Economy of the UK

Falling but still strong

UK economy: An introduction (1)

The United Kingdom has the fifth largesteconomy in the

world in terms of market exchange rates and the sixth
largest by purchasing power parity (PPP). It has the second
largest economy in Europe after Germany.

The United Kingdom is one of the world's most globalised

countries, ranking fourth in one recent survey. The capital,
London, is one of the three major financial centres of the
world, along with New York City and Tokyo.

The British economy is often described as an 'Anglo-Saxon

economy'. It is made up of the economies of England,
Scotland, Wales and Northern Ireland. The UK has been a
member state of the European Union since 1973.
2

UK economy: An introduction (2)

Privatisation of state-owned enterprises under the Government of

Margaret Thatcher in the 1980s. No state-owned enterprises
except Royal Mail.

The British economy has in recent years seen the longest period of
sustained economic growth in every quarter since 1992. It is one
of the strongest EU economies in terms of inflation, interest rates
and unemployment, all of which remain relatively low.

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 lags around 20% behind France's level.

The United Kingdom currently ranks 16th on the Human

Development Index.

Recent economic growth

The most recent official figure, from the Office for
National Statistics, for annual UK GDP growth is 3.1%
(2007 compared to 2006).
According to official Treasury estimates, British GDP
grew by 2% in 2006 and is expected to grow by 3%
in 2007. Growth is expected to slow slightly in 2008
to between 2% and 2%. The forecast for 2009 and
2010 is for the economy to return to trend growth of
between 2% and 3%.
In October 2007, the International Monetary Fund
forecast British GDP to grow by 3.1% in 2007 and
2.3% in 2008.
4

Agriculture: Primary Industry

Agriculture and fishing

Agriculture
intensive, highly mechanised, and efficient by European standards;
producing about 60% of food needs with less than 2% of the labour force.
contributing around 2% of GDP;
About two-thirds of the production is devoted to livestock, one-third to
arable crops;
main crops: wheat, barley, oats, oilseed rape, maize for animal feeds,
potatoes and sugar beet;
main livestock: cattle, chickens and sheep;
Agriculture is subsidised by the European Union's Common Agricultural
Policy.

Fishing
a significant, although vastly reduced, industry
fish ranging from sole to herring
coastal towns with fishing industries: Kingston upon Hull, Grimsby,
Fleetwood, Great Yarmouth, Peterhead, Fraserburgh, and Lowestoft

Sowing and harvesting, no more

work!
British farmers are blessed

Cattle and sheep needs no

care!

Secondary Industry: Mining and Manufacturing

Office for National Statistics (2003)
The importance of the manufacturing industry has been
declining since 1960s:
Accounting for 16% of national output
Accounting for for 13% of employment
The sector is still important for overseas trade:
Accounting for 83% of exports
The regions with the highest proportion of employees in
manufacturing:
The East Midlands: 19%
The West Midlands 18%
London had the lowest at 6%
8

Service industry: Tertiary industry

UK exports of services in 2005

The service sector is the dominant sector of the UK economy, a feature
normally associated with the economy of a developed country. This means
that the Tertiary sector jobs outnumber the Secondary and Primary sector
jobs combined.
Wholesale and retail trade
This sector includes the motor trade, auto repairs, personal and household
goods industries.
This sector added gross value of 127 billion to the UK economy in 2004.
Hotels and restaurants
Adding gross value of 33 billion to the UK economy.
Transport, storage and communication
Adding gross value of 49 billion to the UK economy.
The communication industry added a gross value of 29,762 million.
Financial intermediation
Adding gross value of 86 billion to the UK economy before adjustment of
financial services valued at 50 billion

Service industry: Tertiary industry

Real estate and lettings

This sector includes letting of dwellings and other related business
support activities. The Blue Book 2006 reports that the lettings
industry added gross value of 83 billion to the UK economy in
2004 while other real estate and business support activities added
gross value of 175 billion.
Public administration and defence
Adding gross value of 55 billion to the UK economy
Education
Adding gross value of 61 billion to the UK economy
UK students (3000)
national students (9000)
Health and social work
Adding gross value of 76 billion to the UK economy
Other social and personal services
This sector includes value added by private households with
employees and extra-territorial organisations.
It added gross value of 56 million to the UK economy
10

The UK: A financial empire

The United Kingdom had 21bn of financial exports in 2005, contributing

significantly towards the Balance of Payments. The UK has had an expanding
export business in financial service, which has been influenced by a mixture of
unique institutions, light regulation, and a highly skilled workforce.

Important financial cities in the UK

London: the worlds financial center
Shares and bonds:
London Stock Exchange
Insurance:
Lloyds of London
Central bank: The Bank of England
Business banks
Barclays Bank, Citigroup and HSBC
There are now over 500 banks with offices in the City and Docklands, with the
majority of business in London being conducted on an international basis.
Edinburgh: the fifth largest financial centre in Europe
the Royal Bank of Scotland (the second largest bank in Europe), HBOS (owners of
the Bank of Scotland) and Standard Life Insurance.
Cardiff: has in recent years seen significant growth in its financial industry, due to
new start ups, such as Admiral Group, which have set up their main headquarters
in the city.
Other cities with large financial districts:
Manchester, Leeds and Birmingham.

11

Service industry: Tertiary industry

Major banks in the UK with Bank of England as the central bank

HSBC Bank London
Royal Bank of Scotland Edinburgh
Barclays BankLondon
HBOS
Edinburgh
Lloyds TSB
London
Standard Chartered
London
Alliance & Leicester
Leicester
Northern Rock
Newcastle upon Tyne
Co-operative Bank
Manchester
Bradford & Bingley
Bingley

Convenience and inconvenience

opening an account
closed (Sunday and banking holidays)
Internet banking
cash back
ATM money transmission
Security: a relative matter
Northern Rock and US Subprime Mortgage Crisis

12

Pound sterling:
A symbol of nationalist character
(1)

Pound sterling: The symbol of the UK

Units of the sterling
Coins
1 penny
2 pence
5 pence
10 pence
20 pence 50 pence
1 pound
2 pounds
5 pounds (commemorative only)
Notes
5 pounds
10 pounds
20 pounds (seldom)
50 pounds (rarely used)

*On 15 February1971, the U.K. decimalized, replacing the

shilling and penny with a single subdivision, the new
penny. The word "new" was used on coins until 1981.
13

Pound sterling:
A symbol of nationalist character
(2)

Joining the single currency, EURO: still a long

way to go
1. The Labor Party and Gordon Brown promised to hold a
public referendum.
2. Public opinion polls have shown that a majority of
Britons have been opposed to joining the single
currency for some considerable time.
3. The main opposition party, the Conservative party, are
opposed to membership.
Three of 25 member countries of EU do not join
EURO:
The UK Sweden
Denmark
14

Regional GDP variation

Regional variation
The strength of the UK economy varies from region to region. GDP, and GDP per capita
is highest in London. The following table shows the GDP (2004) per capita of the 12
areas.

Rank
Place
GDP per capita in Euros

1.
London, England
44 401
2.
South East England
31 300
3.
East of England
27 778
4.
Scotland
27 669
5.
South West England
27 348
6.
East Midlands, England
26 863
7.
West Midlands, England
25 931
8.
North West England
25 396
9.
Yorkshire and the Humber, England 25 300
10. Northern Ireland
23 319
11. North East England
22 886
12. Wales
22 567

15

Ethnic income difference

Rank Average total income by ethnic group
_________________________________________
Rank
ethnic group
Average total income
1 Indian 30,211
2 Chinese
25,964
3 White 24,756
4 National average
24,568
5 Any other ethnic group
23,350
6 BlackAfrican 23,109
7 Black Caribbean
22,902
8 Bangladeshi 18,407
9 Pakistani
18,209
______________________________________________
16

The End

17