Everything about The Economy Of The United Kingdom totally explained
The
economy of the United Kingdom is the
fifth largest in the world in terms of market
exchange rates and the
sixth largest by
purchasing power parity (PPP). It is the second largest
economy in
Europe after
Germany's.
The
United Kingdom is one of the world's most
globalised 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 made up (in descending order of size) of the economies of
England,
Scotland,
Wales and
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
British 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. Consequently, the United Kingdom, according to the
International Monetary Fund, now has the seventh highest level of
GDP per capita in the European Union in terms of purchasing power parity, after
Luxembourg,
Ireland, the
Netherlands,
Denmark,
Austria and
Finland. However, in common with the economies of other
English-speaking countries, it has higher levels of
income inequality than many European countries. The UK also has the
world's third largest current account deficit, 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. The UK's "labour productivity per hour worked" is currently on a par with the average for the "old" EU (15 countries).
The United Kingdom currently ranks 16th on the
Human Development Index.
Recent economic growth
The most recent official figure, from the
ONS, for annual UK GDP growth is 3.1% (2007 compared to 2006).
(External Link
) (External Link)
According to official
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%.
In October 2007, the
IMF forecast British GDP to grow by 3.1% in 2007 and 2.3% in 2008.
(External Link)
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.
| Year |
Gross domestic product |
US dollar exchange |
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, highly
mechanised, and efficient by
European standards, producing about 60% of food needs with less than 2% of the labour force. It contributes around 2% of
GDP. 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, oilseed rape, maize for animal feeds, potatoes and sugar beet. New
crops are also emerging, such as linseed for oil and hemp for fibre production. 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 to
herring.
Kingston upon Hull,
Grimsby,
Fleetwood,
Great Yarmouth,
Peterhead,
Fraserburgh, and
Lowestoft are among the coastal towns that have
fishing industries.
The
Blue Book 2006 reports that this sector added gross value of £10,323 million to the UK economy in 2004.
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.
(External Link)
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. The
main opposition party, the
Conservative party, are opposed to membership.
Exchange rates
(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 |
$1.530 |
|
|
£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 |
|
| 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 |
€1.640 |
|
| 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 |
£0.5461 |
$1.832 |
2.26% |
|
£0.6787 |
€1.474 |
1.92% |
| 2005 |
£0.5500 |
$1.820 |
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 |
2.40% |
For consistency and comparison purposes, coefficient of variation is measured on both the "per pound" ratios, although it's conventional to show the forex rates as dollars per pound and pounds per euro.
Regional variation
The strength of the UK economy varies from region to region.
GVA, and GVA per capita is highest in
London. The following table shows the GVA (
2006) per capita of the 12
NUTS:2 areas, with data supplied by the
Office for National Statistics .
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.
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
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% |
(* — 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.
GDP % GDP for selected years, 2002 — 2006 est.>
| Year |
GDP
in billions of USD PPP
|
1.9% (2005 est.) 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% |
(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) |
| exports |
0.77% |
Electricity production composition
fossil fuel
hydro
nuclear
renewables
imports |
(2004)
74.13%
1.1%
19.26%
3.55%
1.96% |
| 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 |
Exports
In 2007 UK exports were valued at £220bn.
Food and drink exports were valued at £9.7bn (2005)
UK total arms exports were valued at £7.1bn (2005)
UK export figures are boosted 10% by high levels of Missing trader fraud according to the Office for National Statistics.
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. (External Link) 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.
There's a large Pakistanis business community in the UK, notable Pakistani businessmen include Sir Anwar Pervez who is the Chairman of Bestway (Holdings) Limited, UK & its subsidiaries, Bestway Cement in Pakistan. He is the Deputy Chairman of United Bank Limited and also the Chairman of the Board of Trustees of Bestway Foundation UK and the Patron-in-Chief of Bestway Foundation Pakistan. Sir Anwar is a Trustee of the Memorial Gates Trust, Crimestoppers and the Duke of Edinburgh’s Award Scheme.
Shami Ahmed is another British Pakistani millionaire founder of the Joe Bloggs clothing brand. He launched "The Legendary Joe Bloggs Clothing Company". It became part of the Manchester scene and was quickly successful. Bloggs was the first British company into the UK's top ten jeans brands. Shami made his first million at the age of 24.
Notable Indians include 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 are the least economically affluent with their male unemployment rates being 20% and 16% respectively. One in seven Bangladeshis 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. (External Link).
(External Link).
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