British Economic Analysis

British Economic Analysis

By

Yue xiaoru

6/June/2018

Economic overview

The economy of the United Kingdom is highly developed and market-oriented. (Hawkins, 2010)

It is the fifth-largest national economy in the world measured by nominal gross domestic product (GDP), ninth-largest measured by purchasing power parity (PPP), and nineteenth-largest measured by GDP per capita, comprising 3.5% of world GDP. (Kupelian, 2017)

The main economic industries in the UK：

1. Agriculture

Agriculture in the UK is intensive, highly mechanized. It contributes around 0.6% of British national value added. (Wikipedia, 2018)

1. Manufacturing

UK's manufacturing industry accounts for 10% of GDP.

1. Services

The service sector is the dominant sector of the UK economy, and contributes around 80.2% of GDP as of 2016. (Wikipedia, 2018)

The major export countries and markets:

The main export destinations in the United Kingdom are the United States, Germany, France, the Netherlands and Ireland. (Wikipedia, 2018)

The main products:

The main products are manufactured, goods, fuels, chemicals, food, beverages and tobacco. (Wikipedia, 2018)

Quick overview of the economic performance in the last 10 years

After the financial crisis in 2008, the British bank’s face value shrank and its liabilities were serious. For example, the Bank of Barclays fell from 174 billion pounds to 7.4 billion pounds, and the pound sterling depreciated. The British business has become difficult to survive. Martha, a major supermarket in the UK, has reduced her sales by 71% compared to the same period due to Christmas sales and has had to announce its 25 food stores in the UK. This kind of decline in corporate profits and a stagnant trade have led most companies to lay off their employees and cut employee salaries and pensions.

Production output performance analysis

Real GDP

GDP can measure the national output of an economy or the national income, which is a measure of the quantity of goods and services produced in a given year. However, the actual GDP is the value of the final goods and services produced at a certain year at a fixed price. As the actual GDP considers inflation, the actual GDP is a measure of the kimono of the goods. The actual growth of business and exclude the impact of price increases.

UK REAL GDP

[pic 1]

The above graph shows the real GDP changes in the UK from 2008 to 2018. The real GDP of the United Kingdom is more than 440,000 GBP Million in 2008. After that, the real GDP of the United Kingdom declined, dropping to 420,000 GBP Million in 2010. After 2010, the real GDP of the United Kingdom has been on an upward trend. In 2014, the real GDP of the United Kingdom has risen to about 450,000 GBP Million, which has exceeded the real GDP of 2008. In 2018, the real GDP of Britain has exceeded 490,000 GBP Million.

GDP Growth Rate

The GDP growth rate is the annual percentage change of real GDP.

The GDP growth rate tells us how rapidly the total economy is expanding, according to the GDP growth rate; the government can see whether the leadership methods adopted by the current leaders are effective in raising the national economic level.

REAL GDP GROWTH RATE

[pic 2]

The graph above shows the trend of the growth rate of gross domestic product between 2008 and 2018. In 2008, the GDP growth rate of the United Kingdom was 2.5 percent. After 2008, the gross domestic product of the United Kingdom declined rapidly, and dropped to -6 percent in 2009, the lowest in ten years from 2008 to 2018. After 2009, the growth rate of gross domestic product (GDP) in Britain showed an obvious upward trend, reaching zero percent in 2010. The growth rate of UK GDP rose to two percent in 2011, then began to fluctuate and showed a slow downward trend. In 2012, the growth rate of GDP in the UK reached one percent 1. Since 2012, the upward trend has slowed down and accompanied by small fluctuations. In 2015, the UK's GDP rose to three percent, the highest point in the UK's GDP growth rate between 2008 and 2018. However, the growth trend of GDP in the UK has not continued. Since 2015, the growth rate of gross domestic product in the UK began to decline and fluctuated, and the growth rate of GDP in the UK fell to about one point five percent in 2018.

Real GDP Per Capita

The standard of living depends on GDP per person or GDP per capita.

GDP per person is GDP divided by the population.

REAL GDP PER CAPITA

[pic 3]

This line chart tells us the change in per capita GDP in Britain between 2008 and 2016. Britain's per capita GDP was about $40250 in 2008, and then dropped rapidly to $38250 after 2008, the lowest in 2008 to 2016. After that, the average per capita GDP reached about $38750 in 2010, and in 2012 Britain's per capita GDP rose to about $39250. In 2012, the UK's per capita GDP rose faster and in 2014 to about $20750. But after 2014, the UK's per capita GDP was on the per capita GDP. As the rate of growth slows down, the per capita GDP in 2016 reaches about 41750 US dollars, which is the highest value of Britain's per capita GDP between 2008 and 2016. From the above line chart and data analysis, it can be seen that the per capita GDP of the UK has begun to increase, although it has not been restored to its previous level, but it is sufficient to indicate that the UK economy is starting to recover.

Measures taken by the government

To increase productivity, the British government has issued the following measures:

1. Increase government investment in infrastructure.
2. Encourage large-scale commercial investment both at home and abroad. For example, reduce the corporate tax.
3. The better the tax and welfare reforms are, the higher the wages will be and motivate the employees.
4. Improve the quality of education and training, which can indirectly increase productivity.
5. Improve the quality of care and reduce absenteeism due to illness, thereby increasing the output of each staff member.
6. The government took measures to increase bank loans to further increase investment and productivity, such as the Loan Financing Plan launched by the Bank of England

Labor market analysis

Unemployment rate

The unemployment rate is the percentage of the labor force that is unemployed.

Type of unemployment

Three types of unemployment

1. Frictional unemployment

Frictional unemployment is unemployment that arises from normal labor market turnover.

1. Structural unemployment

Structural unemployment is unemployment caused by changes in technology and foreign competition that change the skills needed to perform jobs or the locations of jobs.