UK Economic Overview
Source: the British Embassy, Washington D.C.
The UK is the worlds fifth largest economy and has weathered the recent economic downturn better than any other G8 country.
The UK Governments economic strategy aims to improve growth and employment by creating economic stability based on low inflation and prudent government borrowing, and a better environment for long-term investment in industry, infrastructure, science and technology, and education and training.
Britains economy is based primarily on private enterprise which accounts for approximately four-fifths of both output and employment. Since the global recession of 1990 – 1992 the UK has experienced continuous growth and low inflation. Employment levels are the highest ever recorded.
The UK is Europes leading business center and has the least restricted business environment within the EU. Economist Intelligence Unit e-readiness rankings, 2003 rate the UK in third place globally, equal to the US and the Netherlands, well ahead of Germany and Japan in 13th and 24th places, respectively.
The service sector accounts for about two-thirds of GDP and the UK has easily the largest financial services trade surplus in the world. London remains the largest center in the world for international financial services business and Londons pre-eminence in Europes financial services industry is increasing, with international banks centralizing many of their European operations in London.
Britains absence from the Euro has not prevented London from becoming effectively the international financial capital for the Euro; 31% of global foreign exchange trading of Euros is done in London. The United Kingdom has a very strong economic relationship with the United States.
The UK is the largest foreign investor in the United States and the US is the largest foreign investor in the UK. Nearly 45% of UK outward investment goes to the US and 40% of overseas direct investment in the UK is from the US. Around one million Americans are employed by UK companies and the same number of British people are employed by US businesses.
Source: Wikipedia, the fee encyclopedia
The City of London is a major business and commercial centre, alongside New York City as the leading centre of global finance. For over twenty-five years, the British economy has corresponded with what has been described by some since the 1980s as the Anglo-Saxon model, focusing on the principles of liberalisation, the free market, and low taxation and regulation. Based on market exchange rates, the United Kingdom is the fifth largest economy in the world, and the second largest in Europe after Germany. The British were the first in the world to enter the Industrial Revolution, and, like most industrialising countries at the time, initially concentrated on heavy industries such as shipbuilding, coal mining, steel production, and textiles. The empire created an overseas market for British products, allowing the United Kingdom to dominate international trade in the 19th century. However, as other nations industrialised and surplus labour from agriculture began to dry up, the United Kingdom began to lose its economic advantage. As a result, heavy industry declined, by degrees, throughout the 20th century. The British service sector, however, has grown substantially, and now makes up about 73% of GDP.
The service sector of the United Kingdom is dominated by financial services, especially in banking and insurance. London is the world’s largest financial centre with the London Stock Exchange, the London International Financial Futures and Options Exchange, and the Lloyd’s of London insurance market all based in The City. It also has the largest concentration of foreign bank branches in the world. In the past decade, a rival financial centre in London has grown in the Docklands area, with HSBC and Barclays Bank relocating their head offices there. Many multinational companies that are not primarily UK-based have chosen to site their European or rest-of-world headquarters in London: an example is the US financial services firm Citigroup. The Scottish capital, Edinburgh, also has one of the large financial centres of Europe. Tourism is very important to the British economy. With over 27 million tourists a year, the United Kingdom is ranked as the sixth major tourist destination in the world.
The British manufacturing sector, however, has greatly diminished, relative to the economy as a whole, since World War II. It is still a significant part of the economy, but only accounted for one-sixth of national output in 2003. The British motor industry is a significant part of this sector, although it has diminished with the collapse of MG Rover and most of the industry is foreign owned. Civil and defence aircraft production is led by the United Kingdom’s largest aerospace firm, BAE Systems, and the continental European firm EADS, the owners of Airbus. Rolls-Royce holds a major share of the global aerospace engines market. The chemical and pharmaceutical industry is also strong in the UK, with the world’s second and sixth largest pharmaceutical firms (GlaxoSmithKline and AstraZeneca, respectively) being based in the UK.
The Creative Industries accounted for 7.3% GVA in 2004 and grew at an average of 5% per annum between 1997 and 2004. The United Kingdom’s agriculture sector accounts for only 0.9% of the country’s GDP. The UK has large coal, natural gas, and oil reserves, although the natural gas and oil reserves are diminishing. Primary energy production accounts for about 10% of Gross domestic product (GDP), one of the highest shares of any industrial state. Government involvement throughout the economy is exercised by the Chancellor of the Exchequer (currently Gordon Brown) who heads HM Treasury, but the Prime Minister (currently Tony Blair), is First Lord of the Treasury; the Chancellor of the Exchequer is the Second Lord of the Treasury. However since 1997, the Bank of England, headed by the Governor of the Bank of England, has control of interest rates and other monetary policy. The UK government has greatly increased public sector spending (i.e. government spending of taxes) since 1995, and annual spending on investment in infrastructure has grown from £5.6 thousand million in 1997 to £29 thousand million in 2006.
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