UK Economy

Focal points ★ Absolute decline and relative decline ★ Recent history ★ The current UK economy

Absolute Decline and Relative Decline By the 1880s, the British economy was dominant in the world, producing one third of the world’s manufactured goods, half of its coal and iron and half of its cotton.—the workshop of the world 2. But by 1900, the UK has been overtaken by both the US and Germany. 3. The Second Industrial Revolution in the US meant the US had begun to challenge Britain’s role as the leader of the global economy.

★ The extensive war effects of both World Wars in the 20th century and the dismantlement of the British Empire also weakened the UK economy in global terms, and by that time Britain had been superseded by the US as the chief player in the global economy. ★ From 1945 to the present, the story of the UK economy is usually thought of as one of decline.

The reasons for decline of the UK economy First, World War Ⅱ made the UK go heavily into debt in order to finance the war, and after that it had to sell many of its accumulated overseas assets, and borrow large amounts of money from the US and Canada.

Second, the era of British empire was over, the independence of its colonies makes Britain lose big markets for British goods, and the independent colonies stopped providing raw materials to the UK, leaving Britain as just a medium-size European country.

Third, Britain spent a higher proportion of national wealth on the military presence in many overseas locations than most of its competitors. Fourth, its industry survived almost unaffected during the war so that Britain continued with its older factories and pre-war products.

Fifth, the lack of a close relationship between industry and banks Fifth, the lack of a close relationship between industry and banks. Banks and industry in the UK are not as close as that of Japan and Germany, and the rates of investment were low.

Relative Decline What does relative decline mean? ★ Britain is not poorer or producing less than it was in 1945, but a lot wealthier and more productive than it was then.

★ though it has improved, other countries have improved more rapidly ★ though it has improved, other countries have improved more rapidly. Even many smaller economies have overtaken the UK in terms of output per head of population, and the UK slide from being the 2nd largest economies (after the US) to being the 6th at present. ★ So the UK has experienced economic decline, but this decline is relative to some other economies rather than absolute.

Rank of Major Economies in 2013 in terms of GDP Rank order country GDP 万亿美元 01 USA 16.19 02 CHINA 9.04 03 JAPAN 5.99 04 GERMANY 3.37 05 FRANCE 2.56

Recent History The evolution of the British economy since WWⅡ ★ Steady development in the 50s and 60s: The British economy in this periods characterized by slow but steady growth, low unemployment and great material property with rising standards of consumption

★ Economic recession in the 70s: The British economy went through a particular bad period in the 1970s. Following the severe shock of the 1973 oil crisis and the 1973-74 stock market crash, the British economy went into recession in 1974.

In the 1970s among the developed countries, Britain maintained the lowest growth rate and the highest inflation rate (25%) and the high record of trade deficits. ☆ Results: ＊ Workers struck for more pay. ＊ The government was in debt. ＊ The British industry appeared to be doing badly, with increasing imports relative to exports. ＊ Value of the British currency fell.

☆Solution: a change of government In 1979, the British people voted in the Conservative Party under the Margaret Thatcher, with the promise of a radical program of reform. (privatization)

Results of Reform ★ Positive consequences: ☆ The inflation was under control. ☆ Companies were more efficient, being able to pay higher wages and make higher profits. ★ Negative consequences: ☆ A rapid increase in unemployment. ☆ The public services became worse. However, the national economy as a whole continued to grow at lower rates than its competitors.

★ Economic recovery in the 80s: An outstanding feature of the economic recovery in the 80s was its length, lasting seven years. Another was the improved financial position of the government, with stronger current account of the balance of payments.

A General Picture of the UK Economy ★ Primary industries: agriculture, fishing and mining. ★ Secondary industries: manufacturing ★ Tertiary industries: services, such as banking, insurance, tourism and the selling of goods.

★ Steady growth in the 90s and the beginning of the 21st century: Britain is growing at higher rates and has the lowest unemployment in the EU. Inflation has remained under control at very low levels and investment has increased.

Primary Industry ★ Agriculture is intensive, highly mechanized, and efficient by European standards, producing about 60% of food needs with less than 2% of the labor force, it contributes about 2% of GDP. The best agricultural area is located in the southeast of England.

★ Around 2/3 of the production is devoted to livestock, 1/3 to arable crops. ★¾ of Britain's land is used for agriculture, with about ¼ of that under crops, and the rest is grazing for animals. ★ The fishing industry provides 55% of the UK demand for fish. Scottish ports provide the majority of the fish caught.

British Petroleum (英国石油公司) British Gas (英国天然气公司) ★ Energy production accounts for 5% of the national wealth. The abundance of energy resources make the UK become an overall exporter of energy. ☆ 3 of 10 biggest companies in Britain are in the energy sector: Shell (壳牌石油) British Petroleum (英国石油公司) British Gas (英国天然气公司) ☆ North Sea oil and gas supply most of the UK’s needs of energy.

Second Industry ★ Secondary industries manufacture complex goods from those primary products. ★ In 2003, manufacturing industry accounted for 16% of national output in the UK and for 13% of employment, according to the Office for National Statistics. ★ This is a continuation of the steady decline in the importance of this sector to the British economy since the 1960s, although the sector is still important for overseas trade, accounting for 83% of exports in 2003.

★ Britain's companies are active in all major fields of manufacturing industry, but are particular strong in pharmaceuticals, chemicals, aerospace, and food and drink, steel, electronics industry and the car industry.

Tertiary Industry ★ The importance of secondary industry has shrunk, while the importance of service industry grows. ★ 70% of the UK’s workforce are employed in the service sector. The UK service sector now makes up about 73% of GDP/ ★ The service sector is dominated by financial services, especially in banking and insurance. ★ London is the world’s largest financial center with the London Stock Exchange, the London International Financial Futures and Options Exchange and the LIoyd’s of London insurance market all based in the City of London.

★ London has the largest concentration of foreign bank branches in the world, with HSBC and Barclays Bank relocating their head offices there.

The Central Bank of the UK

★ Tourism is very important to the British economy ★ Tourism is very important to the British economy. With over 27 million tourists arriving in 2004, the UK is ranked as the 6th major tourist destination in the world. ☆ London is the most visited city in the world with 15.6 million visitors in 2006, ahead of the 2nd placed Bangkok and the 3rd placed Paris.

The UK Economy in 2009 ★ The UK entered a recession in the 2008. at the end of September 2009, the country had shrunk by 5.9%, making the 2008-2009 recession the longest since records began. ★ There was a 2.4% decline in the first quarter of 2009. GDP decreased by 0.4% in the 3rd quarter of 2009, after a decrease of 0.6% in the 2nd quarter, according to the October 2009 figures from the Office for National Statistics.

By the end of 2009, the UK economy is expected to have contracted 3 By the end of 2009, the UK economy is expected to have contracted 3.2% with the UK budget deficit ballooning 11.3% of GDP, from 5.3%, and British national public debt expanding to 59% of GDP. ★ Inflation is no longer a concern thanks to the collapse in energy and commodity prices. ★ It is expected to be around 0.5% in 2000. indeed many argue that deflation is now a bigger concern. As such, the Bank of England is expected to cut Interest Rates.