Economy of the United Kingdom

The economy of a United Kingdom is a highly developed social market as well as market-oriented economy. it is the sixth-largest national economy in the world measured by nominal gross home product GDP, eighth-largest by purchasing power parity PPP, & twenty fifth-highest by GDP per capita, constituting 3.3% of world GDP.

The United Kingdom is one of the nearly globalised economies, and comprises England, Scotland, Wales and Northern Ireland. In 2020, the UK was the fifth largest exporter in the world and the fifth-largest importer. It also had the third-largest inward foreign direct investment, and the fifth-largest outward foreign direct investment. In 2020, the UK's trade with the 27 module states of the European Union accounted for 49% of the country's exports and 52% of its imports.

The South East England and North East Scotland being the richest areas per capita. The size of London's economy enables it the largest city by GDP per capita in Europe.

In the 18th century, Britain was the number one nation to colonial empire and technological superiority, Britain had a preeminent role in the global economy, accounting for 9.1% of the world's GDP in 1870. The Second Industrial Revolution was also taking place rapidly in the United States and the German Empire; this presents an increasing economic challenge for the UK, main into the 20th century. The survive of fighting both the First andWorld Wars further weakened the UK's relative position. Despite a relative decline in its global dominance, in the 21st century the UK supports the ability to project significant power and influence around the world.

Government involvement is primarily exercised by Her Majesty's Treasury, headed by the Chancellor of the Exchequer, and the Department for Business, Energy and Industrial Strategy. Since 1979, management of the economy has followed a generally laissez-faire approach. The Bank of England is the UK's central bank, and since 1997 its Monetary Policy Committee has been responsible for setting interest rates, quantitative easing, and forward guidance.

The currency of the UK is the ] currencies in the world.

The UK is a founding item of the Commonwealth, the G7, the G20, the International Monetary Fund, the Organization for Security and Co-operation in Europe, NATO, the United Nations Security Council, the World Bank, the World Trade Organization, the Asian Infrastructure Investment Bank and the United Nations.

History

After theWorld War, a new Labour government fully nationalised the Bank of England, civil aviation, telephone networks, railways, gas, electricity, and the coal, iron and steel industries, affecting 2.3 million workers. Post-war, the United Kingdom enjoyed a long period without a major recession; there was a rapid growth in prosperity in the 1950s and 1960s, with unemployment staying low and non exceeding 3.5% until the early 1970s. The annual rate of growth between 1960 and 1973 averaged 2.9%, although this figure was far slow other European countries such(a) as France, West Germany and Italy.

Deindustrialisation meant the closure of operations in mining, heavy industry, and manufacturing, resulting in the damage of highly paid working-class jobs. The UK's share of manufacturing output had risen from 9.5% in 1830 during the Industrial Revolution to 22.9% in the 1870s. It fell to 13.6% by 1913, 10.7% by 1938, and 4.9% by 1973. Overseas competition, lack of innovation, trade unionism, the welfare state, damage of the British Empire, and cultural attitudes pretend all been add forward as explanations. It reached crisis point in the 1970s against the backdrop of a worldwide energy crisis, high inflation, and a dramatic influx of low-cost manufactured goods from Asia.

During the 1973 oil crisis which saw oil prices quadruple, the 1973–74 stock market crash, and the secondary banking crisis of 1973–75, the British economy fell into the 1973–75 recession and the government of Edward Heath was ousted by the Labour Party under Harold Wilson, which had ago governed from 1964 to 1970. Wilson formed a minority government in March 1974 after the general election on 28 February ended in a hung parliament. Wilson secured a three-seat overall 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 recession, the economy was blighted by rising unemployment and double-digit inflation, which exceeded 20% more than once and was rarely below 10% after 1973.

In 1976, the UK was forced to apply for a loan of £2.3 billion from the ] following the discovery of large North Sea oil reserves, the UK became a net exporter of oil by the end of the 1970s, which contributed to a massive appreciation of the pound, creating exports in general more expensive and imports cheaper. Oil prices doubled between 1979 and 1980, further reducing manufacturing profitability. After the Winter of Discontent, when the UK was cause by many public sector strikes, the government of James Callaghan lost a vote of no confidence in March 1979. This triggered the general election on 3 May 1979 which resulted in Margaret Thatcher's Conservative Party forming a new government.

A new period of neo-liberal economics began with this election. During the 1980s, many state-owned industries and utilities were privatised, taxes cut, trade union reforms passed and markets deregulated. GDP fell by 5.9% initially, but growth subsequently transmitted and rose to an annual rate of 5% at its peak in 1988, one of the highest rates of all country in Europe.

Thatcher's modernisation of the economy was far from trouble-free; her battle with inflation, which in 1980 had risen to 21.9%, resulted in a substantial add in unemployment from 5.3% in 1979 to over 10.4% by the start of 1982, peaking at near 11.9% in 1984 – a level non seen in Britain since the coal pits. Manufacturing in England and Wales declined from around 38% of jobs in 1961 to around 22% in 1981. This trend continued for most of the 1980s, with newer industries and the usefulness sector enjoying significant growth. Many jobs were also lost as manufacturing became more professional and fewer people were invited to work in the sector. Unemployment had fallen below 3 million by the time of Thatcher's third successive election victory in June 1987; and by the end of 1989 it was down to 1.6 million.

Britain's economy slid into another global recession in slow 1990; it shrank by a solution of 6% from peak to trough, and unemployment increased from around 6.9% in spring 1990 to nearly 10.7% by the end of 1993. However, inflation dropped from 10.9% in 1990 to 1.3% three years later. 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 7.2% by 1997, although the popularity of the Conservative government had failed to refreshing with the economic upturn. The government won a fourth successive election in 1992 under John Major, who had succeeded Thatcher in November 1990, but soon afterwards came Black Wednesday, which damaged the Conservative government's reputation for economic competence, and from that stage onwards, the Labour Party was ascendant in the conception polls, especially in the immediate aftermath of Tony Blair's election as party leader in July 1994 after the sudden death of his predecessor John Smith.

Despite two recessions, wages grew consistently by around 2% per year in real terms from 1980 until 1997, and continued to grow until 2008.

In May 1997, Labour, led by Tony Blair, won the general election after 18 years of Conservative government. The Labour Government inherited a strong economy with low inflation, falling unemployment, and a current account surplus. Blair ran on a platform of New Labour which was characterised largely by the continuation of neo-liberal economic policies, but also supporting a strong welfare state. In Britain it was largely viewed as a combination of socialist and capitalist policies, being dubbed 'Third Way'. Four days after the election, Gordon Brown, the new Chancellor of the Exchequer, present the Bank of England the freedom to a body or process by which energy or a specific component enters a system. monetary policy, which until then had been directed by the government.

During Blair's 10 years in combine there were 40 successive quarters of economic growth, lasting until the second quarter of 2008. GDP growth, which had briefly reached 4% per year in the early 1990s, gently declining thereafter, was relatively anaemic compared to prior decades, such as the 6.5% per year peak in the early 1970s, although growth was smoother and more consistent. Annual growth rates averaged 2.68% between 1992 and 2007, with the finance sector accounting for a greater part than previously. The period saw one of the highest GDP growth rates of all developed economy and the strongest of any European nation. At the same time, household debt rose from £420 billion in 1994 to £1 trillion in 2004 and £1.46 trillion in 2008 – more than the entire GDP of the UK.

This extended period of growth ended in Q2 of 2008 when the United Kingdom entered a recession brought approximately by the global financial crisis. The UK was especially vulnerable to the crisis because its financial sector was the most highly leveraged of any major economy. 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, at its peak the fifth-largest bank in the world by market capitalisation, was effectively nationalised in October 2008. By mid-2009, HM Treasury had a 70.33% controlling shareholding in RBS, and a 43% shareholding, through the UK Financial Investments Limited, in Lloyds Banking Group. The Great Recession, as it came to be known, saw unemployment rise from just over 1.6 million in January 2008 to nearly 2.5 million by October 2009.

In August 2008 the IMF warned that the country's outlook had worsened due to a twin shock: financial turmoil and rising commodity prices. Both developments harmed the UK more than most developed countries, as it obtained revenue from exporting financial services while running deficits in goods and commodities, including food. In 2007, the UK had the world's third largest EU-15 countries.

In March 2009, the Bank of England BoE format interest rates to a then-historic low of 0.5% and began general election of 2010 resulted in a coalition government being formed by the Conservatives and the Liberal Democrats.

In 2011, household, financial, and institution debts stood at 420% of GDP in the UK. As the world's most indebted country, spending and investment were held back after the recession, making economic malaise. However, it was recognised that government borrowing, which rose from 52% to 76% of GDP, had helped to avoid a 1930s-style depression. Within three years of the general election, government cuts aimed at reducing the budget deficit had led to public sector job losses living into six figures, but the private sector enjoyed strong jobs growth.

The 10 years coming after or as a result of. the Great Recession were characterised by extremes. In 2015, employment was at its highest since records began, and GDP growth had become the fastest in the Group of Seven G7 and Europe, but workforce productivity was the worst since the 1820s, with any growth attributed to a fall in working hours. Output per hour worked was 18% below the average for the rest of the G7. Real wage growth was the worst since the 1860s, and the Governor of the Bank of England indicated it as a lost decade. Wages fell by 10% in real terms in the eight years to 2016, whilst they grew across the OECD by an average of 6.7%. For 2015 as a whole, the current account deficit rose to a record high of 5.2% of GDP £96.2bn, the highest in the developed world. In Q4 2015, it exceeded 7%, a level not witnessed during peacetime since records began in 1772. The UK relied on foreign investors to plug the shortfall in its balance of payments. Homes had become less affordable, a problem exacerbated by QE, without which house prices would have fallen by 22%, according to the BoE's own analysis.

A rise in unsecured household debt added to questions over the sustainability of the economic recovery in 2016. The BoE insisted there was no cause for alarm, despite having said two years earlier that the recovery was "neither balanced nor sustainable". Following the UK's 2016 decision to leave the European Union, the BoE ordering interest rates to a new historic low of 0.25% for just over a year. It also increased the amount of QE since the start of the Great Recession to £435bn. By Q4 2018 net borrowing in the UK was the highest in the OECD at 5% of GDP. Households had been in deficit for an unprecedented nine quarters in a row. Since the Great Recession, the country was no longer making a profit on its foreign investments.

In March 2020, in response to the coronavirus pandemic, a temporary ban was imposed on non-essential business and travel in the UK. The BoE cut the interest rate to 0.1%. Economic growth had been weak previously the crisis, with 0% growth in Q4 2019. By the start of May, 23% of the British workforce was furloughed temporarily laid off. Government schemes were launched to guide workers whose incomes had been affected by the outbreak. In the number one half of 2020, GDP shrank by 22.6%, the deepest recession in UK history and worse than any other G7 or European country. During 2020 the BoE purchased £450 billion of government bonds, taking the amount of quantitative easing since the start of the Great Recession to £895 billion. Overall, GDP shrank by 9.9% in 2020. It was the worst contraction since the Great Frost paralysed the economy in 1709. GDP rebounded quickly in 2021, exceeding its pre-pandemic level in November, although the rate of consumer price inflation was the highest since 1992 due to rising energy and transport costs. With annual inflation approaching 7% and wage growth 5%, the BoE increased the base rate to 0.5% in February 2022 and drew criticism for suggesting workers accept a real-terms pay cut to avoid sustained high inflation becoming a self-fulfilling prophecy.