Gdp In Uk

INTRODUCTION-

UK, the third world largest economy in Europe after France and Germany, is a leading trading power and financial center. From the past two decades, the government has greatly decreases the public ownership and contained the growth of social welfare programs. Agriculture is intensive, highly mechanized, and efficient by European standards, producing about 60 percent of food needs with less than 2precent of the labor force of the country. The UK has large coal, natural gas, and oil resources, but its oil and natural gas reserves are declining and the UK became a net importer of energy in 2005. Services, particularly banking, insurance, and business services, account by far for the largest proportion of gross domestic product (GDP)

Overvalued exchange rates- Countries, in the Eurozone, which became uncompetitive, experienced large current account deficits. Other than those it makes it tuff for exporters because they are relatively uncompetitive. That is because an overvalued exchange rates means exports are more expensive, but imports are cheaper. This encourages domestic consumers to purchase imports.

2. High Consumer Spending. If there is rapid increase in consumer spending, then there tends to be a growth in imports causing deterioration in the current account. For example, in the 1980 boom, we saw depreciation in the savings rate and a rise in United Kingdom consumer spending; this caused a record current account deficit. The recession of 1991s caused an improvement in the current account as import spending down.

3. Unbalanced Economy. An economy major focused on customer spending rather than investment and exports will tend to have a biggest current account deficit.

4. Competitiveness. Related to exchange rate is the general competitiveness of firms. If that is a decline in relative competitiveness, for example increasing wage rate, industrial unrest, bad quality goods then it is harder to export causing falling in the current

Reduce consumer spending – through tight fiscal and tight monetary policy. For example higher income tax will decrease disposable income and therefore reduce spending on imports.

2. Policies on supply to improve competitiveness.

3. Devaluation of the exchange rate. Those makes exports most cheaper and imports more costly.

UK Balance of Payments-

In second Quarter 2012, the main components of the balance of payments were:

1. Current Account – £ -15 962m

2. Financial Account + £ 5 785m

3. Capital Account + £1000 m

4. Net errors and Omissions + £9177 m

5. Net balance = £0 m

In other words, if we have a deficit on the regular account to purchase product from China, we need foreign currency to come from some other source to keep purchasing these imports.

One example is to think of United Kingdom consumers purchasing Chinese product causing a deficit on the current account. Then Chinese banks and firms invest some of this money back into UK investment trusts or build a factor in the United Kingdom. These leads to a credit on the financial account. Our current account deficit are being financed by a surplus on financial flows.

Fiscal