Economic Overview: United Kingdom

With a gross domestic product (G.D.P) of $2.83 trillion in 2019 and a population of more than 66 million, the United Kingdom (U.K.) has the sixth-largest economy after the U.S., China, Japan, Germany, and India. According to the U.K. Office for National Statistics (ONS), the services sector is the largest sector in the nation, accounting for more than three-quarters of the GDP. The service industry in the U.K. comprises of many industries, including finance and business services, consumer-focused industries, such as retail, food and beverage, and entertainment. 

Important to remember is that, as one of the most globalized economies, it comprises of England, Scotland, Wales and Northern Ireland. This economic powerhouse is also the fifth-largest national economy in the world measured by nominal gross domestic product (GDP), ninth-largest by purchasing power parity (PPP), and twenty first-largest by GDP per capita, constituting 3.3% of world GDP. In 2020 alone, the UK's trade with the 27 member states of the European Union accounted for 49% of the country's exports and 52% of its imports.

Below is a break down of major economic indicators (2018 - 2020)

GDP (Billion)

The British economy contracted 21.5 percent year-on-year in the second quarter of 2020 due to covid-19 impact  making it the biggest contraction recorded since 1956.

GDP Growth (%)

Fixed investment fell  by 26.1 percent, below the estimated 27 percent drop, while household spending sank at a faster 26.2 percent vs expected 25.2 percent.

FDI Net (Billion)

In 2019, UK achieved a 5% increase in inbound FDI projects compared to 2018. It is recommended that UK’s COVID-19 recovery plan should be built around Digital, Cleantech and Advanced Manufacturing, and must achieve a better geographic balance.

Inflation (%)

Annual inflation rate slowed sharply to 0.2 percent in August of 2020. It is the lowest reading since December of 2015, amid a big fall in prices in restaurants and cafes, arising from the Eat Out to Help Out Scheme (-2.8 percent vs +1.8 percent in July). Other downward contributions came from lower air fares (-20.6 percent vs -1.9 percent) and clothing prices. 

Unemployment Rate (%)

The coronavirus pandemic has hit the labour market.  For June to August 2020, an estimated 1.52 million people were unemployed, up 209,000. ​

Balance of Trade (USD millions)

The total trade surplus (goods and services) widened £0.6 billion to £1.1 billion in the three months to November 2019, largely driven by rising exports of unspecified goods (which includes non-monetary gold); excluding unspecified goods, the total trade deficit narrowed £1.0 billion to £1.1 billion.​

Exchange Rate USD/LC

The pound traded slightly higher at $1.297 after Bank of England policymaker Gertjan Vlieghe warned that downside risks to the economic outlook are starting to materialize and that the outlook for monetary policy is skewed towards adding further stimulus.

Lending Interest Rate (%)

The significant decrease in lending rate in 2020 is a result of government policy via its central bank to make loans affordable to individuals and businesses during this pandemic period. 

National Debt

The national debt has been gradually increasing and the forecasted figures up to 2024 also show the same gradual increase due to the increasing gap between government revenue and expenditure.