Economic Overview

The UK appears to be the 6^th largest economy in the world according to nominal GDP (current prices, US dollars). Presently the UK’s economy encompasses those of its home nations - England, Scotland, Wales and Northern Ireland. The Isle of Man and the Channel Isles are also considered to be part of the British Isles but have offshore banking statuses.

As a member of the EU, the UK is part of a single market, which ensures the free movement of people, goods, services, and capital within member states. Nevertheless, the UK still maintains its own economy and has chosen to continue using the Pound Sterling as its national currency rather than converting to the Euro.

During its heyday as the British Empire, the UK was the largest and most influential economy in the world. As the birthplace of the first Industrial Revolution during the 18^th century, the UK ushered in what economic historians agree to be the most significant event in mankind’s history. The UK was also able to be at the forefront of technological advances during this time, which was a strong economic advantage over any other country in the world. However, as other countries began to catch up technologically wise, UK’s economy was greatly affected by the two World Wars and the breaking up of the British Empire. Although the UK economy has since recovered, it is unlikely to reclaim its former position as the top economic power in the world.

Today, the UK economy faces another struggle to recover from the 2008 financial crisis. Presently, the recovery effort has been sluggish. In 2011 a report by the Organization for Economic Co-operation and Development (OECD) ranked the UK as the slowest growing economy in the G7, with the exception of Japan.

The UK’s current inflation rate ( 2.60 percent in July of 2012) is threatening to sabotage the UK’s government austerity plans to keep interest rates under control. However, the IMF predicts that the UK economy will recover sufficiently enough for inflation rates to hit the government’s target of 2 percent by the end of 2012. In addition, the inflation rate is expected to remain consistent until 2015 at least.

In 2010, the UK had the sixth largest current account balance deficit in the world, behind the US, Spain, Italy, France and Brazil. UK’s austerity plan has been designed to reduce the debt. By 2015, UK’s current account balance deficit is expected to decrease by half.

The UK’s GDP is also expected to improve over the next years. By the end of 2015, UK’s GDP is expected to reach US$2.608 trillion. Similarly, the UK’s GDP per capita is likely to experience slow but steady growth annually during the same period. In 2015, UK’s GDP per capita will be the 22^nd highest in the world, coming in at US$40,545.95.

The UK’s GDP make-up is comprised of agriculture (1.4 percent), industries (22.1 percent) and services (77.1 percent). Despite only contributing 1.4 percent of the UK’s GDP in 2010, agriculture is still considered an important part of the UK’s economy and society as it produces 60 percent of the UK’s food needs. Agriculture in the UK is highly mechanized and efficient, combining advanced technology with modern farming techniques. Agriculture in the UK is also highly subsidized, both by the UK government and the EU’s Common Agricultural Policy.

Industries and manufacturing on the other hand are extremely important if the UK wishes to reduce its trade deficit. The UK is the sixth-largest manufacturer of goods in the world according to the value of its outputs. Within manufacturing, the production of automotive or aerospace equipment is a major contributor to the UK’s industries.

However, despite the historical importance of agriculture and industries, services remain the dominant component of the UK’s economy. Finance and banking are by far the UK’s most important services with London being one of the three major economic “command centers” alongside New York City and Tokyo. Important financial institutions located within London include the London Stock Exchange, the London International Financial Futures and Options Exchange, the London Metal Exchange, Lloyds of London, and the Bank of England.

Tourism is another extremely important service in the UK. With more than 28 million tourist arrivals in 2009, the tourism industry is worth nearly £80 million annually. The 2012 London Olympics are expected to be a boost to the UK’s economy – providing an additional US$2.457 billion to the economy over ten years.

Дата добавления: 2015-08-17