United Kingdom Economy

The United Kingdom economy ranks at sixth position in terms of Gross Domestic Product and eighth if measured on the basis of Purchasing Power Parity. England, Scotland, Wales and Northern Ireland are the countries which forms the economy of the United Kingdom. The city of London is the hub of financial activities and is one of the largest financial centers around the world. It is the second largest economy in Europe after Germany. United Kingdom is one of the members in the European Union and the G8 group which is an organization of the top eight economic countries in the world. The United Kingdom economy is also known and described as Anglo-Saxon Economy.

UK Economy GDP Change Image

UK Economy GDP Change Image

United Kingdom Economic Performance 1989-2015

Year GDP % Change Inflation % Change Year GDP % Change Inflation % Change
1989 2.52 8 2003 3.34 2.73
1990 0.55 8.08 2004 2.49 2.9
1991 -1.26 6.58 2005 3 2.92
1992 0.45 3.27 2006 2.66 2.99
1993 2.63 2.59 2007 2.59 2.86
1994 4.02 1.22 2008 -0.47 2.86
1995 2.52 2.65 2009 -4.19 2.05
1996 2.67 4.02 2010 1.54 3.11
1997 3.1 2.32 2011 1.97 2.1
1998 3.38 1.62 2012 1.18 1.63
1999 3.11 1.11 2013 2.16 1.99
2000 3.8 2.31 2014 2.85 1.84
2001 2.76 1.05 2015 2.33 0.27
2002 2.49 2.51    

Source: World Bank

One of the biggest economic problems happened in 2007-2008 which affected the economy of the United Kingdom to a large extent. The GDP of the British economy is estimated to grow at 1.1% in the year 2013 with a further increase of 1%, projecting 2.1% GDP growth for the year 2014. Real GDP growth is prognosticated to rise steadily as non-residential investment, held up by credit easing, high retained earnings and external demand, is set to gather momentum. In spite of that a further fiscal consolidation, private sector deleveraging and sluggish real income growth will restrain domestic demand. The rate of unemployment is estimated to be broadly flat at around 8% in the near term.

Inflation is projected to rise to 3% in 2013. The Service Sector is the major contributor to the United Kingdom economy and grew by around 1% in the year 2012. Other sectors such as mining and quarrying and oil and gas production witnessed a decline. Both the manufacturing and the construction sector was hit due to sluggish export orders and fall in public spending on infrastructure pertaining to downfall in the property market.

The United Kingdom economy performed poorly in 2012 because the export trade was low due to recession causing a downfall in the euro zone. This can be measured from the fact that exports to the countries of the European Union fell by 5.1% in the year 2012 while, on the other hand, it rose to 6.5% for the non European Union parts.

Viewing the trends of the previous years, it has been observed that there was a decline of 1% in the consumer spending growth between 2009 and 2012. There has been a growth in the labor market. As compared to the first quarter of the year 2011, the employment rate declined to 7.9% in the year 2012 compared to 8.5% in 2011. However, there has been a fall in productivity by 1.7% compared to the previous year, as a result of which unemployment from 2.501 million in 2013 to 2.600 million in 2014. The growth of the United Kingdom economy will depend largely on private consumption in the year 2013-14. There is a likely possibility of growth in the household consumption levels much to the fact that there is a fall in inflation.

In order to boost growth of the United Kingdom economy, the central banks are focusing on the expansionary policy with focus on keeping the interest rates at low levels and increase in various bond purchase programmes. With a high level of budget deficit and gross debt rising to 90% of GDP in 2012, a further fiscal consolidation is needed in 2013 to restore the sustainability of public finances.

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Last Updated on : 21th February 2015 Next Update : February 2016