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Economic Overview

The United Kingdom is the 6th largest economy in the world. After rebounding in 2022 (+4.1%), GDP growth was subdued in 2023, estimated at 0.5% by the IMF as the effects of elevated interest rates and more stringent fiscal policies counterbalance the advantages to households stemming from reduced energy prices. Accordingly, consumption is set to grow only slowly 2024, before picking up in 2025. Concerning companies, despite the dissipation of Brexit-related uncertainty and the robust condition of balance sheets, they are confronted with subdued short-term prospects for demand growth and significantly elevated borrowing costs. The IMF expects growth to be low in 2024 (+0,6%), while a modest pickup should be registered in 2025 (2%), although structural impediments to growth will persist, including low levels of both public and private investment and skills gaps.

Concerning public finances, the public sector deficit narrowed to 3.3% of GDP in 2023 (from 3.8%) and should decrease to 3.1% of GDP by 2025, owing to a combination of increased taxes and reduced spending. In 2023, the tax burden rose by over 0.5% of GDP. Government expenditure plans anticipated minimal growth in nominal spending for the fiscal years 2023-24 and 2024-25, posing challenges amidst heightened pressures on the public sector, particularly for increased wages. Elevated bond yields also led to a significant rise in debt interest payments. The government's gross debt is projected to slightly decrease over the forecast horizon, going from 104.1% of GDP in 2023 to 107.3% by 2025 (nevertheless, the EU Commission sees the debt declining to 96.5%). The government has adopted several support measures to help households and businesses cope with rising energy prices, including the Energy Price Guarantee and the Energy Bill Relief Scheme. The Bank of England has responded to rising inflation with monetary tightening, raising the policy rate several times, and starting to sell government bonds. After peaking in 2022, inflation was estimated at 7.7% last year and is expected to gradually decline in the forecast period, reaching 2.1% in 2025, remaining slightly above the 2% inflation target. Tackling inflation is the government’s priority, in addition to addressing long-standing structural challenges such as low productivity growth, high inequalities of opportunity and achieving carbon neutrality, with the ‘Plan for Growth’ and ‘Levelling Up’ agenda (OECD).

While the labour market experienced swift employment expansion in early 2023, the momentum waned in the latter part of the year. Employment has been on the decline since April, vacancies have decreased, and the unemployment rate has inched up from 3.7% in 2022 to 4.2% in the previous year. Anticipated to climb to 4.6% in 2024 due to sluggish employment growth, unemployment should slightly decrease in 2025 as employment growth picks up, reaching 4.3% according to the IMF. The country’s GDP per capita (PPP) was estimated at USD 56,836 in 2023 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 is a key priority.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 3,081.873,332.063,587.753,830.054,083.25
GDP (Constant Prices, Annual % Change) 4.10.50.62.02.1
GDP per Capita (USD) 45,46148,91352,42655,73259,190
General Government Balance (in % of GDP) -3.8-3.3-2.4-3.1-3.4
General Government Gross Debt (in % of GDP) 101.9104.1105.9107.3108.5
Inflation Rate (%) n/a7.73.72.12.0
Unemployment Rate (% of the Labour Force) 3.74.24.64.34.2
Current Account (billions USD) -116.14-121.96-131.37-138.28-146.50
Current Account (in % of GDP) -3.8-3.7-3.7-3.6-3.6

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 0.8% of GDP, but is very productive, the country managing to produce enough to meet around 60% of its food demand. The primary sector employs 1% of the active population (World Bank, latest data available). 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), the utilised agricultural area stood at 8.8 million hectares in 2023. The country’s total income from farming in 2022 was GBP 7.9 billion, +16.6% year-on-year; while the total livestock output was GBP 19.3 billion (+16.2% - 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 16.7% 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 2022, the total value of UK manufacturers' product sales was GBP 429.8 billion, an increase of 7% from the previous year. The manufacture of food remained the largest division and represented 21% of the total. In July–September 2023, the manufacturing sector accounted for 9.4% of total UK economic output.

The tertiary sector is the backbone of the British economy, representing 72.2% of GDP and 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 less than a third in other currencies (European Banking Federation). According to figures from the House of Commons, in the three months to October 2023, services output increased by 0.5% y-o-y.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.0 18.0 81.0
Value Added (in % of GDP) 0.7 17.9 71.0
Value Added (Annual % Change) 3.3 -0.5 5.3

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 69% of its GDP in 2022 (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 crude oil, mechanical power generators, medicinal and pharmaceutical products, and cars; whereas imports were led by gas, crude oil, medicinal & pharmaceutical products, refined oil, and mechanical power generators (data ONS).

The EU as a whole is the main trading partner of the United Kingdom: in 2022, it accounted for 41% of UK exports of goods and services and 47% of imports (data House of Commons). At a country level, the UK mainly exports towards the United States (12.1%), the Netherlands (8.3%), Germany (7.8%), China (6.7%), and Switzerland (6.6%); whereas its main suppliers are China (13.4%), the United States (11.9%), Germany (8.6%), Norway (6.5%), and France (4.2% - data Comtrade). In order to diversify its business partners, the UK has 38 active free trade agreements with nations and trade blocs, covering 99 countries and territories. In July 2023, the UK signed an agreement to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – an Asia-Pacific trade bloc of 11 countries.

The country has a structural trade deficit, even though it has a large surplus in the services sector. According to WTO data, in 2022 the United Kingdom imported USD 823.9 billion worth of goods (+18.6% y-o-y) and exported USD 530.2 billion (+12.7% y-o-y); in the same year, exports of services stood at USD 494.4 billion (+8.7% y-o-y), against USD 317 billion in imports (+21.6% y-o-y). The overall trade balance was estimated to be negative by 2.7% of GDP by the World Bank (compared to -0.2% one year earlier). According to preliminary estimates, in the third quarter of 2023, the value of exports from the United Kingdom amounted to over GBP 213.5 billion, while imports to the country reached GBP 218 billion, resulting in a trade deficit of GBP 4.5 billion.

 
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 20182019202020212022
Foreign Trade (in % of GDP) 64.064.158.158.968.9
Trade Balance (million USD) -191,203-189,482-172,739-232,548-288,479
Trade Balance (Including Service) (million USD) -43,883-46,2078,295-38,564-111,286
Imports of Goods and Services (Annual % Change) 3.32.6-16.06.213.3
Exports of Goods and Services (Annual % Change) 3.11.7-12.12.29.9
Imports of Goods and Services (in % of GDP) 32.832.928.930.136.2
Exports of Goods and Services (in % of GDP) 31.231.329.228.832.7

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20232024 (e)2025 (e)2026 (e)2027 (e)
Volume of exports of goods and services (Annual % change) -2.81.82.41.81.6
Volume of imports of goods and services (Annual % change) -1.61.21.21.51.5

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)
2022
United States 12.1%
Netherlands 8.3%
Germany 7.8%
China 6.7%
Switzerland 6.6%
See More Countries 58.5%
Main Suppliers
(% of Imports)
2022
China 13.4%
United States 11.9%
Germany 8.6%
Norway 6.5%
France 4.2%
See More Countries 55.2%

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: Rishi Sunak (since 25 October 2022), Conservative Party.
Next Election Dates
General elections (House of Commons): 28 January 2025 (at the latest).
Current Political Context
Rishi Sunak took over as prime minister of a Conservative-led government in October 2022. On November 13, 2023, Sunak conducted the second cabinet reshuffle of his premiership. The next general election must take place no later than early January 2025; considering the improbability of holding elections during the Christmas period, it is likely that 2024 will be designated as an election year. As of the end of 2023, the polls show the Conservative Party maintaining a steady 27%, significantly lower than the Labour Party (45%), the primary opposition on the left. Consequently, Sunak is anticipated to delay calling for an election as much as possible, particularly to avoid association with memories of elevated inflation and ongoing strikes.
Although political tensions have somewhat subsided since their peak in 2022, they persist both domestically and internationally. The ongoing discord between the government and unions regarding wage issues remains, and a notable number of strikes continued to take place.
In the meantime, the relationship with the European Union has seen improvement following the announcement of the Windsor Framework - a comprehensive package of joint solutions responding to the challenges that have emerged in the implementation of the Protocol on Ireland/Northern Ireland over the past two years - in February 2023, which was subsequently adopted the following month.
Main Political Parties
The three dominant parties:
- 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, opposed the Iraq war and strong on civil rights.
Other parties exist, such as:
- Scottish National Party (SNP): centre-left;
- UK Independence Party (UKIP): Eurosceptic, right-wing populist;
- Plaid Cymru – the Party of Wales: centre-left to left-wing, Welsh nationali;sm;
- Green Party of England and Wales (GPEW - Greens): environmentalist
- Alba Party: Scottish nationalist and pro-independence;
- Democratic Unionist Party: right-wing;
- Reform UK (Brexit Party): Eurosceptic.
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 to serve a five-year term. 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 Council of Ministers is appointed by the Prime Minister.
Legislative Power
The United Kingdom has a bicameral legislative system. The parliament is made up of: the House of Lords (the upper house), whose members are appointed for life by the King on the proposal of the Prime Minister (the number of members varies, currently at about 800), 90 hereditary peers and 25 members of the clergy. The House of Commons (lower house) has 650 seats, and its members are elected by universal suffrage, for a 5-year term. The government is directly responsible to and dependent on parliament.
 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For information on the economic recovery scheme put in place by the UK government to address the impact of the COVID-19 pandemic refer to the Bank of England’s publications and updates at Our response to Coronavirus (Covid-19).
For a general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) undertaken by the UK government, please consult the section dedicated to the United Kingdom in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

 

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