The U.K.

Economy
Unit 5

Contents: 1. A Brief Introduction to U.K. Economy 2. Absolute Decline and Relative Decline 3. Recent History 4. The Current U.K. Economy 5. Case Study: The Aerospace

A Brief Introduction to U.K. Economy

Britain was the first country to start the industrial revolution in the 18th century. Britain is a capitalist country. The characteristic of the economic system of capitalism is that it protects private enterprise. Britain began its market economy about 300 years ago.

A Brief Introduction to U.K. Economy

Britain is a trading nation. (Why?) In Britain, the domestic market is limited. So, it has to find more markets outside the country. It has to find more markets in the world. Eg. Each year Britain exports some one-third of its gross domestic product. It is the fourth largest exporter in the world. Its exports account for about 5% of the worlds total trade volume.

A Brief Introduction to U.K. Economy

Britain is also one of the worlds largest importers. Because Britain lacks raw materials, or we may say its home supply of raw materials is inadequate, Britain has to buy up a large proportion of the raw materials sold in the world market. Britains major trading partners are industrialized countries.

Absolute Decline and Relative Decline

What is absolute decline? What is relative decline? Does British economy belong to the former one or the latter one?

Absolute Decline and Relative Decline

Britain was the first country in the world to start the industrial revolution. It took the lead in the development of economy in the world in the 19th century. But by 1900, it was overtaken by both the US and Germany. In the Post-war period, the U.K. economy experienced boom and bust (the fluctuation of U.K. economy).

Absolute Decline and Relative Decline

The reasons of the economic decline:

1) Being in debt; 2) The end of the empire; 3) Large military spending; 4) A catching-up by Germany and Japan; 5) Lack of a close relationship between industry and banks.

Absolute Decline and Relative Decline

A Characteristic of the UK economy----A low rate of domestic industrial investment coupled with a very high rate of overseas investment.

Recent History

Britains slow growth of productivity, soaring inflation, and large unemployment gave birth to the mocking term British Disease. In 1979, Margaret Thatcher became Britains first-ever woman Prime Minister. She carried out an extensive program of privatization. The new doctrine advocated reduction of taxes so as to stimulate investment and consumption.

Recent History

Thatchers economic policy achieved remarkable success: 1) Inflation fell to about 4 percent. 2) Britain achieved an average 3 percent increase in its economic growth. 3) The workers take-home pay increased by 20 percent. 4) Profitability of industrial companies was high.

Recent History

Thatchers policy was like a coin with two sides: 1) High Unemployment; 2) Widened gap between the poor and the rich; 3) High crime rates; 4) Unsatisfactory social services.

Recent History

IMF

The IMF (International Monetary Fund) is an international organization of 185 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment.

Recent History

IMF

Since the IMF was established its purposes have remained unchanged but its operations which involve surveillance, financial assistance, and technical assistancehave developed to meet the changing needs of its member countries in an evolving world economy.

The Current U.K. Economy

Division of the economic sectors: 1. primary industry 2. secondary industry 3. tertiary industries/service industry

Case Study: The Aerospace

Aerospace industry Large companies

Big Four Lloyds Barclays Midland The National Westminster Bank Group