United Kingdom flag United Kingdom: Economic outline

Economic Outline

Economic Indicators

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.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 3,081.873,332.063,587.753,830.054,083.25
GDP (Constant Prices, Annual % Change) 4.10.50.62.02.1
GDP per Capita (USD) 45,46148,91352,42655,73259,190
General Government Balance (in % of GDP) -3.8-3.3-2.4-3.1-3.4
General Government Gross Debt (in % of GDP) 101.9104.1105.9107.3108.5
Inflation Rate (%) n/a7.73.72.12.0
Unemployment Rate (% of the Labour Force) 3.74.24.64.34.2
Current Account (billions USD) -116.14-121.96-131.37-138.28-146.50
Current Account (in % of GDP) -3.8-3.7-3.7-3.6-3.6

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

 
Monetary Indicators 20162017201820192020
British Pound (GBP) - Average Annual Exchange Rate For 1 ZAR 0.050.060.060.060.05

Source: World Bank, 2015

 

Return to top

Any Comment About This Content? Report It to Us.

 

© eexpand, All Rights Reserved.
Latest Update: April 2024