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Economic and political overview

Economic Overview

The United Kingdom is the sixth-largest economy in the world. According to the ONS, in 2024, GDP grew by 0.8%, following a 0.4% increase in 2023. Services led the growth with a 1.3% rise, while construction and agriculture, forestry, and fishing saw increases of 0.4% and 1.0%, respectively. However, production fell by 1.7%, with all four subsectors declining. Twelve of the twenty industry subsectors grew, with professional, scientific, and technical activities (3.2%) and human health and social work activities (2.9%) leading the way. The largest decline came from mining and quarrying, which dropped by 7.2%. According to the EU Commission, GDP is expected to grow by 1.4% in both 2025 and 2026. Private consumption is forecast to increase by 1% in 2025 and 1.4% in 2026. Investment is projected to rise slightly in 2025 and 2026, supported by lower interest rates, especially for residential investment. Imports and exports are expected to grow modestly, with goods trade remaining weak due to post-Brexit supply chain issues and the real exchange rate appreciating in 2024. Net trade is not anticipated to significantly drive growth.

According to official governmental figures, borrowing for the financial year ending December 2024 was GBP 129.9 billion, GBP 8.9 billion higher than the previous year, marking the second-highest borrowing since monthly records began in January 1993. Public sector net debt, excluding public sector banks, was provisionally estimated at 97.2% of GDP by December 2024, up 0.3 percentage points from December 2023, remaining at levels last seen in the early 1960s. The new UK government's budget, presented in October 2024, plans a significant increase in public current and investment spending, about 2% of GDP by 2026, funded by higher taxes and increased borrowing. As a result, total public expenditure is projected to decline only slightly as a share of GDP in 2025 and 2026, while total receipts as a share of GDP are expected to rise. The general government deficit is forecast to narrow slowly, remaining around 4% in 2026, with overall government debt continuing to rise throughout the forecast period (EU Commission). Prices in the UK rose by 3% in the 12 months to January, pushing inflation further from the 2% target of the Bank of England, which has made three cuts since August 2024. CPI was 3% for the year to January 2025, up from 2.5% in December, mainly due to rising food prices, VAT on private school fees, and airfares not decreasing as expected. In announcing the latest cut, the Bank warned that inflation was expected to rise again in 2025.

The UK labour market has shown moderate signs of loosening recently, with vacancies continuing to fall and now at pre-pandemic levels. The unemployment rate was 4.4% in 2024, with 1.56 million people aged 16+ unemployed, up by around 210,000 over the year (ONS). With tepid GDP growth expected in the coming quarters, labour market slack is anticipated to rise, and nominal wage growth is projected to slow gradually throughout the forecast period. The country’s GDP per capita (PPP) was estimated at USD 62,573 in 2024 by the IMF, but the relatively solid macroeconomic performance of the United Kingdom conceals weaknesses and situations of inequality. Thus, as the IMF has emphasised, strengthening human capital remains a key priority for the country's economy.

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 3,382.123,587.553,730.263,873.124,023.53
GDP (Constant Prices, Annual % Change) 0.31.11.61.51.5
GDP per Capita (USD) 49,64852,42354,28056,14458,125
General Government Balance (in % of GDP) -4.7-3.0-3.4-3.3-3.2
General Government Gross Debt (in % of GDP) 100.0101.8103.8104.9106.1
Inflation Rate (%) 7.32.62.12.02.0
Unemployment Rate (% of the Labour Force) 4.04.34.14.04.0
Current Account (billions USD) -66.32-99.99-105.54-108.41-104.11
Current Account (in % of GDP) -2.0-2.8-2.8-2.8-2.6

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

The agricultural sector accounts for only 0.6% of GDP and 1% of employment (World Bank, latest data available), but is very productive, the country managing to produce enough to meet around 60% of its food demand. The main crops produced in the UK are potatoes, beets, wheat and barley. Livestock farming (especially sheep and cattle) remains a major agricultural activity. The fishing sector is also well developed but is currently suffering from the depletion of fish volumes in traditional fishing areas (the subject was a key issue of the trade deal concluded with the EU, which states that the UK will have the right to completely exclude EU boats after 2026). According to the latest data from the Office for National Statistics (ONS), in 2024, the UK’s utilised agricultural area (UAA) covered 16.8 million hectares, accounting for 69% of the total land, while the croppable area reached 6.2 million hectares (37% of UAA). The arable crop area fell by 5.4% from 2023 to 4.1 million hectares, with cereals comprising 72% (almost 3.0 million hectares). The country’s total income from farming in 2023 was GBP 7.2 billion, -9.8% year-on-year; while the total livestock output was GBP 19.2 billion (-0.7% - ONS, latest data available).

The United Kingdom is one of the world's largest producing countries, with particularly important civil and military aerospace and pharmaceutical industries, and has considerable mineral resources. Once the 10th-largest oil producer in the world with huge natural gas reserves, its production is declining rapidly. Nevertheless, groups such as British Petroleum (BP) continue to be among the world leaders in the petroleum industry. The industrial sector, which accounts for 17.5% of GDP and employs 18% of the working population, is not very competitive, mainly due to low productivity. Some of the main sectors include machine tools, transport equipment and chemicals. Among the sectors with strong potential are information and communication technologies, biotechnologies, aviation, renewable energies and defence. In 2023, the UK had 269,000 manufacturing organizations, with over 250,000 being SMEs (90%). The sector contributed GBP 217 billion in output (data The Manufacturer).

The tertiary sector is the backbone of the British economy, representing 72.5% of GDP and over 81% of employment. Despite Brexit, London remains the largest financial centre in Europe, on par with New York, and it is also home to the headquarters of many multinationals. The banking sector has been very dynamic, the same as the tourism sector, which generates around 10% of GDP. There are more than 370 monetary financial institutions in the UK, with just under half the sector balance sheet being held in GBP, less than a fifth in EUR and a third in other currencies (European Banking Federation). The retail sector is also pivotal: in 2024, retail sales in Great Britain reached GBP 517 billion, up 1.4% from 2023 (data House of Commons).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.0 17.8 81.2
Value Added (in % of GDP) 0.6 17.5 72.5
Value Added (Annual % Change) 0.2 -0.1 0.4

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
British Pound (GBP) - Average Annual Exchange Rate For 1 USD 0.740.780.750.800.78

Source: World Bank - Latest available data.

 

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Foreign Trade

The United Kingdom is one of the main players in international commerce, with foreign trade representing 64% of its GDP in 2023 (World Bank). The country is the 6th largest importer and 15th exporter of goods in the world, and the second-largest exporter and the largest importer of commercial services (WTO). In 2022, the country mainly exported cars, mechanical power generators, medicinal & pharmaceutical products, and crude oil; whereas imports were led by cars, refined oil, crude oil, mechanical power generators (intermediate), and medicinal & pharmaceutical products (data ONS). Since 2018, the value of UK imports and exports has risen, but volatile price inflation has impacted trade. After adjusting for inflation, both imports and exports are actually lower than in 2018.

The EU as a whole is the main trading partner of the United Kingdom: in 2023, it accounted for 42% of UK exports of goods and services and 52% of imports (data House of Commons). At a country level, the UK mainly exported towards the United States (13.8%), Germany (7.6%), Netherlands (7.1%), Switzerland (6.8%), China (6.6%), and France (5.6%); with imports coming chiefly from China (12.5%), the United States (12.0%), Germany (9.5%), France (5.1%), and Norway (4.1% - data Comtrade). In order to diversify its business partners, the UK has 39 active free trade agreements with nations and trade blocs.

The country has a structural trade deficit, even though it has a large surplus in the services sector. According to WTO data, in 2023, the United Kingdom imported USD 791.3 billion worth of goods (-3.9% y-o-y) and exported USD 520.7 billion (-2.3% y-o-y); in the same year, exports of services stood at USD 584.2 billion (+15.3% y-o-y), against USD 393.9 billion in imports (+22.4% y-o-y). The overall trade balance was estimated to be negative by 0.6% of GDP by the World Bank (compared to -1.7% one year earlier). According to preliminary estimates from the ONS, after adjusting for inflation, total annual imports of goods and services increased by GBP 5.8 billion (0.7% y-o-y) to GBP 858.2 billion in 2024, while total annual exports decreased by GBP 4.5 billion (0.6%) to GBP 798.6 billion in 2024.

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 696,208638,251694,635823,547791,302
Exports of Goods (million USD) 460,026399,529470,508532,982520,691
Imports of Services (million USD) 286,080218,608253,986321,618393,941
Exports of Services (million USD) 429,069398,556473,879506,585584,214

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20192020202120222023
Foreign Trade (in % of GDP) 64.758.858.668.963.9
Trade Balance (million USD) -185,429-165,636-222,966-258,722-233,120
Trade Balance (Including Service) (million USD) -39,83013,847-6,976-58,862-18,845
Imports of Goods and Services (Annual % Change) 2.7-15.95.813.0-3.4
Exports of Goods and Services (Annual % Change) 2.0-11.83.212.6-2.2
Imports of Goods and Services (in % of GDP) 33.029.129.435.332.2
Exports of Goods and Services (in % of GDP) 31.629.729.233.631.7

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20242025 (e)2026 (e)2027 (e)2028 (e)
Volume of exports of goods and services (Annual % change) -0.71.11.21.51.2
Volume of imports of goods and services (Annual % change) 0.40.71.01.01.3

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
The United Kingdom is a member of the following international economic organisations: IMF, Commonwealth, G-5, G-8, G-10, G-20, ICC, WHO, OECD, among others. For the full list of economic and other international organisations in which participates the United Kingdom click here. International organisation membership of the United Kingdom is also outlined here.
Free Trade Agreements
The complete and up-to-date list of Free Trade Agreements signed by the United Kingdom can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)		 2023
United States 13.8%
Germany 7.6%
Netherlands 7.1%
Switzerland 6.8%
China 6.6%
See More Countries 58.1%
Main Suppliers
(% of Imports)		 2023
China 12.5%
United States 12.0%
Germany 9.5%
France 5.1%
Norway 4.1%
See More Countries 56.8%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
King: Charles III (since 8 September 2022). Predecessor: Queen Elizabeth II.
Prime Minister: Sir Keir Starmer (since 5 July 2024), The Labour Party.
Next Election Dates
General elections (House of Commons): July 2029
Current Political Context
The July 2024 general elections saw the first victory for Labour since 2005 and ended the Conservatives' 14-year tenure as the primary governing party. Labour achieved a 174-seat simple majority and a total of 411 seats. Labour won 211 more seats than the previous general election in 2019, but half a million fewer total votes. The Conservative Party was reduced to 121 seats on a vote share of 23.7%, the worst result in its history, losing 251 seats in total. Smaller parties took a record 42.6% of the vote in the election. Of these, the Liberal Democrats made the most significant gains, securing 72 seats.
 The five main goals of Keir Starmer's government agenda are to boost economic growth, achieve net-zero electricity by 2030, revitalize the NHS, enhance public safety, and increase opportunities for everyone. Plans call for investing in AI innovation, accelerating infrastructure projects, and constructing 1.5 million houses close to transportation hubs. Furthermore, the Labour government is expected to take a closer stance with the European Union (EU) than the previous government, even if Kier Starmer has made it clear “about not rejoining the EU, the single market or the customs union or a return to freedom of movement”.
Main Political Parties
Historically, the three dominant parties are:
- Labour Party: left-wing socialist and social democratic, grew out of trade union movement in the 19th century;
- Conservative Party: centre-right; believes in free-market economy, strong military and traditional cultural values;
- Liberal Democrats: centrist, moderate pro-European;

Other parties represented in the parliament include:
- Scottish National Party (SNP): centre-left;
- Democratic Unionist Party: right-wing;
- Reform UK (Brexit Party): right-wing, Eurosceptic;
- Green Party of England and Wales (GPEW - Greens): environmentalist;
- Plaid Cymru – the Party of Wales: centre-left to left-wing, Welsh nationalism;
- Social Democratic and Labour Party (SDLP): advocates Irish reunification;
- Alliance Party of Northern Ireland (APNI): liberal, centrist.
Executive Power
The King is the head of state. But above all he plays a symbolic and representational role. He continues to exercise three essential rights: the right to be consulted, to advise and to warn. Following legislative elections to the lower house of parliament, the leader of the majority party or coalition is usually appointed Prime Minister by the King and remains in office as long as he/she retains the confidence of the House of Commons. The Prime Minister is the head of government and has all executive powers, which include law enforcement and the conduct of the day-to-day affairs of the country. The Prime Minister selects members of the Cabinet and other ministers, who are then formally appointed by the monarch.
Legislative Power
The United Kingdom has a bicameral legislative system. The parliament consists of the House of Lords (the upper house) and the House of Commons (the lower house). The House of Lords includes life peers, who are appointed by the King on the advice of the Prime Minister and the House of Lords Appointments Commission, 92 hereditary peers, and 26 members of the clergy (Lords Spiritual). The House of Commons has 650 seats, and its members are elected by universal suffrage, generally for a 5-year term. The government is directly responsible to and dependent on parliament.
 

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