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.

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.

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.