Pakistani || £18,209|}.

See also

List of British companies
Economic history of Britain
British property bubble
UK topics

References

External links

CIA World Factbook
OECD's United Kingdom country Web site and OECD Economic Survey of the United Kingdom
Is the US a Good Model for Reducing Social Exclusion in Europe? August 2006
UK Bank Rate since 1970

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