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Economy of the United Kingdom PDF Print E-mail
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Saturday, 11 June 2011 20:02

The UK has a partially regulated market economy. The UK is today the sixth largest economy in the world and the third largest in Europe after Germany and France, after having fallen behind France in 2008 for the first time in over a decade. In recent years the UK economy has been managed in accordance with principles of market liberalisation and low taxation and regulation. Government involvement throughout the economy is exercised by the Chancellor of the Exchequer.

Since 1997 the Bank of England's Monetary Policy Committee, headed by the Governor of the Bank of England, has been responsible for setting interest rates at the level necessary to achieve the overall inflation target for the economy that is set by the Chancellor each year. In July 2007 the UK had government debt at 35.5% of GDP. This figure rose to 56.8% of GDP by July 2009. On 23 January 2009 Government figures from the Office for National Statistics showed that the UK was officially in recession for the first time since 1991. It entered a recession in the final quarter of 2008, accompanied by rising unemployment which increased from 5.2% in May 2008 to 7.6% in May 2009.

The Bank of England is the central bank of the UK and is responsible for issuing the nation's currency, the pound sterling. Banks in Scotland and Northern Ireland retain the right to issue their own notes, subject to retaining enough Bank of England notes in reserve to cover their issue. Pound sterling is the world's third-largest reserve currency (after the U.S. dollar and the euro).

The UK service sector makes up around 73% of GDP. London is one of the three "command centres" of the the global economy (alongside New York City and Tokyo). It is the world's largest financial centre alongside New York, and has the largest city GDP in Europe. Edinburgh is also one of the largest financial centres in Europe. Tourism is very important to the British economy and, with over 27 million tourists arriving in 2004, the United Kingdom is ranked as the sixth major tourist destination in the world and London has the most international visitors of any city in the world. The creative industries accounted for 7% GVA in 2005 and grew at an average of 6% per annum between 1997 and 2005.

The Industrial Revolution started in the UK with an initial concentration on the textile industry, followed by other heavy industries such as shipbuilding, coal mining, and Steelmaking. The empire created an overseas market for British products, allowing the UK to dominate international trade in the 19th century. As other nations industrialised, coupled with economic decline after two world wars, the United Kingdom began to lose its competitive advantage and heavy industry declined, by degrees, throughout the 20th century. Manufacturing remains a significant part of the economy but accounted for only one-sixth of national output in 2003.

The automotive industry is a significant part of the UK manufacturing sector and in 2008 employed around 180,000 people, had a turnover of £52.5 billion and generated £26.6 billion of exports. The aerospace industry of the UK is the second- or third-largest national aerospace industry depending upon the method of measurement and has an annual turnover of around £20 billion. The pharmaceutical industry plays an important role in the UK economy and the country has the third-highest share of global pharmaceutical R&D expenditures (after the United States and Japan).

The poverty line in the UK is commonly defined as being 60% of the median household income. In 2007–2008 13.5 million people, or 22% of the population, lived below this line. This is a higher level of relative poverty than all but four other EU members. In the same year 4.0 million children, 31% of the total, lived in households below the poverty line after housing costs were taken into account. This is a decrease of 400,000 children since 1998–1999. The UK imports 40% of its food supplies.

 

Last Updated on Sunday, 12 June 2011 10:13