Economy
Overview
The UK has a partially regulated market economy.[234] Based on market exchange rates, the UK is today the fifth-largest economy in the world and the second-largest in Europe after Germany. HM Treasury, led by the Chancellor of the Exchequer, is responsible for developing and executing the government's public finance policy and economic policy. The Bank of England is the UK's central bank and is responsible for issuing notes and coins in the nation's currency, the pound sterling. Banks in Scotland and Northern Ireland retain the right to issue their own notes, subject to retaining enough Bank of England notes in reserve to cover their issue. The pound sterling is the world's third-largest reserve currency (after the US dollar and the euro).[235] Since 1997 the Bank of England's Monetary Policy Committee, headed by the Governor of the Bank of England, has been responsible for setting interest rates at the level necessary to achieve the overall inflation target for the economy that is set by the Chancellor each year.[236]
The UK service sector makes up around 79 per cent of GDP.[237] London is one of the three "command centres" of the global economy (alongside New York City and Tokyo),[238] it is the world's largest financial centre alongside New York,[239][240][241] and it has the largest city GDP in Europe.[242] Tourism is very important to the British economy; with over 27 million tourists arriving in 2004, the United Kingdom is ranked as the sixth major tourist destination in the world and London has the most international visitors of any city in the world.[243][244] The creative industries accounted for 7 per cent GVA in 2005 and grew at an average of 6 per cent per annum between 1997 and 2005.[245]
The Industrial Revolution started in the UK with an initial concentration on the textile industry,[246] followed by other heavy industries such as shipbuilding, coal mining and steelmaking.[247][248] British merchants, shippers and bankers developed overwhelming advantage over those of other nations allowing the UK to dominate international trade in the 19th century.[249][250] As other nations industrialised, coupled with economic decline after two world wars, the United Kingdom began to lose its competitive advantage and heavy industry declined, by degrees, throughout the 20th century. Manufacturing remains a significant part of the economy but accounted for only 16.7 per cent of national output in 2003.[251]
The automotive industry employs around 800,000 people, with a turnover in 2015 of £70 billion, generating £34.6 billion of exports (11.8 per cent of the UK's total export goods). In 2015, the UK produced around 1.6 million passenger vehicles and 94,500 commercial vehicles. The UK is a major centre for engine manufacturing: in 2015 around 2.4 million engines were produced. The UK motorsport industry employs around 41,000 people, comprises around 4,500 companies and has an annual turnover of around £6 billion.[252]
The aerospace industry of the UK is the second- or third-largest national aerospace industry in the world depending upon the method of measurement and has an annual turnover of around £30 billion.[253] The wings for the Airbus A380 and the A350 XWB are designed and manufactured at Airbus UK's Broughton facility, whilst over a quarter of the value of the Boeing 787 comes from UK manufacturers including Eaton, Messier-Bugatti-Dowty and Rolls-Royce.[citation needed]
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BAE Systems plays a critical role in some of the world's biggest defence aerospace projects. In the UK, the company makes large sections of the Typhoon Eurofighter and assembles the aircraft for the Royal Air Force. It is also a principal subcontractor on the F35 Joint Strike Fighter – the world's largest single defence project – for which it designs and manufactures a range of components. It also manufactures the Hawk, the world's most successful jet training aircraft.[254] Airbus UK also manufactures the wings for the A400 m military transporter. Rolls-Royce is the world's second-largest aero-engine manufacturer. Its engines power more than 30 types of commercial aircraft and it has more than 30,000 engines in service in the civil and defence sectors.
The UK space industry was worth £9.1bn in 2011 and employed 29,000 people. It is growing at a rate of 7.5 per cent annually, according to its umbrella organisation, the UK Space Agency. In 2013, the British Government pledged £60 m to the Skylon project: this investment will provide support at a "crucial stage" to allow a full-scale prototype of the SABRE engine to be built.
The pharmaceutical industry plays an important role in the UK economy and the country has the third-highest share of global pharmaceutical R&D expenditures.[255][256]
Agriculture is intensive, highly mechanised and efficient by European standards, producing about 60 per cent of food needs with less than 1.6 per cent of the labour force (535,000 workers).[257] Around two-thirds of production is devoted to livestock, one-third to arable crops. Farmers are subsidised by the EU's Common Agricultural Policy. The UK retains a significant, though much reduced fishing industry. It is also rich in a number of natural resources including coal, petroleum, natural gas, tin, limestone, iron ore, salt, clay, chalk, gypsum, lead, silica and an abundance of arable land.[258]
In the final quarter of 2008, the UK economy officially entered recession for the first time since 1991.[259] Following the likes of the United States, France and many major economies, in 2013, the UK lost its top AAA credit rating for the first time since 1978 with Moodys and Fitch credit agency, but, unlike the other major economies, retained its triple A rating with Standard & Poor's.[260][261] By the end of 2014, UK growth was the fastest in both the G7 and in Europe,[262][263] and by September 2015, the unemployment rate was down to a seven-year low of 5.3 per cent.[264]
Since the 1980s, UK economic inequality, like Canada, Australia and the United States, has grown faster than in other developed countries.[265][266] The poverty line in the UK is commonly defined as being 60 per cent of the median household income.[note 16] The Office for National Statistics has estimated that in 2011, 14 million people were at risk of poverty or social exclusion, and that one person in 20 (5.1 per cent) was experiencing "severe material depression",[267] up from 3 million people in 1977.[268][269] Although the UK does not have an official poverty measure, the Joseph Rowntree Foundation and the Social Metrics Commission estimate, based on government data, that there are 14 million people in poverty in the UK.[270][271] 1.5 million people experienced destitution in 2017.[272] In 2018, the UN Special Rapporteur on Extreme Poverty and Human Rights visited the UK and found that government policies and cuts to social support are "entrenching high levels of poverty and inflicting unnecessary misery in one of the richest countries in the world."[273] His final 2019 report found that the UK government was doubling down on policies that have "led to the systematic immiseration of millions across Great Britain" and that sustained and widespread cuts to social support "amount to retrogressive measures in clear violation of the United Kingdom’s human rights obligations."[274]
The UK has an external debt of $9.6 trillion dollars, which is the second-highest in the world after the US. As a percentage of GDP, external debt is 408 per cent, which is the third-highest in the world after Luxembourg and Iceland.[275][276][277][278][279]
Science and technology
England and Scotland were leading centres of the Scientific Revolution from the 17th century.[280] The United Kingdom led the Industrial Revolution from the 18th century,[246] and has continued to produce scientists and engineers credited with important advances.[281] Major theorists from the 17th and 18th centuries include Isaac Newton, whose laws of motion and illumination of gravity have been seen as a keystone of modern science;[282] from the 19th century Charles Darwin, whose theory of evolution by natural selection was fundamental to the development of modern biology, and James Clerk Maxwell, who formulated classical electromagnetic theory; and more recently Stephen Hawking, who has advanced major theories in the fields of cosmology, quantum gravity and the investigation of black holes.[283]
Major scientific discoveries from the 18th century include hydrogen by Henry Cavendish;[284] from the 20th century penicillin by Alexander Fleming,[285] and the structure of DNA, by Francis Crick and others.[286] Famous British engineers and inventors of the Industrial Revolution include James Watt, George Stephenson, Richard Arkwright, Robert Stephenson and Isambard Kingdom Brunel.[287] Other major engineering projects and applications by people from the UK include the steam locomotive, developed by Richard Trevithick and Andrew Vivian;[288] from the 19th century the electric motor by Michael Faraday, the first computer designed by Charles Babbage,[289] the first commercial electrical telegraph by William Fothergill Cooke and Charles Wheatstone,[290] the incandescent light bulb by Joseph Swan,[291] and the first practical telephone, patented by Alexander Graham Bell;[292] and in the 20th century the world's first working television system by John Logie Baird and others,[293] the jet engine by Frank Whittle, the basis of the modern computer by Alan Turing, and the World Wide Web by Tim Berners-Lee.[294]
Scientific research and development remains important in British universities, with many establishing science parks to facilitate production and co-operation with industry.[295] Between 2004 and 2008 the UK produced 7 per cent of the world's scientific research papers and had an 8 per cent share of scientific citations, the third and second-highest in the world (after the United States and China, respectively).[296] Scientific journals produced in the UK include Nature, the British Medical Journal and The Lancet.[297]
Transport
A radial road network totals 29,145 miles (46,904 km) of main roads, 2,173 miles (3,497 km) of motorways and 213,750 miles (344,000 km) of paved roads.[139] The M25, encircling London, is the largest and busiest bypass in the world.[300] In 2009 there were a total of 34 million licensed vehicles in Great Britain.[301]
The UK has a railway network of 10,072 miles (16,209 km) in Great Britain and 189 miles (304 km) in Northern Ireland. Railways in Northern Ireland are operated by NI Railways, a subsidiary of state-owned Translink. In Great Britain, the British Rail network was privatised between 1994 and 1997, which was followed by a rapid rise in passenger numbers following years of decline, although the factors behind this are disputed. The UK was ranked eighth among national European rail systems in the 2017 European Railway Performance Index assessing intensity of use, quality of service and safety.[302] Network Rail owns and manages most of the fixed assets (tracks, signals etc.). About 20 privately owned Train Operating Companies operate passenger trains, which carried 1.68 billion passengers in 2015.[303][304] There are also some 1,000 freight trains in daily operation.[when?][139] The British Government is to spend £30 billion on a new high-speed railway line, HS2, to be operational by 2026.[305] Crossrail, under construction in London, is Europe's largest construction project with a £15 billion projected cost.[306][307]
In the year from October 2009 to September 2010 UK airports handled a total of 211.4 million passengers.[308] In that period the three largest airports were London Heathrow Airport (65.6 million passengers), Gatwick Airport (31.5 million passengers) and London Stansted Airport (18.9 million passengers).[308] London Heathrow Airport, located 15 miles (24 km) west of the capital, has the most international passenger traffic of any airport in the world[298][299] and is the hub for the UK flag carrier British Airways, as well as Virgin Atlantic.[309]
Energy
In 2006, the UK was the world's ninth-largest consumer of energy and the 15th-largest producer.[310] The UK is home to a number of large energy companies, including two of the six oil and gas "supermajors" – BP and Royal Dutch Shell.[311][312] In 2011, 40 per cent of the UK's electricity was produced by gas, 30 per cent by coal, 19 per cent by nuclear power and 4.2 per cent by wind, hydro, biofuels and wastes.[313]
In 2013, the UK produced 914 thousand barrels per day (bbl/d) of oil and consumed 1,507 thousand bbl/d.[314][315] Production is now in decline and the UK has been a net importer of oil since 2005.[316] In 2010 the UK had around 3.1 billion barrels of proven crude oil reserves, the largest of any EU member state.[316]
In 2009, the UK was the 13th-largest producer of natural gas in the world and the largest producer in the EU.[317] Production is now in decline and the UK has been a net importer of natural gas since 2004.[317]
Coal production played a key role in the UK economy in the 19th and 20th centuries. In the mid-1970s, 130 million tonnes of coal were produced annually, not falling below 100 million tonnes until the early 1980s. During the 1980s and 1990s the industry was scaled back considerably. In 2011, the UK produced 18.3 million tonnes of coal.[318] In 2005 it had proven recoverable coal reserves of 171 million tons.[318] The UK Coal Authority has stated there is a potential to produce between 7 billion tonnes and 16 billion tonnes of coal through underground coal gasification (UCG) or 'fracking',[319] and that, based on current UK coal consumption, such reserves could last between 200 and 400 years.[320] Environmental and social concerns have been raised over chemicals getting into the water table and minor earthquakes damaging homes.[321][322]
In the late 1990s, nuclear power plants contributed around 25 per cent of total annual electricity generation in the UK, but this has gradually declined as old plants have been shut down and ageing-related problems affect plant availability. In 2012, the UK had 16 reactors normally generating about 19 per cent of its electricity. All but one of the reactors will be retired by 2023. Unlike Germany and Japan, the UK intends to build a new generation of nuclear plants from about 2018.[313]
The total of all renewable electricity sources provided for 14.9 per cent of the electricity generated in the United Kingdom in 2013,[323] reaching 53.7 TWh of electricity generated. The UK is one of the best sites in Europe for wind energy, and wind power production is its fastest growing supply, in 2014 it generated 9.3 per cent of the UK's total electricity.[324][325][326]
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