GDP of the UK

Gross Domestic Product is the most common indicator used to show a country’s size and economic health. It gives us information about the overall market value of all goods and services a country produces. Furthermore, it helps us figure out whether a country is expanding,  improving or contracting. The measurement most people focus on is the percentage change, because we usually look at the growth of the country’s economy over a period of time (a quarter or one year).

So first, the United Kingdom includes England, Scotland, Wales and Northern Ireland. It  is a constitutional monarchy with a parliamentary system of governance The economy of the UK is highly developed meaning it is a sovereign state that has a developed economy and advanced technological infrastructure and is market orientated (the decisions regarding investment, production and distribution are guided by the price signals creates by the forces of supply and demand); with a GDP of 2,8 trillion US dollars in 2018 and a population of more than 66 million, it is currently the 5th largest national economy in the world after the US, China, Japan and Germany, and the second largest in Europe after Germany. It is also the ninth largest economy by purchasing power.

Concerning the GDP Growth performance, in the 10 years before the subprimes crisis of 2008, the UK’s GDP grew 2,8% on average per year. However the economy was hit very hard by the financial crisis due to overinvestment in the housing market and consumer’s strong dependence on credit and shrunk by more than 6%  between the first quarter of 2008 and the second quarter of 2009. It took the UK economy 5 years to get back to the size it was before the recession.

There is different sectors contributing to the GDP in the UK :

The most remarkable economic development in the United Kingdom has been the growth of services, it is the sector that account for the largest of the economy, in 2017 they accounted for 80% of economic output so more than three-quarters of the GDP and a similar ratio of employment. The service industry in the UK is composed of many industries including finance and business services, consumer-focused industries, such as retail, food and entertainment.

 The manufacturing for 10% and agriculture for 1%. There is no heavy manufacturing industry in which UK based firms can be considered world leaders and it keeps declining.

The most recent evolutions are in 2019: UK’s GDP grew by 0,3% in the three months to August 2019 after falling in quarter 2 and the service sector contributed 0,36% percentage points to GDP’s growth in the three months to August 2019.

Trade has long been a major key to the United Kingdom’s economy. About 28% of what the UK produces is exported. The total value of imports and exports represents nearly half the country’s GDP. It is the 9th largest export economy in the world.

BREXIT IMPACT on the UK economy

The UK’s June 2016 decision the leave the European Union, mostly known as “Brexit” is having a negative impact on the economy, indeed, even if in the six months following the Brexit referendum, UK economy held up better than expecting, it began to slow down in early 2017 as inflation rose. It can also be explained by the fact that the country is impacted by uncertainties related to Brexit negotiations and expectations of higher future trade costs because for now the UK has access to the EU market but Brexit will lead to a significant change in the UK’s relationship with other countries, indeed the EU negotiates trade agreements with the rest of the world but outside the EU, the UK would have to renegotiate trade deals alone. There are declines in business investments (6 percentage points) and employment reduction by 1,5 percentage points, but also less access to foreign markets. So this led to declines in the exchange rate, raising inflation so reducing consumer income therefore less spending and less contributing to the economic growth.

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