UK Economy UK Economic Profile, British Economy, United Kingdom Economy

During the days of the British Empire the UK economy was the largest in the world and the first to industrialise (or industrialize, ushering in the Industrial Revolution). Although it has declined in significance since, the UK is still the sixth largest economy in the world by purchasing power parity.

It is a member of the G7 (now expanding to the G8 and G20), the European Union (although not the European Economic and Monetary Union -EMU – or Euro) and the OECD (Organisation for Economic Cooperation and Development). It is also the founding member of the Commonwealth, the association formed by former British Empire states.

The British Economy is one of the most globalised (or globalized) economies in the world, thanks in no small part to the City of London, considered to be the largest financial center in the world.

The economy of the United Kingdom of Great Britain includes the economies of England, Scotland, Wales and Northern Ireland. The Isle of Man and the Channel Isles are part of the British Isles and have offshore banking status.

The Bank of England had cut interest rates to 1.0 per cent by the end of 2008, and that is expected to drop to 0.5 per cent for most of 2009 and 2010.

UK budget deficit stood at 5.3 per cent of GDP in 2008. With economic stimulus packages and bank bailouts being worked on, that is expected to balloon to 11.3 per cent of GDP in 2009 and 13 per cent of GDP in 2010.

In 2008, the UK had the 43rd largest relative national public debt, at 47.2 per cent of GDP. This figure could rise to 58.5 per cent of GDP by 2009 and 70 per cent of GDP in 2010, thanks to the projected budget deficits of 2009-2010.

Inflation had ramped up to 3.6 per cent in 2008, but has dropped back with the economic collapse and is expected to be 0.4 per cent in 2009 and 0.8 per cent in 2010. It had the 58th lowest inflation rate in the world at end 2008.

The 3-month Treasury rate has similarly dropped, from 5.5 per cent in 2008 to an expected 1.3 per cent in 2009 and 2010.

The unemployment rate had reached 6.3 per cent in the UK by the end of 2008 according to the Office of National Statistics, reaching close to 2 million unemployed. This figure is likely to grow to the 2.5 million – 3 million figures, or 8-10 per cent.

The UK has the third highest current account deficit in the world of US$186 billion. It has a large trade deficit in manufacturing and has become a net importer of energy and North Sea extraction declines. It runs $468.7 billion of exports (9th in the world export rankings) and $654.7 billion of imports (6th in the world).

It was the 2nd largest recipient of foreign direct investment (FDI) in 2007 (although the figure has dropped since), and one of the most competitive in Europe for business and tax.