Transcript A Characteristic of the UK economy

The British Economy
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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)