The British Economy Zhejiang University of Finance & Economics Dong Fang College Toriano Cook

A Brief Introduction to U.K. Economy Britain was the first country to start the Industrial Revolution in the 18th century. Britain is a capitalist country. The economic system of capitalism is one that promotes and protects private enterprises and business. Britain began its market economy about 300 years ago.

A Brief Introduction to U.K. Economy Britain is a trading nation. In Britain, the domestic market is limited. So, it has to find more markets outside the country. It has to find more markets in the world. Each year Britain exports one-third of its gross domestic product (GDP). It is the fourth largest exporter in the world. Its exports account for about 5% of the world’s total trade volume.

A Brief Introduction to U.K. Economy Britain is also one of the world’s largest importers. Because Britain lacks raw materials (metal, fuel,…), or we may say its home supply of raw materials is inadequate, Britain has to buy a large proportion of the raw materials sold in the world market. Britain’s major trading partners are industrialized countries.

Absolute Decline and Relative Decline Absolute Decline: the general fall of an economy, from manufacture output, employment, profits, spending Relative Decline: when one industry is growing but much slower than other industries (looks like it is in decline in comparison) Which is the United Kingdom?

Absolute Decline and Relative Decline Britain was the first country in the world to start the industrial revolution. It took the lead in the development of economy in the world in the 19th century. But by 1900, it was overtaken by both the US and Germany. In the Post-war period, the U.K. economy experienced boom and bust (the fluctuation of U.K. economy). Can be said the UK is both.

Absolute Decline and Relative Decline The reasons of the economic decline: 1)  Being in debt (to other countries, like China); 2)  The end of the empire; 3)  Large military spending; 4)  Economic increase by Germany and Japan; 5) Lack of a close relationship between industry and banks.

Absolute Decline and Relative Decline A Characteristic of the UK economy – Low domestic industrial investment, with a very high rate of investments made in other countries.

Recent History Britain’s slow economic growth in the second half of the 20th century, high inflation and high unemployment became known as the “British Disease”. In 1979, Margaret Thatcher became Britain’s first-ever woman Prime Minister. She started a large program of privatization. The new program pushed reducing taxes to encourage investments and spending.

Recent History Thatcher’s economic policy achieved remarkable success: 1) Inflation fell to about 4 percent. 2) Britain achieved an average 3 percent increase in its economic growth. 3) The worker’s take-home pay increased by 20 percent. 4) Profits of industrial companies was high.

Recent History Thatcher’s policy also had many downsides… 1) High Unemployment; 2) Widened gap between the poor and the rich; 3) High crime rates; 4) Unsatisfactory social services.

The Current U.K. Economy Division of the economic sectors: Primary industry (1) Secondary industry (2) Tertiary industries/service industry (3)

Primary Industry Collection of raw materials Coal production (15th largest producing country. Oil: produced in the North Sea (off the coast of Scotland) Natural gas: off the coast of Scotland and the Irish Sea

Secondary Industry The manufacturing and assembly process Construction industry (in England) High-tech production Science Parks

Tertiary Industry Commercial or service industries Dominant in the UK market Financial Services (London) Pharmaceutical industry Entertainment (media, creative services)

Dominant Companies of the UK HSBC Group (Banks)

Dominant Companies of the UK Shell Oil

Dominant Companies of the UK British Petroleum (BP)

Dominant Companies of the UK Barclays Financial Services

Dominant Companies of the UK

Dominant Companies of the UK Lloyd’s Bank PLC

Dominant Companies of the UK GlaxoSmithKline (Drug Company)

Dominant Companies of the UK Unilever (Consumer goods)