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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The sixth-largest in the world, the British economy's growth has slowed since the 2016 referendum on leaving the European Union (Brexit). The situation worsened with the outbreak of the COVID-19 pandemic, with GDP falling an unprecedented 9.8% in 2020. The downward trend continued in the first quarter of 2021; however, GDP started rebounding since then, with private and public consumption as the main driver, reaching an estimated 6.8%. The IMF expects real UK GDP to reach pre-pandemic levels only by the second quarter of 2022 when business investment is forecast to increase strongly thanks to the ‘super-deduction’, which allows businesses to offset 130% of eligible investment spending. Overall, GDP is forecast to grow 5% this year and 1.9% in 2023. In addition to persistent economic challenges caused by the recrudescence of COVID-19 and Brexit-related trade disruption, the UK is also likely to continue being hit by significant supply-side constraints and acute labour shortages.

The fiscal efforts undertaken in recent years have been jeopardized by the emergency measures the government had to introduce to fight the epidemic-induced crisis, including short-time work schemes, grants for self-employed, grants and tax relief for businesses and additional funding for the NHS, for a total of more than 19% of GDP (EU Commission). Coupled with a decrease in revenues, the general government balance recorded a deficit of 5.6% in 2021, with the debt-to-GDP ratio skyrocketing to 108.5%, from a pre-pandemic level of 85.2% (IMF). As the economy recovers and the fiscal support is scaled back, the budget deficit is expected to gradually decline to 4.9% in 2022 and 3.5% the following year; whereas the general government gross debt should increase further, reaching 109.4% by the end of 2023. Due to a rise in global energy prices and increased consumer spending, inflation accelerated towards the end of the year hitting 2.2%, and is expected to further increase to 2.6% this year before decelerating to 2% in 2023 (IMF). The Bank of England’s Monetary Policy Committee confirmed that some modest tightening of monetary policy over the forecast period is likely in order to meet the inflation target sustainably in the medium term.

The measures taken by the government to support employees and the self-employed helped to contain the rise of the unemployment rate, which stood at an estimated 5% in 2021 (up from 3.8% before the pandemic). Such rate should remain stable in 2022, before decreasing marginally to 4.7% the following year (IMF). The country’s GDP per capita (PPP) was estimated at USD 47,089 in 2021 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. The government's efforts to invest in infrastructure, increase the supply of housing and increase the participation of women in the labour market will also help support more sustainable and inclusive growth.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 2,833.302,709.68e3,108.423,442.213,582.34
GDP (Constant Prices, Annual % Change) 1.4-9.8e7.24.72.3
GDP per Capita (USD) 42,41740,39446,20050,87952,731
General Government Balance (in % of GDP) -2.31.4e-5.6-4.9-3.5
General Government Gross Debt (in % of GDP) 85.2104.5108.5107.1109.4
Inflation Rate (%) 1.80.92.22.62.0
Unemployment Rate (% of the Labour Force) 3.84.55.05.04.7
Current Account (billions USD) -87.65-100.61-104.62-117.04-115.90
Current Account (in % of GDP) -3.1-3.7e-3.4-3.4-3.2

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

The agricultural sector accounts for 0.6% 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 stands at 8.8 million hectares in 2021. The country’s total income from farming in 2020 was GBP 5,121 million, -2.5% year-on-year (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% of GDP and employs 18.1% 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 2020, the manufacturing sector accounted for 9.6% of total UK economic output (as a consequence of the COVID-19 crisis, production output fell by 8.6% vis-à-vis 2019, with manufacturing output declining by 9.9% - ONS).

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, same as for the tourism sector, which generates around 10% of GDP. However, the tertiary sector was no exception to the 2020 COVID-19-induced crisis, with total services output losing 8.9% compared to one year earlier (ONS). There are more than 370 monetary financial institutions in the UK, with just under half the sector balance sheet (49.7%) being held in GBP, 18.4% in EUR and 31.9% in other currencies (European Banking Federation).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.0 18.1 80.8
Value Added (in % of GDP) 0.6 16.9 72.8
Value Added (Annual % Change) -10.0 -10.8 -9.7

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 55.5% of its GDP in 2020, down from 62.9% one year earlier (World Bank). The country is the fifth-largest importer and eleventh exporter of goods in the world, and the second-largest exporter and fifth-largest importer of commercial services in the world (WTO). In 2020, the country mainly imported cars, medicaments, clothing, telecommunication equipment and office machinery; whereas exports were driven by motor cars, medicaments, mechanical power generators, crude oil and non-ferrous metals (ONS). However, in 2020 both imports and exports fell drastically (-20% and -14.6%, respectively according to the IMF) as a consequence of the unprecedented global economic crisis that followed the outbreak of the Covid-19 pandemic, coupled with uncertainties related to the Brexit process. On 1 May 2021, the UK-EU trade deal came into force, granting the UK “zero tariff, zero quota” for its exports towards the EU. Nevertheless, a whole series of new customs and regulatory checks have been introduced, including rules of origin and stringent local content requirements, which could make the procedures more burdensome and thus hinder mutual trade.

In fact, the EU as a whole is the main trading partner of the United Kingdom. At a country level, the UK mainly exports towards the United States (14.1%), Germany (10.5%), Ireland (7%), the Netherlands (6.4%), and France (6%); whereas its main suppliers are China (11.9%), Germany (9.7%), the United States (9.2%), the Netherlands (7.3%) and France (4.7%). In order to diversify its business partners, the UK signed trade deals and agreements in principle with 69 countries and one with the EU.

The country has a structural trade deficit, even though it has a large surplus in the services sector. According to WTO data, in 2020 the United Kingdom imported USD 634.7 million worth of goods (-8.7% y-o-y) and exported USD 404.7 million (-13.8% y-o-y); in the same year, exports of services stood at USD 338.8 billion (-15.6% y-o-y), against USD 201.1 billion in imports (-26.2% y-o-y). In 2020, the total trade deficit, excluding non-monetary gold and other precious metals, narrowed by GBP 11.3 billion to GBP 15.0 billion (ONS).

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 635,762643,515672,267695,798634,742
Exports of Goods (million USD) 409,397441,106486,439469,684404,681
Imports of Services (million USD) 198,653207,037260,767272,717201,163
Exports of Services (million USD) 327,176353,077410,685401,430338,804

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

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 58.361.763.063.455.1
Trade Balance (million USD) -179,293-174,421-182,425-167,289-148,740
Trade Balance (Including Service) (million USD) -48,621-38,428-33,752-35,041-10,819
Imports of Goods and Services (Annual % Change) 3.92.62.72.7-17.8
Exports of Goods and Services (Annual % Change) 2.75.43.02.7-15.8
Imports of Goods and Services (in % of GDP) 30.031.632.132.327.7
Exports of Goods and Services (in % of GDP) 28.230.130.931.127.4

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 0.48.73.82.92.5
Volume of imports of goods and services (Annual % change) 1.69.83.62.72.4

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)
2020
United States 14.4%
Germany 10.3%
Ireland 6.8%
Netherlands 6.2%
France 5.9%
See More Countries 56.3%
Main Suppliers
(% of Imports)
2020
China 11.9%
Germany 11.6%
United States 9.2%
Netherlands 7.2%
France 4.6%
See More Countries 55.4%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
Queen: Elizabeth II (since February 1952).
Prime Minister: Boris Johnson (since 24 July 2019), Conservative Party.
Next Election Dates
General elections (House of Commons): May 2, 2024 (at the latest).
Current Political Context
Tory Premier Boris Johnson can count on a strong majority in the Parliament; however, several open issues remain: the UK’s dispute with the EU and Ireland regarding the special status of Northern Ireland, diplomatic disputes with France over migration and fishing rights (as well as the AUKUS affair), and other Brexit-related problems remain challenges for Johnson’s government. Domestically, Johnson faces opposition from within the Conservative Party over the government’s COVID-19 strategy, diminishing electoral support overall, and deteriorating personal approval ratings.
Meanwhile, the UK worked on strengthening its commercial relations, signing around 70 rollover agreements (to ensure continuity to the deals previously covered by the EU), as well as an important trade deal with Japan, the first that differs from an existing EU deal. An FTA with the USA is also being negotiated.
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:
- The Scottish National Party (SNP): centre-left;
- The UK Independence Party (UKIP): Eurosceptic, right-wing populist;
- The Green Party of England and Wales (GPEW - Greens): environmentalist
- The Democratic Unionist Party: right-wing;
- The Reform UK (Brexit Party): Eurosceptic
Executive Power
The Queen is the head of state. But above all she plays a symbolic and representational role. She 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 Queen 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 Queen on the proposal of the Prime Minister (the number of members varies, currently at 673), 88 hereditary peers and 26 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

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in the United Kingdom, please visit Public Health England’s COVID-19 dashboard with the official data. More detailed information on tests and testing capacity can be found in the weekly Test and Trace publication by the Department of Health and Social Care.
For a international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Information regarding the identification of a new virus variant causing COVID-19 (SARS-CoV-2), called 'VUI - 202012/01', is available on the UK government website.

Sanitary measures
To find out about the latest public health situation in the United Kingdom and the current sanitary measures in vigour, please consult the GOV.uk’ Coronavirus webpage, and the National Health Service’s Advices including the up-to-date information on the measures put in place and public health recommendations.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website GOV.uk’s Coronavirus (COVID-19): guidance for UK businesses trading internationally and Moving goods through customs during the coronavirus (COVID-19).
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to the United Kingdom 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 Tony Blair Institute for Global Change’s The Economic Policy Response to Covid-19 and 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) taken by the UK government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to the United Kingdom in the IMF’s Policy Tracker platform.
Support plan for businesses
For information on the local business support scheme established by the UK government to help small and medium-sized companies to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult GOV.uk’s Coronavirus (COVID-19) Business support webpages. The Local Government Association provides a list of the measures taken by UK authorities.
For a general overview of international SME support policy responses to the COVID-19 outbreak 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.
Support plan for exporters
The UK government provides information on the webpage "Coronavirus (COVID-19): support for UK businesses that trade internationally", the portal of the Department for International Trade and that of UK Export Finance.
 

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