The economy of Great Britain

Date: 2015-10-07; view: 574.

The UK has a partially regulated free market economy. Based on market exchange rates, the UK is today the sixth largest economy in the world and the third largest in Europe after Germany and France, after having fallen behind France in 2008 for the first time in over a decade. In recent years, the UK economy has been managed in accordance with principles of market liberalisation and low taxation and regulation. Government involvement throughout the economy is exercised by the Chancellor of the Exchequer. 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. In July 2007, the UK had government debt at 35.5% of GDP.This figure rose to 56.8% of GDP by July 2009. 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. By January 2011, the unemployment rate among 18 to 24-year-olds had risen from 11.9% to 20.3%, the highest since current records began in 1992.

The Industrial Revolution started in the UK with an initial concentration on the textile industry, followed by other heavy industries such as shipbuilding, coal mining, and steel production. The empire created an overseas market for British products, allowing the UK to dominate international trade in the 19th century. However, as other nations industrialised, coupled with economic decline after two world wars, the United Kingdom began to lose its competitive advantage and heavy industry declined, by degrees, throughout the 20th century. Manufacturing remains a significant part of the economy, but accounted for only one-sixth of national output in 2003.

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. In 2007, Prime Minister Gordon Brown ruled out membership for the foreseeable future, saying that the decision not to join had been right for Britain and for Europe. The government of Prime Minister Tony Blair had pledged to hold a public referendum for deciding membership should "five economic tests" be met. In 2005, more than half (55%) of the UK were against adopting the currency, while 30% were in favour.

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 the world's largest financial centre with the London Stock Exchange, the London International Financial Futures and Options Exchange, and the Lloyd's of London insurance market all based in the City of London. London is also a major legal centre, with four of the six largest law firms in the world headquartered there. It has the largest concentration of foreign bank branches in the world. 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 Scottish capital, Edinburgh, 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. The creative industries accounted for 7% GVA in 2005 and grew at an average of 6% per annum between 1997 and 2005.

The British motor industry is a significant part of the manufacturing sector, although it has diminished with the collapse of the MG Rover Group and most of the industry is foreign owned. Civil and defence aircraft production is led by BAE Systems, the second largest defence contractor in the world, and the continental European firm EADS, the owner of Airbus. Rolls-Royce holds a major share of the global aerospace engines market. The chemical and pharmaceutical industry is strong in the UK, with the world's second and sixth largest pharmaceutical firms (GlaxoSmithKline and AstraZeneca, respectively) being based in the UK.

The UK service sector, however, has grown substantially, and now makes up about 73% of GDP.The service sector is dominated by financial services, especially in banking and insurance. 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).

The poverty line in the UK is commonly defined as being 60% of the median household income. 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. UK must also

import 40% of its food suplies.