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ECONOMY OF UNITED KINGDOM

HISTORY
1945 to 1979 Following the end of the Second World War, the United Kingdom enjoyed a long period without a major recession (from 1945 to 1973) and a rapid 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 1973 oil crisis and the 19731974 stock market crash, the British economy fell into recession and the government of Edward Heath was ousted by the Labour Party under Harold Wilson. Wilson formed a minority government on 4 March 1974 after the general election on 28 February ended in a hung parliament. Wilson subsequently secured a three seat majority in a second election in October that year. The UK recorded weaker growth than many other European nations in the 1970s; even after the early 1970s recession ended, the economy was still blighted by rising unemployment and double-digit inflation, which exceeded 20% more than once after 1973 and was rarely below 10% after this date. In 1976, the UK was forced to request a loan of 2.3 billion from the International Monetary Fund. The then Chancellor of the Exchequer Denis Healey was required to implement public spending cuts and other economic reforms in order to secure the loan. Following the Winter of Discontent, the government of James Callaghan lost a vote of no confidence in March 1979. This triggered the May 1979 general election which resulted in Margaret Thatcher's Conservative Party forming a new government. 1979 to 1997 A new period of neo-liberal economics began in 1979 with the election of Margaret Thatcher who won the general election on 3 May that year to return the Conservative Party to government after five years of Labour government. During the 1980s most state-owned enterprises were privatised, taxes cut and markets deregulated. GDP fell 5.9% initially but growth subsequently returned and rose to 5% at its peak in 1988, one of the highest rates of any European nation. However, Thatcher's modernisation of the British economy was far from trouble free; her battle against inflation resulted in a substantial increase in unemployment from

1.5 million in 1979 to over 3 million by the start of 1982. This increase was substantially due to government economic policy which resulted in the closure of outdated factories and coal pits which were no longer economically viable; this process continued for most of the 1980s. Unemployment peaked at nearly 3.3 million during 1984 before falling dramatically in the final three years of the decade, standing at just over 1.6 million by the end of 1989.[52] However, the British economy slid into another recession in late 1990, concurrently with a global recession, and this caused the economy to shrink by a total of 8% from peak to trough and unemployment to increase from around 1.6million in the spring of 1990 to nearly 3 million by the end of 1992. The subsequent economic recovery was extremely strong, and unlike after the early 1980s recession, the recovery saw a rapid and substantial fall in unemployment, which was down to 1.7 million by 1997, although the popularity of the Conservative government failed to improve with the economic upturn. 1997 to 2008

Unemployment rate, 2002-2012


The Labour Party, led by Tony Blair since the death of his predecessor John Smith three years earlier, returned to power in May 1997 after 18 years in opposition.] During Blair's 10 years in office there were 40 successive quarters of economic growth, lasting until the second quarter of 2008, helped by Blair's decision to keep taxes relatively low and abandon traditional Labour policies including public ownership of industries and utilities. 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% per year in the early 1990s, gently declining thereafter. Peak growth was relatively anaemic compared to prior decades, such as the 6.5% pa peak in the early 1970s, although growth was smoother and more consistent. Annual growth rates averaged 2.68% between 19922007 according to the IMF, with the finance sector accounting for a greater part than previously. This extended period of growth ended in 2008 when the United Kingdom suddenly entered a recession its first for nearly two decades 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 fifth-largest in the world by market capitalisation, was effectively nationalised on 13 October 2008. By mid-2009, HM Treasury had a 70.33% controlling shareholding in RBS, and a 43% shareholding, through UK Financial Investments Limited, in Lloyds Banking Group. The recession saw unemployment rise from just over 1.6 million in January 2008 to nearly 2.5 million by October 2009. The UK economy had been one of the strongest economies in terms of inflation, interest rates and unemployment, all of which remained relatively low until the 200809 recessions. Unemployment has since reached a peak of just under 2.5 million (7.8%), the highest level since the early 1990s, although still far lower than some other European nations. However, interest rates have reduced to 0.5% pa. During August 2008 the IMF warned that the UK economic outlook had worsened due to a twin shock: financial turmoil and rising commodity prices. [57] 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, due mainly to a large deficit in manufactured goods. During May 2008, the IMF advised the UK government to broaden the scope of fiscal policy to promote external balance.[58] Although the UK's "labour productivity per person employed" has been progressing well over the last two decades and has overtaken productivity in Germany, it still lags around 20% behind France, 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). In 2010, the United Kingdom ranked 26th on the Human Development Index.

2008 to present

The labour productivity level of United Kingdom is one of the lowest in Western Europe. OECD, 2012

Inflation-adjusted Gross Domestic Product for the United Kingdom and United States, 2007-2012 (pre-2007 peak=100)

Business investment (blue) and profits (red), both as proportion of gross domestic product, 1997-2012. (Compare to US data) In general, the level of economic output is set by business expenditure. The UK entered a recession in Q2 of 2008, according to the Office for National Statistics and exited it in Q4 of 2009. The subsequently revised ONS figures show that the UK suffered six consecutive quarters of negative growth, making it the longest recession since records began. As of the end of Q4 2009, revised statistics from the Office for National Statistics demonstrate that the UK economy shrank by 7.2% from peak to trough. Support for the Labour government (led by Gordon Brown after Tony Blair's resignation in June 2007) slumped during the financial crisis of 2008 and 2009, and the general election of May 2010 ended in a hung parliament. The Conservatives, led by David Cameron since the end of 2005, had the largest number of seats, but came 20 seats short of an overall majority. This resulted in a coalition being formed with the Liberal Democrats in order for the Conservatives to take government within four days of the election results being announced. In order to ease the large deficit created under the previous Labour government, the Conservative-led government has made deep spending cuts since taking office. Within three years, this had led to public sector job losses well into six figures, but the private sector has enjoyed strong job growth and by October 2013 unemployment had fallen back below 2.5 million for the first time in four years. The Blue Book 2013 confirms that UK growth in Q2 of 2013 was 0.7%, and that the volume of output of GDP remains 3.2% below its pre-recession peak; The UK economy's recovery has thus been more lacklustre than previously thought.[64] Furthermore, The Blue Book 2013 demonstrates that the UK experienced a deeper initial downturn than all of the G7 economies save for Japan, and has experienced a slower recovery than all but Italy.

In Q1 of 2012, the UK economy was thought to have entered a double-dip recession by posting two consecutive negative quarters of growth. [65]However, revised figures by the Office for National Statistics show that in fact the UK economy stagnated in Q1 with growth at 0.0%, thereby not fulfilling the technical requirement of two consecutive quarters of negative growth for a recession. A report released by the Office of National Statistics on 14 May 2013 revealed that over the six-year period between 2005 and 2011, the UK dropped from 5th place to 12th place in terms of household income on an international scale the drop was partially attributed to the devaluation of sterling over this time frame. However, the report also concluded that, during this period, inflation was relatively less volatile, the UK labour market was more resilient in comparison to other recessions, and household spending and wealth in the UK remained relatively strong in comparison with other OECD countries.[67] According to a report by Moody's Corporation, Britain's debt-to-GDP ratio continues to increase in 2013 and is expected to reach 93% at the end of the year. The UK has lost its triple-A credit rating on the basis of poor economic outlook. 2013 Economic Growth has surprised many Economists, Ministers and the OBR in the 2013 budget projected annual growth of just 0.6%, In 2013 Q1 the economy grew by 0.4%, Q2 the economy grew by 0.7% and Q3 the economy is predicted to have grown at 0.8%.

The United Kingdoms economic freedom score is 74.8, making its economy the 14th freest in the 2013 Index. Its score is 0.7 point higher than last year, reflecting efforts to improve control of government spending. The U.K. is ranked 5th out of 43 countries in the Europe region.With a legal system that enforces contracts and property rights effectively, the U.K. has long benefited from openness to global trade and investment. Reforms undertaken in recent years include measures to curb the growth of government spending and a series of corporate tax rate cuts that will continue until 2014. Ending the steady erosion of economic freedom during the past five years, Britains overall score took an upturn in the 2013 Index.

However, the British economy continues to struggle to emerge from the slowdown, with the prospects for swift growth complicated by the ongoing sovereign debt crisis, and significant structural reforms are still needed. the soundness of public finances remains especially critical and will sustained commitment to real downsizing of government spending.

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Background
Following the market reforms instituted by Prime Minister Margaret Thatcher in the 1980s, Britain experienced steady economic growth, outpacing other large European Union economies throughout the 1990s. However, the governments size and spending grew significantly under successive Labour governments. The budget deficit was exacerbated by Labours bailout of several British banks in 2008 and by excessive government borrowing. Prime Minister David Camerons Conservative Liberal Democrat coalition government, formed after the 2010 general election, has implemented austerity measures that have cut public services but maintained government spending on the National Health Service and international development. The economy returned to recession in early 2012. Cameron vetoed Britains participation in the EUs Fiscal Compact and has been at the forefront of attempts to cap the EUs annual and long-term budgets.

The rule of law


The rule of law is well established within an independent legal framework. Private property rights and contracts are very secure, and the court system is efficient. Protection of intellectual property rights is effective. Strong anti-corruption measures discourage bribery of public officials and support integrity within the government. The Bribery Act, which came into force in 2011, provides a modern legal framework to combat bribery.

Limited government
The top income tax rate is 50 percent, and the top corporate tax rate has been reduced to 24 percent. Other taxes include a value-added tax (VAT) and an environment tax. The overall tax burden equals 34.3 percent of total domestic income. As a result of austerity measures imposed in 2010, government spending has fallen to 49.1 percent of GDP, and the deficit has begun to narrow. Public debt has climbed to over 80 percent of total domestic output.

Regulatory efficiency
The efficient and transparent regulatory framework encourages entrepreneurship. With no minimum capital required, it takes 13 days to establish a business. The labour market is relatively flexible. The non-salary cost of employing a worker is moderate, and severance payments are not overly burdensome. The government controls virtually all prices for health care services. Monetary stability has been well maintained.

Open markets
The trade-weighted average tariff rate is a low 1.6 percent as in other members of the European Union, with relatively few non-tariff barriers that increase the cost of trade. Under the efficient investment regime, foreign investment is welcomed without heavy bureaucratic interference. The overall stability of the financial system has been restored. The banking sector, although under strain, remains competitive.

UNITED KINGDOM IMPORTS


Imports in the United Kingdom increased to 45011 GBP Million in September of 2013 from 44802 GBP Million in August of 2013. Imports in the United Kingdom is reported by the Office for National Statistics. From 1955 until 2013, the United Kingdom Imports averaged 21627.2 GBP Million reaching an all time high of 45263.0 GBP Million in March of 2013 and a record low of 1031.0 GBP Million in June of 1955. United Kingdom imports mostly manufactured products (83 percent of total imports) and raw metals and fuels (12 percent of total imports). The most important manufactured products are Computer, Electronic and Optical Products (11 percent); Transports Equipment (14 percent); Chemical Products; Food and Beverages; Chemical products; Apparel, Textiles and Leather; Basics Metals and Refined Petroleum Products. U.K. main import partners are China (8 percent), United States (7 percent), Norway (6 percent) and European Union countries with Germany, Netherlands, France, Belgium, Italy and Ireland being the most important. This page contains United Kingdom Imports - actual values, historical data, forecast, chart, statistics, economic calendar and news. 2013-11-22
CO UNT RY UNITED KINGDOM C AT E G O R Y IMPORTS D AT E S 1955 - 2013 AC T U AL 45011.00 HI G HE S T 45263.00 L OW E S T 1031.00 UNI T GBP MILLION F RE Q UE NCY MONTHLY

UNITED KINGDOM EXPORTS


Exports in the United Kingdom increased to 41743 GBP Million in September of 2013 from 41482 GBP Million in August of 2013.Exports in the United Kingdom are reported by the Office for National Statistics. From 1955 until 2013, the United Kingdom Exports averaged 20403.2 GBP Million reaching an all time high of 43276.0 GBP Million in June of 2013 and a record low of 962.0 GBP Million in June of 1955. 85 percent of U.K. exports are manufactured products. Within this category the most important are: Transport Equipment (16 percent); Chemical Products (10 percent of total exports); Machinery and Equipment (9 percent); Computer, Electronic and Optical Products (8 percent); Pharmaceutical Products (8 percent); Refined Petroleum Products (7 percent) and Basic Metals (6 percent). Main export partners are United States (13 percent) and Euro Area countries with Germany, Netherlands, France, Ireland, Belgium, Italy and Spain accounting for more than 40 percent of total exports. This page contains - United Kingdom Exports - actual values, historical data, forecast, chart, statistics, economic calendar and news. 2013-11-22
CO UNT RY UNITED KINGDOM C AT E G O R Y EXPORTS D AT E S 1955 - 2013 AC T U AL 41743.00 HI G HE S T 43276.00 L OW E S T 962.00 UNI T GBP MILLION F RE Q UE NCY MONTHLY

REFRENCES

http://en.wikipedia.org/wiki/Economy_of_the_United_ Kingdom

http://www.tradingeconomics.com/unitedkingdom/exports

http://www.tradingeconomics.com/unitedkingdom/imports