Chapter 7. The Economy of Great Britain

The Economy of Great Britain

Introduction

In 1973 the Britain became a member of the various communities which are now absorbed into the European Union (EU). Europe is undergoing a continuing process of political and financial integration, which has increasingly affected British society and government. Britain's relationship with Europe has become highly uneasy. Whilst membership of the EU is not currently seriously challenged, increased integration—especially the question of whether Britain adopts the single European currency (the Euro)—has become highly controversial. 'Anti-Europeans' argue that British interests are inalienable, and must be defended at all costs, whilst 'pro-Europeans' believe that increased globalisation means that it is vital that Britain is at the heart of a Europe that can compete with the USA and East Asian economies.

Also of importance is Britain's relationship with the USA. This has often been characterised a 'special relationship', in which Britain has seen itself as the bridge between the USA and Europe. It has often been defined in the co-operation of governments and individual premieres, most notably in the mutual admiration of Margaret Thatcher and Ronald Reagan, and in occasions when the two countries have given each other high profile support. However, some sceptics argue that no such relationship exists.

The UK is the fourth largest economy in the world, with a gross domestic product (GDP) of US $1.93 trillion. It has the second largest economy in Europe (after Germany). The capital, London, is one of the two largest financial centres in the world, along with New York City. The UK economy is one of the strongest in Europe; inflation, interest rates, and unemployment remain low. Economic growth in the UK was 1.8 per cent in 2005 (Source: ONS, 2006) and grew by 2.7% in 2006. Gross Domestic Product (GDP) growth is expected to remain steady in 2007 with a forecast growth figure of 2.9%. (Gross Domestic Product (GDP) is the market value of all final goods and services produced and purchased within a country during a given time period.) Thus, the UK economy is complex. The features we focus on here are:

· Resources - land, labour and capital

· Production - primary, secondary and tertiary

· Foreigntrade - exports and imports of goods and services

· Economic growth and living standards

· Employment and unemployment

· Money and banking - financial institution and the general price level

· Government - the economic role of the state

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