Economy of the United Kingdom

1945 to 1973

Following the end of the Second World War, the United Kingdom enjoyed a long period without a major recession and a rapid growth in prosperity in the 1950s and 1960s, with unemployment staying low and not exceeding 3.5% until the early 1970s. According to the OECD, the annual rate of growth (percentage change) between 1960 and 1973 averaged 2.9%, although this figure was far behind the rates of other European countries such as France, West Germany and Italy.

Deindustrialization

Deindustrialization meant the closure of many operations in mining, heavy industry and manufacturing, with the resulting loss of high paid working-class jobs. A certain amount of turnover had always taken place, with older businesses shutting down and new ones opening up. However, the post-1973 scene was different, with a worldwide energy crisis, and a dramatic influx of low-cost manufactured goods from Asia. Coal mining quickly collapsed, and practically disappeared in the 21st century. The consumption of coal--mostly for electricity--plunged from 157 million tonnes in 1970 to 37 million tonnes in 2015, nearly all of it imported. Employment in the coal mines fell from a peak of 1,191,000 in 1920 to 695,000 in 1956, 247,000 in 1976, 44,000 in 1993, and a mere 2,000 in 2015. The railways were decrepit, more textile mills closed than opened, steel employment fell sharply, and the automobile industry practically disappeared, apart from some luxury production. Popular responses varied a great deal. Tim Strangleman et al. found a range of responses from the affected workers. Some nostalgically invoked a glorious industrial past or the bygone British Empire to cope with their newfound personal economic insecurity. Others looked to the EU for help. Some turned to exclusionary Englishness as the solution to current grievances. By the 21st century, grievances accumulated enough to have a political impact. The United Kingdom Independence Party (Ukip), based in white working-class towns, gained increasing share of the vote while warning against the dangers of immigration. The political reverberations came to a head in the popular vote in favor of Brexit in 2016.

1973-1979

However, following the 1973 oil crisis and the 1973–74 stock market crash, the British economy fell into the 1973–75 recession and the government of Edward Heath was ousted by the Labour Party under Harold Wilson, which had previously governed from 1964 to 1970. Wilson formed a minority government in March 1974 after the general election on 28 February ended in a hung parliament. Wilson secured a three-seat majority in a second election in October that year.

The UK recorded weaker growth than many other European nations in the 1970s; even after the early 1970s recession ended, the economy was still blighted by rising unemployment and double-digit inflation, which exceeded 20% more than once after 1973 and was rarely below 10% after this date.

In 1976, the UK was forced to request a loan of £2.3 billion from the International Monetary Fund. The then Chancellor of the Exchequer Denis Healey was required to implement public spending cuts and other economic reforms in order to secure the loan, and for a while the British economy improved, with growth of 4.3 per cent in early 1979. However, following the Winter of Discontent, when the UK was hit by numerous public sector strikes, the government of James Callaghan lost a vote of no confidence in March 1979. This triggered the May 1979 general election which resulted in Margaret Thatcher's Conservative Party forming a new government.

1979 to 1997

A new period of neo-liberal economics began in 1979 with the election of Margaret Thatcher who won the general election on 3 May that year to return the Conservative Party to government after five years of Labour government. During the 1980s, most state-owned industries and utilities were privatised, taxes cut, union reforms passed and markets deregulated. GDP fell by 5.9% initially, but growth subsequently returned and rose to 5% at its peak in 1988, one of the highest rates of any country in Europe.

Thatcher's modernisation of the economy was far from trouble-free; her battle with inflation, which in 1980 had risen to 21.9%, resulted in a substantial increase in unemployment from 5.3% in 1979 to over 10.4% by the start of 1982, peaking at nearly 11.9% in 1984 – a level not seen in Britain since the Great Depression. The rise in unemployment coincided with the global early 1980s recession, after which UK GDP did not reach its pre-recession rate until 1983. In spite of this, Thatcher was re-elected in June 1983 with a landslide majority. Inflation had fallen to 3.7%, while interest rates were relatively high at 9.56%.

The increase in unemployment was largely due to the government's economic policy which resulted in the closure of outdated factories and coal pits. Manufacturing in England and Wales declined from around 38% of jobs in 1961 to around 22% in 1981. This process continued for most of the 1980s, with newer industries and the service sector enjoying significant growth. Many jobs were also lost as manufacturing became more efficient and fewer people were required to work in the sector. Unemployment had fallen below 3 million by the time of Thatcher's third successive election victory in June 1987 and by the end of 1989 it was down to 1.6 million.

Britain's economy slid into another global recession in late 1990, and this caused the economy to shrink by a total of 6% from peak to trough, and unemployment to increase from around 6.9% in the spring of 1990 to nearly 10.7% by the end of 1993. However, inflation dropped from 10.9% in 1990 to 1.3% three years later. The subsequent economic recovery was extremely strong, and unlike after the early 1980s recession, the recovery saw a rapid and substantial fall in unemployment, which was down to 7.2% by 1997, although the popularity of the Conservative government had failed to improve with the economic upturn. The government won a fourth successive election in 1992 under John Major, who had succeeded Thatcher in November 1990, but soon afterwards came Black Wednesday, which damaged the Conservative government's reputation for economic competence, and from that stage onwards, the Labour Party was ascendant in the opinion polls, particularly in the immediate aftermath of Tony Blair's election as party leader in July 1994 following the sudden death of his predecessor John Smith.

In May 1997, Labour won the general election by a landslide after 18 years of Conservative government, and inherited a strong economy with low inflation, falling unemployment and a current account surplus. Since 1980, wages had consistently grown by around 2% per year in real terms.

1997 to 2008

The Labour Party, led by Tony Blair, returned to power in May 1997 after 18 years in opposition. During Blair's 10 years in office there were 40 successive quarters of economic growth, lasting until the second quarter of 2008, helped by Labour's decision to keep taxes relatively low and abandon traditional Labour policies, including public ownership of industries and utilities. The previous 15 years had seen one of the highest economic growth rates of major developed economies during that time and certainly the strongest of any European nation. GDP growth had briefly reached 4% per year in the early 1990s, gently declining thereafter. Peak growth was relatively anaemic compared to prior decades, such as the 6.5% per year peak in the early 1970s, although growth was smoother and more consistent. Annual growth rates averaged 2.68% between 1992 and 2007 according to the IMF, with the finance sector accounting for a greater part than previously.

This extended period of growth ended in Q2 of 2008 when the United Kingdom suddenly entered a recession – its first for nearly two decades – brought about by the global financial crisis. Beginning with the collapse of Northern Rock, which was taken into public ownership in February 2008, other banks had to be partly nationalised. The Royal Bank of Scotland Group, which at its peak was the fifth-largest in the world by market capitalisation, was effectively nationalised on 13 October 2008. By mid-2009, HM Treasury had a 70.33% controlling shareholding in RBS, and a 43% shareholding, through UK Financial Investments Limited, in Lloyds Banking Group. The recession saw unemployment rise from just over 1.6 million in January 2008 to nearly 2.5 million by October 2009.

The UK economy had been one of the strongest economies in terms of inflation, interest rates and unemployment, all of which remained relatively low until the 2008–09 recession. In August 2008 the IMF warned that the UK economic outlook had worsened due to a twin shock: financial turmoil and rising commodity prices. Both developments harmed the UK more than most developed countries, as the UK obtained revenue from exporting financial services while recording deficits in finished goods and commodities, including food. In 2007, the UK had the world's third largest current account deficit, due mainly to a large deficit in manufactured goods. In May 2008, the IMF advised the UK government to broaden the scope of fiscal policy to promote external balance. The UK's output per hour worked was on a par with the average for the "old" EU-15 countries.

2009 to 2015

In March 2009, the Bank of England cut interest rates to a historic low of 0.5% and began quantitative easing to boost lending and shore up the economy. The UK exited the Great Recession in Q4 of 2009 according to the Office for National Statistics (ONS). The subsequently revised ONS figures show that the UK experienced six consecutive quarters of negative growth, shrinking by 6.03% from peak to trough, making it the longest recession since records began, and the deepest recession since World War II.

Support for the Labour government slumped during the recession, and the general election of 2010 resulted in a coalition government being formed by the Conservatives and the Liberal Democrats. In order to ease the large budget deficit which had accumulated due to the recession, the coalition made deep spending cuts. Within three years, this had led to public sector job losses well into six figures, but the private sector enjoyed strong jobs growth, and by October 2013 unemployment was below 2.5 million for the first time in four years.

In May 2013, the ONS revealed that over the six-year period between 2005 and 2011, the UK dropped from 5th place to 12th in terms of household income globally. The drop was partially attributed to the devaluation of sterling over this time frame. However, the report also concluded that, during this period, inflation was steady, the UK labour market had been more resilient compared to other recessions, and household spending and wealth in the UK was relatively strong in comparison with other OECD countries.

By the end of 2014, UK growth had become the fastest in the G7 and in Europe, and employment was at its highest since records began.

In stark contrast to the early 2000s, the UK had one of the least productive workforces among the Group of Seven (G7), Ireland, Spain, Belgium, and the Netherlands in 2014, following seven years of stagnation in productivity. Of these countries, only Japan had lower economic output per hour worked. Output in the UK was 18% below the average for the rest of the G7. Of the "old" EU-15 countries, only Portugal, Italy and Greece (three of the so-called PIGS) had lower output per hour worked than the UK.

Income inequality among the EU-15 was highest in the UK, and wages had fallen by 10% in real terms since 2008, worse than any OECD country apart from Greece. The Office for Budget Responsibility forecast in 2014 that individuals would have to borrow £360 billion (net, and excluding mortgages) over the next five years if the economy was to grow at the rate expected by the Government, taking unsecured debt as a proportion of household income to a record high of 55% by 2020. Unsecured household debt rose by 24% between 2011 and 2015, adding to widespread questions over the sustainability of the economic recovery. The Bank of England insisted there was no cause for alarm, despite having said two years earlier that the economic recovery was "neither balanced nor sustainable".

Between 2009 and 2015, the UK's current account deficit rose from 3% to a record high of 5.2% of GDP (£96.2bn), the highest by GDP in the developed world. In the fourth quarter of 2015, the deficit exceeded 7% of GDP, a level not witnessed during peacetime since records began in 1772. The UK relied on foreign investors to plug the shortfall in its balance of payments.

2016 to present day

Following the UK's decision in June 2016 to leave the European Union, commonly known as Brexit, the pound sterling fell to a 31-year low against the United States dollar, and consumer confidence fell sharply. A month after the vote, the Purchasing Managers' Index suggested that Brexit had caused a "dramatic deterioration" in the economy, with output and orders falling by the most since the Great Recession. The Bank of England responded by cutting interest rates from 0.5% to a new historic low of 0.25%. The Bank also bought £60bn of UK government bonds and £10bn of corporate bonds, taking the amount of quantitative easing since the Great Recession to £435bn.

In the third quarter of 2016 wages were still 7% below the level they had been at prior to the Great Recession in real terms. The previous 10 years had been the worst decade for real wage growth since the 1860s. Mark Carney, Governor of the Bank of England, described it as a lost decade. Productivity was 16% below the long-term trend.

Government spending and economic management

Government involvement throughout the economy is primarily exercised by HM Treasury, headed by the Chancellor of the Exchequer. In recent years, the UK economy has been managed in accordance with principles of market liberalisation and low taxation and regulation. Since 1997, the Bank of England's Monetary Policy Committee, headed by the Governor of the Bank of England, has been responsible for setting interest rates at the level necessary to achieve the overall inflation target for the economy that is set by the Chancellor each year. The Scottish Government, subject to the approval of the Scottish Parliament, has the power to vary the basic rate of income tax payable in Scotland by plus or minus 3 pence in the pound, though this power has not yet been exercised.

In the 20-year period from 1986/87 to 2006/07 government spending in the UK averaged around 40% of GDP. As a result of the 2007–2010 financial crisis and the late-2000s global recession government spending increased to a historically high level of 48% of GDP in 2009–10, partly as a result of the cost of a series of bank bailouts.

In terms of net government debt as % of GDP, at the end of June 2014 public sector net debt excluding financial sector interventions was £1304.6 billion, equivalent to 77.3% of GDP. In July 2007, the UK had government debt at 35.5% of GDP.

For the financial year of 2013–2014 public sector net borrowing was £93.7 billion. This was £13.0 billion higher than in the financial year of 2012–2013.

Taxation

Taxation in the United Kingdom may involve payments to at least two different levels of government: local government and central government (HM Revenue & Customs). Local government is financed by grants from central government funds, business rates, council tax and increasingly from fees and charges such as those from on-street parking. Central government revenues are mainly income tax, national insurance contributions, value added tax, corporation tax and fuel duty.

Agriculture

Agriculture in the UK is intensive, highly mechanised, and efficient by European standards, producing about 60% of food needs, with less than 1.6% of the labour force (535,000 workers). It contributes around 0.6% of British national value added. Around two-thirds of the production is devoted to livestock, one-third to arable crops. Agriculture is subsidised by the European Union's Common Agricultural Policy.

The UK retains a significant, though reduced, fishing industry. Its fleets, based in towns such as Kingston upon Hull, Grimsby, Fleetwood, Newlyn, Great Yarmouth, Peterhead, Fraserburgh, and Lowestoft, bring home fish ranging from sole to herring.

The Blue Book 2013 reports that "Agriculture" added gross value of £9,438 million to the UK economy in 2011.

Construction

The construction industry of the United Kingdom contributed gross value of £86 billion to the UK economy in 2011. The industry employed around 2.2 million people in the fourth quarter of 2009. There were around 194,000 construction firms in the United Kingdom in 2009, of which around 75,400 employed just one person and 62 employed over 1,200 people. In 2009 the construction industry in the UK received total orders of around £18.7 billion from the private sector and £15.1 billion from the public sector.

The largest construction project in the UK is Crossrail. Due to open in 2018, it will be a new railway line running east to west through London and into the surrounding countryside with a branch to Heathrow Airport. The main feature of the project is construction of 42 km (26 mi) of new tunnels connecting stations in central London. It is also Europe's biggest construction project with a £15 billion projected cost.

Prospective construction projects include the High Speed 2 line between London and the West Midlands and Crossrail 2.

Electricity, gas and water supply

The Blue Book 2013 reports that this sector added gross value of £33,289 million to the UK economy in 2011. The United Kingdom is expected to launch the building of new nuclear reactors to replace existing generators and to boost UK's energy reserves.

Manufacturing

In the 1970s, manufacturing accounted for 25 percent of the economy. Total employment in manufacturing fell from 7.1 million in 1979 to 4.5 million in 1992 and only 2.7 million in 2016, when it accounted for 10% of the economy.

In 2011 the UK manufacturing sector generated approximately £140,539 million in gross value added and employed around 2.6 million people. Of the approximately £16 billion invested in R&D by UK businesses in 2008, approximately £12 billion was by manufacturing businesses. In 2008, the UK was the sixth-largest manufacturer in the world measured by value of output.

In 2008 around 180,000 people in the UK were directly employed in the UK automotive manufacturing sector. In that year the sector had a turnover of £52.5 billion, generated £26.6 billion of exports and produced around 1.45 million passenger vehicles and 203,000 commercial vehicles. The UK is a major centre for engine manufacturing, and in 2008 around 3.16 million engines were produced in the country.

The aerospace industry of the UK is the second- or third-largest aerospace industry in the world, depending upon the method of measurement. The industry employs around 113,000 people directly and around 276,000 indirectly and has an annual turnover of around £20 billion. British companies with a major presence in the industry include BAE Systems (the world's second-largest defence contractor) and Rolls-Royce (the world's second-largest aircraft engine maker). Foreign aerospace companies active in the UK include EADS and its Airbus subsidiary, which employs over 13,000 people in the UK.

The pharmaceutical industry employs around 67,000 people in the UK and in 2007 contributed £8.4 billion to the UK's GDP and invested a total of £3.9 billion in research and development. In 2007 exports of pharmaceutical products from the UK totalled £14.6 billion, creating a trade surplus in pharmaceutical products of £4.3 billion. The UK is home to GlaxoSmithKline and AstraZeneca, respectively the world's third- and seventh-largest pharmaceutical companies.

Mining, quarrying and hydrocarbons

The Blue Book 2013 reports that this sector added gross value of £31,380 million to the UK economy in 2011. In 2007 the UK had a total energy output of 9.5 quadrillion Btus, of which the composition was oil (38%), natural gas (36%), coal (13%), nuclear (11%) and other renewables (2%). In 2009, the UK produced 1.5 million barrels per day (bbl/d) of oil and consumed 1.7 million bbl/d. Production is now in decline and the UK has been a net importer of oil since 2005. As of 2010 the UK has around 3.1 billion barrels of proven crude oil reserves, the largest of any EU member state.

In 2009 the UK was the 13th largest producer of natural gas in the world and the largest producer in the EU. Production is now in decline and the UK has been a net importer of natural gas since 2004. In 2009 the UK produced 19.7 million tons of coal and consumed 60.2 million tons. In 2005 it had proven recoverable coal reserves of 171 million tons. It has been estimated that identified onshore areas have the potential to produce between 7 billion tonnes and 16 billion tonnes of coal through underground coal gasification (UCG). Based on current UK coal consumption, these volumes represent reserves that could last the UK between 200 and 400 years.

The UK is home to a number of large energy companies, including two of the six oil and gas "supermajors" – BP and Royal Dutch Shell – and BG Group.

The UK is also rich in a number of natural resources including coal, tin, limestone, iron ore, salt, clay, chalk, gypsum, lead and silica.

Service industries

The service sector is the dominant sector of the UK economy, and contributes around 77.8% of GDP as of Q1 2014.

Creative industries

The creative industries accounted for 7% GVA in 2005 and grew at an average of 6% per annum between 1997 and 2005. Key areas include London and the North West of England which are the two largest creative industry clusters in Europe. According to the British Fashion Council, the fashion industry’s contribution to the UK economy in 2014 is ₤26 billion, up from ₤21 billion pounds in 2009. The UK is home to the world's largest advertising company, WPP.

Education, health and social work

According to The Blue Book 2013 the education sector added gross value of £84,556 million in 2011 whilst Human health and social work activities added £104,026 million in 2011.

In the UK the majority of the healthcare sector consists of the state funded and operated National Health Service (NHS), which accounts for over 80% of all healthcare spending in the UK and has a workforce of around 1.7 million, making it the largest employer in Europe, and putting it amongst the largest employers in the world. The NHS operates independently in each of the four constituent countries of the UK. The NHS in England is by far the largest of the four parts and had a turnover of £92.5 billion in 2008.

In 2007/08 higher education institutions in the UK had a total income of £23 billion and employed a total of 169,995 staff. In 2007/08 there were 2,306,000 higher education students in the UK (1,922,180 in England, 210,180 in Scotland, 125,540 in Wales and 48,200 in Northern Ireland).

Financial and business services

The UK financial services industry added gross value of £116,363 million to the UK economy in 2011. The UK's exports of financial and business services make a significant positive contribution towards the country's balance of payments.

London is a major centre for international business and commerce and is one of the three "command centres" of the global economy (alongside New York City and Tokyo). There are over 500 banks with offices in London, and it is the leading international centre for banking, insurance, Eurobonds, foreign exchange trading and energy futures. London's financial services industry is primarily based in the City of London and Canary Wharf. The City houses the London Stock Exchange, the London International Financial Futures and Options Exchange, the London Metal Exchange, Lloyds of London, and the Bank of England. Canary Wharf began development in the 1980s and is now home to major financial institutions such as Barclays Bank, Citigroup and HSBC, as well as the UK Financial Services Authority. London is also a major centre for other business and professional services, and four of the six largest law firms in the world are headquartered there.

Several other major UK cities have large financial sectors and related services. Edinburgh has one of the largest financial centres in Europe and is home to the headquarters of the Royal Bank of Scotland Group and Standard Life. Leeds is now the UK's largest centre for business and financial services outside London, and the largest centre for legal services in the UK after London.

According to a series of research papers and reports published in the mid-2010s, Britain’s financial firms provide sophisticated methods to launder billions of pounds annually, including money from the proceeds of corruption around the world as well as the world’s drug trade, thus making the City a global hub for illicit finance. According to a Deutsche Bank study published in March 2015, Britain was attracting circa one billion pounds of capital inflows a month not recorded by official statistics, up to 40 percent probably originating from Russia, which implies misreporting by financial institutions, sophisticated tax avoidance, and the UK's "safe-haven" reputation.

Since the 'Brexit' referendum result, commentators have suggested that some banks will relocate out of the UK, with smaller banks planning to move before December 2016, and the larger banks early in 2017.

Hotels and restaurants

The Blue Book 2013 reports that this industry added gross value of £36,554 million to the UK economy in 2011. Intercontinental Hotels Group (IHG), headquartered in Denham, Buckinghamshire, is currently the world's largest hotelier, owning and operating hotel brands such as Intercontinental, Holiday Inn and Crowne Plaza. The international arm of Hilton Hotels, the world's fifth largest hotelier, used to be owned by Ladbrokes Plc, and was headquartered in Watford, Hertfordshire from 1987 to 2005. It was sold to Hilton Hotels Group of the USA in December 2005.

Informal

A study in 2014 found that prostitution and associated services added over £5 billion to the economy each year.

Public administration and defence

The Blue Book 2013 reports that this sector added gross value of £70,400 million to the UK economy in 2011.

Real estate and renting activities

The real estate and renting activities sector includes the letting of dwellings and other related business support activities. The Blue Book 2013 reports that real estate industry added gross value of £143,641 million in 2011. Notable real estate companies in the United Kingdom include British Land, Land Securities and The Peel Group.

The UK property market boomed for the seven years up to 2008 and in some areas property trebled in value over that period. The increase in property prices had a number of causes: low interest rates, credit growth, economic growth, rapid growth in buy to-let property investment, foreign property investment in London and planning restrictions on the supply of new housing.

Rent has nearly doubled as a share of GDP since 1985, and is now larger than the manufacturing sector. In 2014, rent and imputed rent – an estimate of how much home-owners would pay if they rented their home – accounted for 12.3% of GDP.

Tourism

Tourism is very important to the British economy. With over 32.6 million tourists arriving in 2014, the United Kingdom is ranked as the eighth major tourist destination in the world. London is the second most visited city in the world with 17.4 million visitors in 2014, behind of 1st placed Hong Kong (27.8 million visitors).

Transport, storage and communication

The transport and storage industry added gross value of £59,179 million to the UK economy in 2011 and the telecommunication industry added a gross value of £25,098 million in the same year.

The UK has a radial road network of 46,904 kilometres (29,145 mi) of main roads, with a motorway network of 3,497 kilometres (2,173 mi). There are a further 213,750 kilometres (132,818 mi) of paved roads. The railway infrastructure company Network Rail owns and operates the majority of the 16,116 km (10,014 mi) railway lines in Great Britain and a further 303 route km (189 route mi) in Northern Ireland is owned and operated by Northern Ireland Railways. Since privatisation, around 20 Train Operating Companies operate the passenger trains. Urban rail networks are well developed in major cities including Glasgow, Liverpool and London. The government is to spend £30 billion on a new high-speed railway line, HS2, to be operational by 2026. Crossrail, under construction in London, Is Europe's largest construction project with a £15 billion projected cost.

The Highways Agency is the executive agency responsible for trunk roads and motorways in England apart from the privately owned and operated M6 Toll. The Department for Transport states that traffic congestion is one of the most serious transport problems and that it could cost England an extra £22 billion in wasted time by 2025 if left unchecked. According to the government-sponsored Eddington report of 2006, congestion is in danger of harming the economy, unless tackled by road pricing and expansion of the transport network.

In the year from October 2009 to September 2010 UK airports handled a total of 211.4 million passengers. In that period the three largest airports were London Heathrow Airport (65.6 million passengers), Gatwick Airport (31.5 million passengers) and London Stansted Airport (18.9 million passengers). London Heathrow Airport, located 24 kilometres (15 mi) west of the capital, has the most international passenger traffic of any airport in the world. and is the hub for the UK flag carrier British Airways, as well as BMI and Virgin Atlantic. London's six commercial airports form the world's largest city airport system measured by passenger traffic.

Wholesale and retail trade

This sector includes the motor trade, auto repairs, personal and household goods industries. The Blue Book 2013 reports that this sector added gross value of £151,785 million to the UK economy in 2011.

As of 2016, high-street retail spending accounted for about 33% of consumer spending and 20% of GDP. Because 75% of goods bought in the United Kingdom are made overseas, the sector only accounts for 5.7% of gross value added to the British economy.

The UK grocery market is dominated by four companies: Asda (owned by Wal-Mart Stores), Morrisons, Sainsbury's and Tesco.

London is a major retail centre and in 2010 had the highest non-food retail sales of any city in the world, with a total spend of around £64.2 billion. The UK-based Tesco is the third-largest retailer in the world measured by revenues (after Wal-Mart Stores and Carrefour) and as of 2011 was the leader in the UK market with around a 30% share.

Currency

London is the world capital for foreign exchange trading, with a global market share of nearly 41% in 2013 of the daily $5.3 trillion global turnover. The highest daily volume, counted in trillions of dollars US, is reached when New York enters the trade. The currency of the UK is the pound sterling, represented by the symbol £. The Bank of England is the central bank, responsible for issuing currency. Banks in Scotland and Northern Ireland retain the right to issue their own notes, subject to retaining enough Bank of England notes in reserve to cover the issue. Pound sterling is also used as a reserve currency by other governments and institutions, and is the third-largest after the US dollar and the euro.

The UK chose not to join the euro at the currency's launch. The government of former Prime Minister Tony Blair had pledged to hold a public referendum for deciding membership should "five economic tests" be met. Until relatively recently there was debate over whether or not the UK should abolish its currency Pound Sterling and join the Euro. In 2007 the British Prime Minister, Gordon Brown, pledged at the time to hold a public referendum based on certain tests he set as Chancellor of the Exchequer. When assessing the tests, Gordon Brown concluded that while the decision was close, the United Kingdom should not yet join the Euro. He ruled out membership for the foreseeable future, saying that the decision not to join had been right for the UK and for Europe. In particular, he cited fluctuations in house prices as a barrier to immediate entry. Public opinion polls have shown that a majority of Britons have been opposed to joining the single currency for some considerable time and this position has now hardened further. In 2005, more than half (55%) of the UK were against adopting the currency, while 30% were in favour. The issue of joining the Euro has become a non-issue since the referendum decision to withdraw from the European Union.

Exchange rates

(average for of each year), in USD (US dollar) and EUR (euro) per GBP; and inversely: GBP per USD and EUR. (Synthetic Euro XEU before 1999). Caution: these averages conceal wide intra-year spreads. The coefficient of variation gives an indication of this. It also shows the extent to which the pound tracks the euro or the dollar. Note the effect of Black Wednesday in late 1992 by comparing the averages for 1992 with the averages for 1993.

1 GBP in USD since 1971

Source: OANDA.COM Historical Currency Converter For consistency and comparison purposes, coefficient of variation is measured on both the "per pound" ratios, although it is conventional to show the forex rates as dollars per pound and pounds per euro.

Economy by region

The strength of the UK economy varies from country to country and from region to region. Excluding the effects of North Sea oil and gas (which is classified in official statistics as extra-regio), England has the highest gross value added (GVA) and Wales the lowest of the UK's constituent countries.

Within England, GVA per capita is highest in London. The following table shows the GVA per capita of the nine statistical regions of England.

Two of the richest 10 areas in the European Union are in the United Kingdom. Inner London is number 1 with a GDP per capita of €65 138, and Berkshire, Buckinghamshire and Oxfordshire is number 7 with a GDP per capita of €37 379. Edinburgh is also one of the largest financial centres in Europe.

At the other end of the scale, Cornwall has the lowest GVA per head of any county or unitary authority in England, and it has received EU Convergence funding (formerly Objective One funding) since 2000.

Trade

UK Trade bulletin January 2017

The trade deficit in goods and services in January 2017 was £2.0 billion, unchanged from December 2016.

Between the 3 months to October 2016 and the 3 months to January 2017, the total trade deficit (goods and services) narrowed by £4.7 billion to £6.4 billion. At the commodity level, the main contributors to the narrowing of the total trade deficit in the 3 months to January 2017, were increased exports of non-monetary gold, oil, machinery and transport equipment (mainly electrical machinery, aircraft and cars) and chemicals.

The trade in goods deficit for the 3 months to January 2017 narrowed by £4.1 billion to £33.1 billion compared with the 3 months to October 2016.

In 2016, excluding oil and other erratic commodities, the underlying trend in trade in goods is a widening of the deficit; with both exports and imports of goods increasing each quarter of the year. Following the UK trade December 2016 release the quarter 4 (October to December) 2016 total trade (goods and services) balance has been revised upwards by £3.5 billion.

Foreign direct investment

In 2013 the UK was the leading country in Europe for inward foreign direct investment (FDI) with $26.51bn. This gave it a 19.31% market share in Europe. In contrast, the UK was second in Europe for outward FDI, with $42.59bn, giving a 17.24% share of the European market.

European Union membership

As a member of the European Union, the UK has negotiated and agreed to numerous EU-wide trade and market policies. According to the 2014 report within the "Balance of EU competences" review, the majority of the EU trade policies have been beneficial for UK, despite the proportion of the country's exports going to the EU falling from 54 percent to 47 percent over the past decade. The total value of exports however has increased in the same period from £130 billion (€160 billion) to £240 billion (€275 billion).

In June 2016 the UK voted to leave the EU in a national referendum on its membership of the EU. The long-term consequences of this vote are unclear at present.

Poverty

The United Kingdom is a developed country with social welfare infrastructure, thus discussions surrounding poverty tend to be of relative poverty rather than absolute poverty. According to the OECD, the UK is in the lower half of developed country rankings for poverty rates, doing better than Italy and the US but less well than France, Austria, Hungary, Slovakia and the Nordic countries. Eurostat figures show that the numbers of Britons at risk of poverty has fallen to 15.9% in 2014, down from 17.1% in 2010 and 19% in 2005 (after social transfers were taken into account).

The poverty line in the UK is commonly defined as being 60% of the median household income. In 2007–2008, this was calculated to be £115 per week for single adults with no dependent children; £199 per week for couples with no dependent children; £195 per week for single adults with two dependent children under 14; and £279 per week for couples with two dependent children under 14. In 2007–2008, 13.5 million people, or 22% of the population, lived below this line. This is a higher level of relative poverty than all but four other EU members. In the same year, 4.0 million children, 31% of the total, lived in households below the poverty line, after housing costs were taken into account. This is a decrease of 400,000 children since 1998–1999.