United Kingdom: Economic Profile

Background:

The UK enjoyed healthy economic growth during much of the 1990s and outperformed most other European economies during the first seven years of the 2000s. This long period of sustained growth, which was in stark contrast to the boom-and-bust cycles that had produced recessions of varying severity in the 1970s, 1980s and 1990s, even lead the then-Chancellor of the Exchequer Gordon Brown to declare that the UK had reached “the end of boom and bust.” However, the economy during this period was characterized by a high rate of borrowing, low household savings and over-inflated real estate prices. The UK economy is heavily weighted toward the financial sector, whose high exposure to the global economy and financial markets left the economy severely affected by the international financial crisis. The economy entered recession in Q4 2008, leaving the country in an economic slump, saddled with extensive public and government debt. The recession also caused jumps in unemployment and inflation. The economy limped out of recession in Q4 2009, but the huge burden of public debt, as well as its lack of competitiveness compared with its European peers, kept the recovery weak. A major international trading nation, the UK had the sixth-largest economy in the world in purchasing power parity (PPP) terms in 2009, according to the IMF. Since 1979, when the government began privatizing many state-owned companies, the economy has been primarily based on private enterprise. The UK is the only significant energy exporter in the EU but, as one of the world's largest energy users, analysts predict that the country will become a net importer by 2020. The highly developed and diversified economy and extensive state-run welfare system provide a high standard of living for most citizens.