Economy of the United Kingdom

The economy of the United Kingdom is the world's sixth-largest national economy measured by both nominal GDP and purchasing power parity (PPP). The UK has the third-largest national economy in Europe measured by nominal GDP (after Germany and France) and the second-largest measured by PPP (after Germany). Its GDP per capita is ranked the 20th highest in the world in nominal terms and the 17th highest in PPP terms. The UK is a member of the Commonwealth of Nations, the European Union, the G7, the G8, the G20, the International Monetary Fund, the Organisation for Economic Co-operation and Development, the World Bank, the World Trade Organisation and the United Nations. The British economy is made up (in descending order of size) of the economies of England, Scotland, Wales and Northern Ireland.

In the 18th century the UK was the first country in the world to industrialise, and for much of the 19th century possessed a predominant role in the global economy.However, by the late 19th century, the Second Industrial Revolution in the United States and the German Empire caused an increasing challenge to Britain's role as the leader of the global economy. The costs of fighting both the First World War and the Second World War further weakened the relative economic position of the UK, and by 1945 Britain had been superseded by the United States as the chief player in the global economy. However, the UK still maintains a significant role in the world economy.

The UK is one of the world's most globalised countries. London is the world's largest financial centre alongside New York, has the largest city GDP in Europe and is home to the headquarters of more than 100 of Europe's 500 largest companies. The aerospace industry of the UK is the second- or third-largest aerospace industry in the world, depending upon the method of measurement. The British economy is boosted by North Sea oil and gas reserves, overall worth an estimated £250 billion in 2007.

The UK entered its worst recession since World War 2 in 2008. However the UK economy grew by 1.2 per cent in Q2 of 2010 and 0.8 per cent in Q3, the fastest consecutive growth in over 10 years, accelerating from the 0.4 per cent growth recorded in Q1 of 2010 and 0.4 per cent growth in Q4 of 2009. The U.K. economy has grown 2.8% since the end of the recession; the UK economy has recovered twice as fast as expected so far. The UK is currently ranked fourth in the world (and first in Europe) in the World Bank's Ease of Doing Business Index.

History

Economic history of the United Kingdom

Post-war recovery

Following the end of World War II, there was a long interval without a major recession (1945–1973) and a growth in prosperity in the 1950s and 1960s. According to the OECD, the annual rate of growth (percentage change) between 1960 and 1973 averaged 2.9%, although this figure was far behind the rates of other European countries such as France, West Germany and Italy.

However, following the severe shock of the 1973 oil crisis and the 1973–1974 stock market crash, the British economy had fallen into recession by the time Edward Heath's Conservative Party government had been ousted by the Labour Party as Harold Wilson moved into office for the second time. GDP had fallen by 1.1%, recording weaker growth than other European nations in the 1970s overall; even when the recession ended in 1975, the economy was still blighted by double-digit inflation and unemployment was rising, though the figures levelled off by the election of 1979.

Neoliberalism

However, the 1980s saw a strong reversal of fortunes for the British economy. A new period of neo-liberal economics began with the advent of the government of Margaret Thatcher who was elected in 1979. Most state-owned enterprises in the industrial and service sectors, which since the 1940s had been nationalised, were privatised. As a result, the British Government owned very few industries or businesses by the mid 1980s. GDP fell 5.9% at first then rose to 5% at its peak in 1988, according to the IMF, one of the highest rates of any European nations. as banks and other financial institutions in the UK enjoyed the liberalisation of the regulatory structures and greater freedom to explore new investment vehicles with less oversight. However, Mrs Thatcher's modernisation of the British economy was far from trouble free; her battle against inflation resulted in mass unemployment with the jobless count passing 3,000,000 by the start of 1982 and remaining above that level until the spring of 1987. This was largely due to the closure of many outdated factories and coalpits which were inefficient and no longer viable to keep open. Unemployment peaked at nearly 3,300,000 during 1984 but fell dramatically during the final three years of the decade, standing at just over 1,500,000 by the end of 1989. 

Another severe recession hit the British economy at the start of the 1990s, beginning in the summer of 1990 and lasting until the end of 1992. This recession was a global one, brought on by the savings and loan crisis in the United States of America, which caused the economy to shrink by 8%, while unemployment increased from around 1,700,000 at the start of the recession to nearly 3,000,000 at the end of it. The recession ended at the turn of 1993 and subsequent economic recovery was extremely strong. Furthermore, unlike the previous recession, there was a practically instant and substantial fall in unemployment, though it was not enough to prevent the Tory government (led since November 1990 by John Major) from a landslide election defeat to Tony Blair's Labour in May 1997. 

Blair was in power for 10 years and during his rule he saw 40 successive quarters of economic growth. In the second quarter of 2008, the economy finally endured a quarter of detraction. The previous 15 years had seen one of the highest economic growth rates of major developed economies during that time and certainly the strongest of any European nation. 

GDP growth had briefly reached 4% in the early 1990s, gently declining thereafter. Peak growth was relatively anaemic compared to past rates of growth, such as the 6.5% peak in the early 1970s, although over-all growth was more sustained than earlier. Annual growth rates averaged 2.68% between 1992-2007 according to the IMF, with the finance sector growth contributing a greater part than previously.

This boom ended in 2008 when the United Kingdom suddenly entered a recession brought about by the global financial crisis. Beginning with the collapse of Northern Rock, which was taken into public ownership in February 2008, other banks had to be partly nationalised. The Royal Bank of Scotland Group, which at its peak was the second largest bank in the UK and the fifth largest in the world by market capitalisation, was effectively nationalised on 13 October 2008, when the British Government announced it would take a stake of up to 58% in the Group. By mid 2009, the HM Treasury had a 70.33% controlling shareholding in RBS, and a 43% shareholding through UK Financial Investments Limited of Lloyds Banking Group, formerly the fifth largest banking group in the UK. This recession has seen unemployment rise substantially, from just over 1,600,000 in January 2008  to nearly 2,500,000 in October 2009 yet less so when compared to countries such as Germany, France or Spain.

The UK economy had been one of the strongest EU economies in terms of inflation, interest rates and unemployment, all of which remained relatively low until the 2008-09 recession. Unemployment has since reached a peak of just under 2.5 million (7.8%), the highest level since early 1990s although this rate remains far lower than many other European nations. However, interest rates have been slashed to 0.5%. In 2007, according to the International Monetary Fund, the United Kingdom had the ninth highest level of GDP per capita in the European Union in terms of purchasing power parity, after Luxembourg, Ireland, the Netherlands, Austria, Denmark, Sweden, Belgium and Finland. However, in common with the economies of other English-speaking countries, it has higher levels of income inequality than many European countries. During August 2008 the IMF warned that the UK economic outlook had worsened due to a twin shock: financial turmoil as well as rising commodity prices. Both developments harm the UK more than most developed countries, as the UK obtains revenue from exporting financial services while recording deficits in finished goods and commodities, including food.

In 2007, the UK had the world's third largest current account deficit, despite significant oil revenues, according to the IMF. This was mainly the result of a large deficit in the trade in manufactured goods. During May 2008, the IMF advised the UK government to broaden the scope of fiscal policy to promote external balance. Although the UK's "labour productivity per person employed" has been progressing well over the last two decades and has overtaken productivity in the united 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 21st on the Human Development Index.

Recent

UK exports of goods in 2005

The UK entered a recession in Q2 of 2008, according to the UK Office of National Statistics (ONS) and exited it in Q4 of 2009. The revised ONS figures of November 2009 showed that the UK had suffered six consecutive quarters of negative growth. As of the end of November 2009, the economy had shrunk by 4.9%, making the 2008-2009 recession the longest since records began. In December 2009, the Office of National Statistics revised figures for the third quarter of 2009 showed that the economy shrank by 0.2%, compared to a 0.6% fall the previous quarter.

On 23 January 2009, Government figures from the Office for National Statistics showed that the UK was officially in recession for the first time since 1991. It entered a recession in the final quarter of 2008, accompanied by rising unemployment which increased from 5.2% in May 2008 to 7.6% in May 2009. The unemployment rate among 18 to 24-year-olds has risen from 11.9% to 17.3%. Though initially Britain lagged behind other major economies including Germany, France, Japan, and the US which all returned to growth in the second quarter of 2009, the country eventually returned to growth in the last quarter of 2009. On January 26, 2010, it was confirmed that the U.K. had left its recession, the last major economy in the world to do so  In the 3 months to February 2010 the U.K. economy grew yet again by 0.4%  In Q2 of 2010 the economy grew by 1.2% the fastest rate of growth in 9 years, in Q3 of 2010 figures released showed the UK economy grew by 0.8%; this was the fastest Q3 growth in 10 years.

UK exports of services in 2005

It has been suggested that the UK initially lagged behind its European neighbours because the UK entered the 2008 recession later. However, German GDP fell 4.7% year on year compared to the UK's 5.1%, and Germany has now posted a second quarterly gain in GDP. Commentators suggest that the UK suffered a slightly longer recession than other large European countries, as a result of government policy dating back to the policies of the Thatcher government of 1979, in which UK governments have moved away from supporting manufacturing and focused on the financial sector. The OECD predicts that the UK will grow 1.6% in 2010. The unemployment rate recorded by the Labour Force Survey fell in the fourth quarter of 2009, the first of the big 3 economies in the EU to do so. Gross Domestic Product (GDP) decreased by a (second revision) figure of 0.2 per cent in the third quarter of 2009, after a decrease of 0.6 per cent in the second quarter, according to the Office for National Statistics (ONS). There was a 2.4% decline in the first quarter of 2009. The economy has now contracted 5.9% from its peak before the recession began, the BBC reports.

In October 2007, the International Monetary Fund (IMF) had forecast British GDP to grow by 3.1% in 2007 and 2.3% in 2008. However, GDP growth slowed to a fall of 0.1% in the April–June (second) quarter of 2008 (revised down from zero). In September 2008, the OECD forecast contraction for at least two quarters for the UK economy, possibly severe, placing its predicted performance last in the G7 of leading economies. Six quarters later the UK economy was still contracting, placing a question mark over OECD forecasting methods.

It has been argued that heavy government borrowing over the past cycle has led to a severe structural deficit, reminiscent of previous crises, which will inevitably exacerbate the situation and place the UK economy in an unfavourable position compared to its OECD partners as attempts are made to stimulate recovery, other OECD nations having allowed greater room for manoeuvre thanks to contrasting policies of relatively tighter fiscal control prior to the global downturn.

In May 2009 the European Commission (EC) stated: "The UK economy is now clearly experiencing one of its worst recessions in recent history." The EC expected GDP to decline 3.8pc in 2009 and projected that growth will remain negative for the first three quarters of 2009. It predicted two quarters of "virtual stagnation" in late 2009-early 2010, followed by a gradual return to "slight positive growth by late 2010".

The FTSE 100 and FTSE 250 rose to their highest levels in a year on the 9th of September 2009 with the FTSE 100 breaking through 5,000 and the FTSE 250 breaking through 9,000. On the 8th of September the National Institute of Economic and Social Research believed that the economy had grown by 0.2% in the three months to August, but was proved wrong. In its eyes the UK recession was officially over, although it did warn that "normal economic conditions" had not returned. On the same day, figures also showed UK manufacturing output rising at its fastest rate in 18 months in July. On the 15th of September 2009 the EU incorrectly predicted the UK is expected to grow by 0.2% between July and September, on the same day the governor of the Bank of England, Mervyn King said the UK GDP is now growing.[ Unemployment has recently fallen in Wales.

Many commentators in the UK were certain that the UK would leave recession officially in Q3, believing that all the signs showed that growth was extremely likely, although in fact government spending had been insufficient to rescue the economy from recession at that point. Figures in fact showed no growth in retail sales in September 2009, and a 2.5% decline in industrial output in August. The revised UK figures confirmed that the economy shrank in Q3 of 2009 by 0.2%, although government spending on cash for the car scrappage scheme helped. Yet this temporary lapse was followed by a solid 0.4% growth in the Q4. UK manufacturers' body, the EEF, appealed for more cash from the government: "Without an extension of support for business investment in the pre-Budget statement next month, it will be difficult to see where the momentum for growth will come from." 

Moody's, an American credit rating organisation, gave the UK an AAA credit rating in September 2010, forecasting stable finances largely driven by governmental action. It also reported that the economy is flexible to grow in the future and that household debts and poor exports were large growth-reducing factors, as well as its financial sector.

Macroeconomic trend

This is a table of the trend of gross domestic product of United Kingdom at market prices estimated by the International Monetary Fund with figures in millions of pounds sterling.

Year Gross domestic product US dollar exchange Inflation index

(2000=100) Per Capita Income

(as % of USA)

1925 4,466 £0.21 3 61.79

1930 4,572 £0.21 3 66.08

1935 4,676 £0.20 2 85.67

1940 7,117 £0.26 3 74.28

1945 9,816 £0.25 4 50.93

1950 13,162 £0.36 5 38.26

1955 19,264 £0.36 6 42.54

1960 25,678 £0.36 7 47.86

1965 35,781 £0.36 9 49.96

1970 51,515 £0.42 11 44.04

1975 105,773 £0.45 20 55.54

1980 230,695 £0.42 43 78.57

1985 354,952 £0.77 60 46.84

1990 557,300 £0.56 76 76.62

1995 718,383 £0.63 92 71.84

2000 953,576 £0.65 100 72.29

2005 1,209,334 £0.54 107 90.17

Wikinews has related news: UK enters recession

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

Sectors

Agriculture, hunting, forestry, and fishing

Agriculture in the United Kingdom and Forestry in the United Kingdom

Agriculture is intensive, highly mechanised, and efficient by European standards, producing about 60% of food needs, with less than 1.6% of the labour force (535,000 workers). It contributes around 0.6% of British national value added. Around two-thirds of the production is devoted to livestock, one-third to arable crops. Agriculture is subsidised by the European Union's Common Agricultural Policy.

The UK retains a significant, though reduced, fishing industry. Its fleets, based in towns such as Kingston upon Hull, Grimsby, Fleetwood, Great Yarmouth, Peterhead, Fraserburgh, and Lowestoft, bring home fish ranging from sole to herring.

The Blue Book 2006 (page 110) reports that the "Agriculture hunting, forestry and fishing" added gross value of £10,323 million (at 2006 prices) to the UK economy in 2004.

Construction

Construction industry of the United Kingdom

The Blue Book 2006 reports that this industry added gross value of £64,747 million to the UK economy in 2004. It is the fastest growing sector of the economy - after the 2010 Recession.

Production industries

Electricity, gas and water supply

Energy in the United Kingdom

The Blue Book 2006 reports that this sector added gross value of £17,103 million to the UK economy in 2004. The United Kingdom is expected to launch the building of new nuclear reactors to replace existing generators and to boost UK's energy reserves.

Manufacturing

 Manufacturing in the United Kingdom

Rolls-Royce Trent 900 engine

In 2003, manufacturing industry accounted for 16% of national output in the UK and for 13% of employment. 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. Manufacturing is an important sector of the modern British economy and there is a considerable amount of published research on the subject of the factors affecting its growth and performance. After the 2010 Recession it is one of the fastest growing sectors of the economy - experiencing a mini-boom.

The aerospace industry of the UK is the second- or third-largest aerospace industry in the world, depending upon the method of measurement. The industry employs around 113,000 people directly and around 276,000 indirectly and has an annual turnover of around £20 billion. British companies with a major presence in the industry include BAE Systems (the world's second-largest defence contractor) and Rolls-Royce (the world's second-largest aircraft engine maker). Foreign aerospace companies active in the UK include EADS and its Airbus subsidiary, which employs over 13,000 in the UK.

The pharmaceutical industry employs around 67,000 people in the UK and in 2007 contributed £8.4 billion to the UK's GDP and invested a total of £3.9 billion in research and development. In 2007 exports of pharmaceutical products from the UK totalled £14.6 billion, creating a trade surplus in pharmaceutical products of £4.3 billion. The UK is home to GlaxoSmithKline and AstraZeneca, respectively the world's third- and seventh-largest pharmaceutical companies.

The British motor industry remains a significant part of the sector, although it has diminished with the collapse of the MG Rover Group and most of the industry is foreign owned.

Mining and quarrying

 Mining in the United Kingdom and North Sea oil

Kellingley Colliery lies on the border of North and West Yorkshire. Although coal mining has been scaled back in the UK, it is still prevalent in these areas.

The UK has a small coal reserve along with significant, yet continuously decliningnatural gas and oil reserves. Over 400 million tonnes of proven coal reserves have been identified in the UK. Coal mining was a significant part of the UK economy, however scaling back in the industry during the 1980s and 1990s means that it now only exists in Warwickshire and Yorkshire. In 2004, total UK coal consumption (including imports) was 61 million tonnes, allowing the UK to be self sufficient in coal for just over 6.5 years, although at present extraction rates it would take 20 years to mine. The Blue Book 2006 reports that this sector added gross value of £21,876 million to the UK economy in 2004.

An alternative to coal-fired electricity generation is underground coal gasification (UCG). UCG involves injecting steam and oxygen down a borehole, which extracts gas from the coal and draws the mixture to the surface—a potentially very low carbon method of exploiting coal. Identified onshore areas that have the potential for UGC amount to between 7 billion tonnes and 16 billion tonnes. Based on current UK coal consumption, these volumes represent reserves that could last the UK between 200 and 400 years.

Service industries

The service sector is the dominant sector of the UK economy, a feature normally associated with the economy of a developed country, and makes up about 73% of GDP. This means that the Tertiary sector jobs outnumber the Secondary and Primary sector jobs. The service sector is dominated by financial services, especially in banking and insurance. London is a major centre for international business and commerce and is the leader of the three "command centres" for the global economy (along with New York City and Tokyo). It is also a major legal centre, with four of the six largest law firms in the world headquartered 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 creative industries accounted for 7% GVA in 2005 and grew at an average of 6% per annum between 1997 and 2005.

Tourism is very important to the British economy. With over 27 million tourists arriving in 2004, the United Kingdom is ranked as the sixth major tourist destination in the world. London, by a considerable margin, is the most visited city in the world with 15.6 million visitors in 2006, ahead of 2nd placed Bangkok (10.4 million visitors) and 3rd placed Paris (9.7 million).

Education, health and social work

Main articles: Education in the United Kingdom and Healthcare in the United Kingdom

In 2008 the education, health and social work sector had a total gross value added of around £170.3 billion, of which around £145 billion was compensation to employees. In 2008 the sector had a total gross capital formation of around £17.7 billion.

In 2008 health and social work had a gross value added of around £93.7 billion. In the UK the majority of the heathcare sector consists of the state funded and operated National Health Service (NHS), which accounts for over 80% of all healthcare spending in the UK and has a workforce of around 1.5 million, making it the largest employer in Europe. The NHS operates independently in each of the four constituent countries of the UK. The NHS in England is by far the largest of the four parts and had a turnover of £92.5 billion in 2008.

In 2008 education had a gross value added of around £76.4 billion.

Financial and business services

The City of London is the world's largest financial centre alongside New York

London is a global hub for financial services and commerce, ranking top along-side New York on the Global Financial Centres Index for competitiveness. Based on two districts, the country's capital houses 'The City' (the City of London) and the Docklands (particularly around Canary Wharf). The City houses the London Stock Exchange (shares and bonds), London Metal Exchange (base metal and plastic futures), 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 and financial institutions (such as Barclays Bank, Citigroup and HSBC). There are now over 500 banks with offices in the City and Docklands, with most 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. It is also home to the London International Financial Futures and Options Exchange and the Lloyd's of London insurance market. The Alternative Investments Market has acted a growth market over the past decade, allowing London to expand as an international equity centre for smaller firms. The United Kingdom' financial exports contribute significantly towards the balance of payments. The UK has had an expanding export business in financial services, at least partly due to a regulatory structure the Government now accepts as inadequate.

Several other major UK cities have large financial sectors and related services, most notably Leeds, which is now the UK's largest centre for business and financial services outside London, and the largest legal centre outside London, as well as Edinburgh, which has one of the large financial centres of Europe and is the headquarters of the Royal Bank of Scotland Group, one of the world's largest banks, and the third largest bank in Europe. It is also the headquarters of HBOS (owners of the Bank of Scotland) and Standard Life Insurance. 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.

Hotels and restaurants

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

[edit]Other social and personal services

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

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.

Real estate and renting activities

MediaCityUK in Salford, Greater Manchester

The UK property market boomed for the seven years up to 2008 and in some areas property trebled in value over that period. The increase in property prices had a number of causes: sustained economic growth, low interest rates, the growth in property investment, and planning restrictions on the supply of new housing.

UK property market analysts have revised previously negative assessments of the market, with most subsequently predicting continued modest growth in prices in the mid-term. However, around September 2007, house prices began to fall consistently, arguably contributing to the negative UK economic growth of the 3rd Quarter 2008 .

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 five times their annual salary), are now better placed to enter the property market.

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.

The paucity of finance available to homebuyers by the self-regulation of the banks following the collapse of the financial system in 2007 continues to contribute to a very much diminished demand for housing in the UK with sales volumes around half of the pre-crash level. With many sellers reluctant to drop their price, there is a chronic over-supply of housing on the market at prices in excess of demand (as of September 2009), leading to the average time on the market for residential property to be over 12 months (well above the long term trend). This situation has arisen partly because of the deferred repayment windows created by the government forcing the courts to delay possession orders. As the regulatory framework of the banks is in concordance with Basel II, then the demand for UK residential property is likely to remain very subdued in comparison to pre credit-crunch lending for many years to come. As the forced sellers in the market increase when the repayment deferrals cease, in combination with other forced sellers (death and divorce), many economists predict that the worst of the crash in UK residential property is yet to be realised. This is in keeping with other major economies that experienced rapid house price growth over the last decade; They have seen larger scale falls in prices that have yet to materialise in the UK, as of September 2009.

Telecommunications in the United Kingdom and Transport in the United Kingdom

Heathrow Terminal 5 building. London Heathrow Airport has the most international passenger traffic of any airport in the world.

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.

The Highways Agency is the executive agency responsible for trunk roads and motorways in England apart from the privately owned and operated M6 Toll. The Department for Transport states that traffic congestion is one of the most serious transport problems and that it could cost England an extra £22 billion in wasted time by 2025 if left unchecked. According to the government-sponsored Eddington report of 2006, congestion is in danger of harming the economy, unless tackled by road pricing and expansion of the transport network.

The Scottish transport network is the responsibility of the Scottish Government's Enterprise, Transport and Lifelong Learning Department with Transport Scotland being the Executive Agency that is accountable to the Cabinet Secretary for Finance and Sustainable Growth for Scotland's trunk roads and rail networks. Scotland's rail network has around 340 railway stations and 3,000 kilometres of track with over 62 million passenger journeys made each year. In 2008, the Scottish Government set out investment plans for the next 20 years, with priorities to include a new Forth Road Bridge and electrification of the rail network.

Across the UK, there is a radial road network of 46,904 kilometres (29,145 mi) of main roads with a motorway network of 3,497 kilometres (2,173 mi). There are a further 213,750 kilometres (132,818 mi) of paved roads. The rail network of 16,116 km (10,072 miles) in Great Britain and 303 route km (189 route mi) in Northern Ireland carries over 18,000 passenger trains and 1,000 freight trains daily. Urban rail networks are well developed in London and other cities. There was once over 48,000 route km (30,000 route mi) of rail network in the UK, however most of this was reduced over a time period from 1955 to 1975, much of it after a report by a government advisor Richard Beeching in the mid 1960s (known as the Beeching Axe). Plans are now being considered to build new high speed lines by 2025.

London Heathrow Airport, located 15 miles (24 km) west of the capital, is the UK's busiest airport and has the most international passenger traffic of any airport in the world. It is the hub for the flag carrier British Airways, as well as Virgin Atlantic, and BMI.

[edit]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.

Currency

Main article: Pound sterling

The Bank of England; the central bank of the United Kingdom.

London is the world capital for foreign exchange trading. The highest daily volume, counted in trillions of dollars US, is reached when New York enters the trade. The currency of the UK is the pound sterling, represented by the symbol £. The Bank of England is the central bank, responsible for issuing currency. Banks in Scotland and Northern Ireland retain the right to issue their own notes, subject to retaining enough Bank of England notes in reserve to cover the issue. Pound sterling is also used as a reserve currency by other governments and institutions, and is the third-largest after the U.S. dollar and the euro.

The UK chose not to join the euro at the currency's launch. The government of former Prime Minister Tony Blair had pledged to hold a public referendum for deciding membership should "five economic tests" be met. Until relatively recently there was debate over whether or not the UK should abolish its currency Pound Sterling and join the Euro. In 2007 the British Prime Minister, Gordon Brown, pledged at the time to hold a public referendum based on certain tests he set as Chancellor of the Exchequer. When assessing the tests, Gordon Brown concluded that while the decision was close, the United Kingdom should not yet join the Euro. He ruled out membership for the foreseeable future, saying that the decision not to join had been right for Britain and for Europe.] In particular, he cited fluctuations in house prices as a barrier to immediate entry. Public opinion polls have shown that a majority of Britons have been opposed to joining the single currency for some considerable time and this position has now hardened further. In 2005, more than half (55%) of the UK were against adopting the currency, while 30% were in favour. The current government, a Conservative and Liberal Democrat coalition, is 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%

2008 £0.5499 $1.835 tbc £0.7964 €1.226 tbc

1 GBP in USD since 1971

Source: OANDA.COM Historical Currency Converter

For consistency and comparison purposes, coefficient of variation is measured on both the "per pound" ratios, although it is conventional to show the forex rates as dollars per pound and pounds per euro.

National and regional variation

 Ceremonial counties in England by gross value added

A map of the UK divided by the average GDP per capita in 2007 (in euros) showing the distribution of economic activity

The strength of the UK economy varies from country to country and from region to region. Excluding the effects of North Sea Oil and Gas (officially included in the Extra-regio), England has the highest Gross value added (GVA) with Scotland close behind, though Scotland has a higher figure once oil and gas are assigned by country.Scotland had the highest rate of growth over the preceding 12 months, at 4.7%, ahead of even the best performing region of England which was London with growth of 4.1%. GVA per capita figures for 2008 for the four countries of the United Kingdom (excluding oil and gas) are:

Rank Place GVA per capita

in pounds

1 England 21 020

2 Scotland 20 066

3 Northern Ireland 16 188

4 Wales 15 237

Within England, GVA per capita is highest in London. The following table shows the GVA (2008) per capita of the 9 statistical regions of England (NUTS).

Rank Place GVA per capita

in pounds

1 Greater London 34 786

2 South East England 21 688

3 East of England 19 473

4 South West England 18 782

5 East Midlands 18 041

6 North West England 17 555

7 West Midlands 17 463

8 Yorkshire and the Humber, England 17 096

9 North East England 15 887

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. Edinburgh is also one of the largest financial centres in Europe.

Government involvement

 United Kingdom budget

Offices of the Defence Equipment and Support in Filton. The site employs over 4,000 people and manages procurement contracts for the British Armed Forces

Government involvement throughout the economy is exercised by the Chancellor of the Exchequer who heads HM Treasury, but the Prime Minister is First Lord of the Treasury; the Chancellor of the Exchequer is the Second Lord of the Treasury. In recent years, the UK economy has been managed in accordance with principles of market liberalisation and low taxation and regulation. Since 1997, the Bank of England's Monetary Policy Committee, headed by the Governor of the Bank of England, has been responsible for setting interest rates at the level necessary to achieve the overall inflation target for the economy that is set by the Chancellor each year. The Scottish Government, subject to the approval of the Scottish Parliament, has the power to vary the basic rate of income tax payable in Scotland by plus or minus 3 pence in the pound, though this power has not yet been exercised.

In the 20 year period from 1986/87 to 2006/07 govenment spending in the UK averaged around 40 per cent of GDP. As a result of the 2007-2010 financial crisis and the late-2000s global recession govenment spending increased to a historically high level of 48 per cent of GDP in 2009-10, partly as a result of the cost of a series of bank bailouts. In July 2007, the UK had government debt at 35.5% of GDP. This figure rose to 56.8% of GDP by July 2009. As of June 2010 there were approximately 6,051,000 public sector employees in the UK (compared to approximately 23,107,000 private sector employees).

Taxation and borrowing

Taxation in the United Kingdom

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%

2009/10 57% 68%

(Source: HM Treasury Public Finances Databank)

Economic indices

The money Gross Domestic Product (GDP) for the United Kingdom, at market prices, in 2009 was £1 396 billion (or $2 003 billion) according to the Office for National Statistics in February 2010.

Nominal GDP 2000 to 2009

Year GDP (billions of GBP) GDP Change

2000 3.9%

2001 2.5%

2002 2.1%

2003 2.8%

2004 3.0%

2005 2.2%

2006 2.9%

2007 2.6%

2008 1 448 0.7%

2009 1 396 -4.9% 

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 368.6 TWh (2007 est.) 

Electricity production composition

fossil fuel

hydro

nuclear

renewables

imports (2004)

74.13%

1.1%

19.26%

3.55%

1.96%

Electricity consumption 345.8 TWh (2007 est.)

Electricity exports 1.272 TWh (2008 est.) 

Electricity imports 12.29 TWh (2008 est.) 

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 £221bn.

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.

Poverty

 Poverty in the United Kingdom

The United Kingdom is a developed country with social welfare infrastructure, thus discussions surrounding poverty tend to be of relative poverty rather than absolute poverty. According to the OECD, the UK is in the lower half of developed country rankings for poverty rates, doing better than Germany, Italy and the US and less well than France, Austria, Hungary, Slovakia and the Scandinavian countries.

The poverty line in the UK is commonly defined as being 60% of the median household income. In 2007-2008, this was calculated to be £115 per week for single adults with no dependent children; £199 per week for couples with no dependent children; £195 per week for single adults with two dependent children under 14; and £279 per week for couples with two dependent children under 14. In 2007-2008, 13.5 million people, or 22% of the population, lived below this line. This is a higher level of relative poverty than all but four other EU members. In the same year, 4.0 million children, 31% of the total, lived in households below the poverty line, after housing costs were taken into account. This is a decrease of 400,000 children since 1998-1999.

(source:wikipedia)