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  • Economy

United Kingdom - Economy

KEY FACTS 2007

  • GNI: US$2,608.5bn
  • GNI p c: US$42,740
  • GDP growth: 2.7% p.a. 2003–07
  • Inflation: 1.9% p.a. 2003–07
  • Aid: net donor

Overview: The UK is among the largest economies in the world (ranking fifth in 2007 after the USA, Japan, Germany and China). For three decades after the Second World War, it was in decline relative to other industrialised democracies, especially in the 1970s when there was very high inflation, ending in the recession of the early 1980s.

However, during the 1980s the Conservative government managed to arrest this decline and GDP growth averaged 3.0% in that decade, one of the highest OECD rates, despite the slowdown at the end of the decade when the country was in recession again. During the 1990s growth averaged 2.5% p.a. and exports remained strong.
Interest rate policy was surrendered by the Treasury to the Bank of England in 1997 soon after Labour came to power.

Growth continued into the 2000s, despite the global slowdown in 2001–02, the very serious outbreak of foot and mouth disease in February 2001, and the impact of the terrorist attacks in the USA in September 2001 on air travel and tourism industries. GDP grew by 1.9% in 2005, 2.8% in 2006 and 3.0% in 2007, while inflation remained at no more than 2.3% p.a.

From the second half of 2007 the country was increasingly affected by the global credit crunch, the resulting turmoil in financial markets throughout the world, high and volatile energy prices, and impending recession. Financial institutions with exposure in the US sub-prime mortgage sector and those most dependent on inter-bank lending became especially vulnerable. One such British bank, Northern Rock, had to be rescued by the government in 2008, the first nationalisation since the economic turmoil of the 1970s.

Trade: Exports of goods and services account for 25% of GDP and manufactured exports for 76% of total merchandise exports (2004). Within the EU, all national quantitative trading restrictions have been abolished, although some EU-wide import quotas remain. Principal exports are machinery, transport equipment, chemicals and manufactured goods, while principal imports are machinery, transport equipment, manufactured goods, chemicals and food. Main export partners are the USA, Germany, France, the Netherlands, Ireland, Belgium/Luxembourg and Italy (the EU accounts for more than half of exports). Main import partners are Germany, the USA, France, the Netherlands, Belgium/Luxembourg, Japan and Italy.