“Emanuil Gojdu” Economic College Hunedoara
United Kingdom Economy
Coordonating teacher: Rotaru Marta
Student:Maxim Alexia-Gabriela
2023
Table of contents
1.
1. Argument
I’ve chosen to write about economy of United Kindom because
UK economy since early years
The economic history of the United Kingdom relates the economic
development in the British state from the absorption of Wales into the Kingdom of
England after 1535 to the modern United Kingdom of Great Britain and Northern
Ireland of the early 21st century.
Scotland, England, and Wales shared a monarch from 1601 but their economies
were run separately until they were unified in the 1707 Act of Union.Ireland was
incorporated in the United Kingdom economy between 1800 and 1922; from 1922
the Irish Free State (the modern Republic of Ireland) became independent and set its
own economic policy.
Total economic output in England 1270 to 2016
Great Britain, and England in particular, became one of the most prosperous
economic regions in the world between the late 1600s and early 1800s as a result of
being the birthplace of the industrial revolution that began in the mid-eighteenth
century.The developments brought by industrialization resulted in Britain becoming
the premier European and global economic, political, and military power for more
than a century. As the first to industrialize, Britain’s industrialists revolutionized areas
like manufacturing, communication, and transportation through innovations such as
the steam engine (for pumps, factories, railway locomotives and steamships), textile
equipment, tool-making, the Telegraph, and pioneered the railway system. With these
many new technologies Britain manufactured much of the equipment and products
used by other nations, becoming known as the “workshop of the world”. Its
businessmen were leaders in international commerce and banking, trade and shipping.
Its markets included both areas that were independent and those that were part of the
rapidly expanding British Empire, which by the early 1900s had become the largest
empire in history.
16th–17th centuries
Ancient coat of arms of the Tudor family
During 16th and 17th century many fundamental economic changes occurred, these
resulted in rising incomes and paved the way to the industrialization. After 1600,
the North Sea Region took over the role of the leading economic centre of Europe
from the Mediterranean, which prior to this date, particularly in northern Italy, had
been the most highly developed part of Europe. Great Britain, together with the Low
Countries, profited more in the long run from the expansion of trade in the Atlantic
and Asia than the pioneers of this trade, Spain and Portugal, fundamentally because of
the success of the mainly privately owned enterprises in these two Northern countries
in contrast to the arguably less successful state-owned economic systems in Iberia.
Following the Black Death in the mid 14th century, and the agricultural depression
of the late 15th century, the population began to increase. The export of woollen
products resulted in an economic upturn with products exported to mainland
Europe. Henry VII negotiated the favourable Intercursus Magnus treaty in 1496.
The high wages and abundance of available land seen in the late 15th century and
early 16th century were temporary. When the population recovered, low wages and a
land shortage returned. Historians in the early 20th century characterized the
economic in terms of general decline, manorial reorganization, and agricultural
contraction. Later historians dropped those themes and stressed the transitions
between medieval forms and Tudor progress.
Growth in money supply
Spanish and Portuguese colonies in the New World exported large quantities of silver
and gold to Europe, some of which added to the English money supply. There were
multiple results that all expanded the English economy, according to Dr. Nuno Palma
of the University of Manchester. The key features of the growth pattern included
specialisation and structural change, and increases in market participation. The new
supply of specie (silver and gold) increased the money supply. Instead of promissory
notes paid off by future promissory notes, business transactions were supported by
specie. This reduced transaction costs, increased the coverage of the market, and
opened incentives and opportunities to participate in cash transaction.
Exports
Exports increased significantly, especially within the British empire. Mostly
privately owned companies traded with the colonies in the West Indies, Northern
America and India.
The Company of Merchant Adventurers of London brought together London's
leading overseas merchants in a regulated company in the early 15th century, in the
nature of a guild. Its members' main business was the export of cloth, especially white
(undyed) woollen broadcloth. This enabled them to import a large range of foreign
goods.[18][19] Given the trade conditions of the time, England came up with a public
policy to increase Armenian merchant's involvement in English trade to pursue its
commercial interests. Accordingly, in 1688 a trade agreement was signed in London
between English East India Company and Kjoja Panos Kalantar. Armenian merchants
received privileges to carry out commercial activities in England. England, in its turn,
wanted to change the main trade route from Europe to Asia, and from now
on, Armenians, instead of overlanding in Arabia or Persia, used England. With this
agreement, England wanted to take over the control that Dutch and France had at that
time on world exports.
Manufacturing
Besides woollens, cotton, silk and linen cloth manufacturing became important after
1600, as did coal and iron.
Coalbrookdale by Night, 1801. Blast furnaces light the iron making town
of Coalbrookdale.
In 1709, Abraham Darby I established a coke-fired blast furnace to produce cast
iron, replacing charcoal, although continuing to use blast furnaces. The ensuing
availability of inexpensive iron was one of the factors leading to the Industrial
Revolution. Toward the end of the 18th century, cast iron began to replace wrought
iron for certain purposes, because it was cheaper. Carbon content in iron was not
implicated as the reason for the differences in properties of wrought iron, cast iron,
and steel until the 18th century.
The Industrial Revolution
Main article: Industrial Revolution
In period loosely dated from the 1770s to the 1820s, Britain experienced an
accelerated process of economic change that transformed a largely agrarian economy
into the world's first industrial economy. This phenomenon is known as the "industrial
revolution", since the changes were far-reaching and permanent throughout many
areas of Britain, especially in the developing cities.
Economic, institutional, and social changes were fundamental to the emergence of
the industrial revolution. Whereas absolutism remained the normal form of
governance through most parts of Europe, in the UK a fundamentally different power
balance was created after the revolutions of 1640 and 1688. The new institutional
setup ensured property rights and political safety and thereby supported the
emergence of an economically prosperous middle class. Another factor is the change
in marriage patterns through this period. Marrying later allowed young people to
acquire more education, thereby building up more human capital in the population.
These changes enhanced the already relatively developed labour and financial
markets, paving the way for the industrial revolution starting in the mid-18th century.
Great Britain provided the legal and cultural foundations that enabled entrepreneurs
to pioneer the industrial revolution.Starting in the later part of the 18th century, there
began a transition in parts of Great Britain's previously manual labour and draft-
animal–based economy towards machine-based manufacturing. It started with the
mechanisation of the textile industries, the development of iron-making techniques
and the increased use of refined coal. Trade expansion was enabled by the
introduction of canals, improved roads and railways.
18th century
The trading nation
The 18th century was prosperous as entrepreneurs extended the range of their
business around the globe. By the 1720s Britain was one of the most prosperous
countries in the world, and Daniel Defoe boasted: "We are the most diligent nation in
the world. Vast trade, rich manufactures, mighty wealth, universal correspondence,
and happy success have been constant companions of England, and given us the title
of an industrious people."
Most of the companies earned good profits, and enormous personal fortunes were
created in India. However, there was one major fiasco that caused heavy losses.
The South Sea Bubble was a business enterprise that exploded in scandal. The South
Sea Company was a private business corporation supposedly set up much like the
other trading companies, with a focus on South America. Its actual purpose was to
renegotiate previous high-interest government loans amounting to £31 million
through market manipulation and speculation. It issued stock four times in 1720 that
reached about 8,000 investors. Prices kept soaring every day, from £130 a share to
£1,000, with insiders making huge paper profits. The Bubble collapsed overnight,
ruining many speculators.
1900–1914
The Edwardian era (1901–1910) stands out as a period of peace and plenty. There
were no severe depressions and prosperity was widespread. Britain's growth rate,
manufacturing output, and GDP (but not GDP per capita) fell behind its rivals the
United States, and Germany. Nevertheless, the nation still led the world in trade,
finance and shipping, and had strong bases in manufacturing and mining.Growth in
the mining sector was strong and the coal industry played a significant role as the
focus of the world's energy market; this prominence was to be challenged after the
First World War by the growth of the oil industry and continuing development of the
internal combustion engine. Although the relative contribution of the agricultural
sector was becoming less important, productivity in the British agriculture sector was
relatively high.
By international standards, and across all sectors of the United Kingdom, the British
services sectors exhibited high labour factor productivity and, especially, total factor
productivity; as was to be even more the case one hundred years later, it was the
services sectors that provided the British economy's relative advantage in 1900.
Second World War
Further information: United Kingdom home front during World War
II and Economic history of World War II
In the Second World War, 1939–45, Britain had a highly successful record of
mobilising the home front for the war effort, in terms of mobilising the greatest
proportion of potential workers, maximising output, assigning the right skills to the
right task, and maintaining the morale and spirit of the people.Much of this success
was due to the systematic planned mobilisation of women, as workers, soldiers, and
housewives, enforced after December 1941 by conscription The women supported the
war effort, and made the rationing of consumer goods a success.
Smoke billowing from London's Surrey Docks, after a destructive night-time bombing raid by
the Luftwaffe on 7 September 1940
Industrial production was reoriented toward munitions, and output soared. In steel, for
example, the Materials Committee of the government tried to balance the needs of
civilian departments and the war effort, but strategic considerations received
precedence over any other need. Highest priority went to aircraft production as the
RAF was under continuous heavy German pressure. The government decided to
concentrate on only five types of aircraft in order to optimize output.
1945–2001
Main articles: Postwar Britain (1945–1979) and Post-war consensus
UK annual balance of trade in goods since 1870 (£m)
Trade in goods and services balance (U.K.)
UK Trade with China (1999-2009)
Although Britain achieved ultimate victory in the war, the economic costs were
enormous.Six years of prolonged warfare and heavy losses of merchant shipping
meant that Britain had lost two-thirds of her pre-war export trade by 1945.The loss of
her export markets also caused a serious shortage of US dollars, which were crucial to
servicing Britain's war debt and maintaining imports from the United States. Most of
Britain's gold and currency reserves were depleted and the Government had been
forced to sell off the bulk of British overseas assets to fund the war effort.When Lend
Lease was terminated by the United States in August 1945, Britain was unable to pay
for the import of essential supplies from America. Although the US agreed to cancel
$20 million in Lend Lease debt, the UK was forced to obtain a $3.75 billion loan from
the United States at 2% interest in December 1945.The US/UK trade imbalance was
perilously high, forcing the extension of rationing to lessen the imbalance and
preserve precious US dollars for the servicing of loan repayments.
The next 15 years saw some of the most rapid growth Britain had ever experienced,
recovering from the devastation of the Second World War and then expanding rapidly
past the previous size of the economy. The economy went from strength to strength
particularly after the Conservatives returned to government in 1951, still led by
wartime leader Sir Winston Churchill until he retired to make way for Anthony
Eden just before his party's re-election in 1955. However, the Suez crisis of 1956
weakened the government's reputation and Britain's global standing, and prompted
Eden to resign in early 1957 to be replaced by Harold Macmillan.
The 2008 recession and quantitative easing
UK bond rates
50 year bond
10 year bond
1 year bond
3 month bond
Main article: Great Recession
The UK entered a recession in Q2 of 2008, according to the UK Office for National
Statistics (ONS) and exited it in Q4 of 2009. The revised ONS figures of November
2009 showed that the UK had suffered six consecutive quarters of contraction.On 23
January 2009, Government figures from the Office for National Statistics showed that
the UK was officially in recession for the first time since 1991.It entered a recession
in the final quarter of 2008, accompanied by unemployment rising from 5.2% in May
2008 to 7.6% in May 2009. The unemployment rate among 18 to 24-year-olds rose
from 11.9% to 17.3%.Although initially Britain lagged behind other major economies
including Germany, France, Japan, and the US which all returned to growth in the
second quarter of 2009, the country eventually returned to growth in the last quarter
of 2009. On 26 January 2010, it was confirmed that the UK had left its recession, the
last major economy in the world to do so.
In the 3 months to February 2010 the UK economy grew yet again by 0.4%.In Q2 of
2010 the economy grew by 1.2% the fastest rate of growth in 9 years. In Q3 of 2010
figures released showed the UK economy grew by 0.8%; this was the fastest Q3
growth in 10 years.
From Q2 2013, the UK's economy continued to grow for five consecutive quarters,
the longest since Q1 of 2008,[321] showing growth beating most developed
economies helped by the rebound in the housing market and strong growth in both
manufacturing and services industries. The IMF increased UK growth forecasts for
2014 from 1.9% to 2.4% in January 2014.[322] Subsequently, inflation dropped to a
low of 1.6% in Q1 2014,[323] unemployment dropped to 6.8% (the lowest level since
2009)[324] with impressive growth in employment leading to an all-time high of 30.4
million.[325] The UK government posted a £107.6 billion national deficit for the
fiscal year ending March 2014, meeting the target of £107.7 billion set a month
previously.[326] This was especially impressive since many countries in the EU,
more specifically in the Euro, were stagnating such as France and Italy.However, it
has been argued that the economic recovery was not reaching the majority of the
people in the country, with wage growth not keeping up with inflation. In 2014 this
metric
Ten years later in February 2023, the public sector spent more than it received in
taxes and other income, requiring it to borrow £16.7 billion.This was £9.7 billion
more borrowing than that in February 2022 and the highest February borrowing since
monthly records began in 1993.
While central government tax receipts grew by a steady £3.6 billion to £58.4
billion compared to February last year, it wasn’t enough to offset the cost of the
combined energy schemes provided to households and businesses in February 2023,
provisionally estimated at around £9.3 billion.
The £16.7 billion borrowed in February 2023 combined with a reduction of £1.4
billion to our previously published financial year-to-January borrowing estimate
brings the total borrowed in the financial year-to-February 2023 to £132.2 billion.This
was £15.5 billion more borrowing than in the same period last year and the third
highest financial year-to-February borrowing since monthly records began.Debt at the
end of January was £2.5 trillion (£2,507.3 billion) or 99.2% of the UK’s annual gross
domestic product (GDP).
The “Services” sector was the main contributor
to monthly GDP growth in January 2023
Contributions to monthly GDP growth, January 2022 to January
2023, UK
Dec 2022
● GDP: -0.55
● Services: -0.61
● Production: 0.04
● Construction: 0.00
Source: GDP monthly estimate from the Office for National Statistics
Monthly real gross domestic product (GDP) is estimated to have grown by 0.3% in
January 2023, following a fall of 0.5% in December 2022.
Looking at the broader picture, GDP remained flat in the three months to January
2023 compared with the three months to October 2022.
Services grew by 0.5% in January 2023, after falling by 0.8% in December 2022. The
largest contribution to the growth came from education, transport and storage, human
health activities and arts, entertainment and recreation activities, all of which have
rebounded after falls in December 2022.
Production output fell by 0.3% in January 2023, after growth of 0.3% in December
2022. Manufacturing was the largest contributor to the production sector’s negative
growth.
Construction saw a 1.7% fall in January 2023, following flat growth in December
2022.
