This presentation explains the economic history of UK and its policy changes in different phase....

1. The U.K. Economy
“The sun never sets on the British Empire"
Presentedby
W.ASenathissa

2. The sun never sets on the British Empire

3. The evolution of U.K. Economy
• Dominant empire in the world integrated as one
country, one nation and one language.
• The British economy encompasses the
economies of England, Scotland, Wales and
Northern Ireland.
• Britain was the first country to start the
industrial revolution in the 18th century. Britain
is a capitalist country.
• Increasing economic challenge from USA and
Germany through the 02nd Industrial Revolution

4. England, Great Britain and UK
• England: 50,338sq km-Two times as SL
• Great Britain =England + (Wales +Scotland).
• UK= Great Britain + North Ireland. (In 1801)
• Expansion of the UK
– In 1800: 94251sq km
– In 1940: 160,000,000sq km
Cotton → Steam engine →Coal /mining →Steel/ Machinery

5. Trade vs God
• Resorted trade than the god
• The major sources of wealth & income was trade .
• God with the ten act allowed to earn 5 % interest
rate any investment.
• Believed, The precept of buying low cost and selling
high price followed to earning profit.
• Worship bank in first six days, but on 07th day of
the week they resort church.
• Only the country, used national flag for
advertisement & trade promoting in the world

6. Monarchy empire
• Resource allocation basically done by the
letters of monarchy dealers.
• There was no any General Election until by
1929.
• The first general election in 1929 trough
majority vote system.

7. Salient features of UK economy
• The 07th
largest national economy in the world
measured by nominal GDP $2.480 tn (2011)
• 08th largest economy measured by
purchasing power parity (PPP) $2.253 tn
(2011).
• GDP percapita: $39,600 (2011)(nom; 20th)
$36,000 (2011) (PPP; 17th)
• The 03rd
largest in Europe measured by GDPn
– after Germany and France
– Second-largest measured by PPP after Germany

8. GDP Contribution by sector
GDP by sector
Agriculture: 0.7%
Industry: 21.5%
Services: 77.8% (2011)
Inflation: CPI:2.7% (November 2012)
Gini coefficient 0.36 (2008)
Labour force 31.72 million (2011 est.)
Average Gross Salary €4,108 / $5,546, monthly (2006)

9. A Brief Introduction to U.K. Economy
• End of the II World War, the UK enjoyed a
long period without a major recession (from
1945 to 1973) and a rapid growth in
prosperity in the 1950s and 1960s.
• The annual rate of growth (percentage
change) between 1960 and 1973 averaged
2.9%,
– figure was far behind the rates of other European
countries such as France, West Germany and Italy.

10. Recession condition
• Severe shock of the 1973 oil crisis and the
1973–1974 stock market crash, the British
economy had fallen into recession.
• Double-digit inflation and rising unemployment.
• Strictly public spending cuts as a condition to
the rescue package of IMF £2.3bn loan.
• Soon enough, in 1979 the government fell

11. Neo-liberal economics
• A new period of neo-liberal economics began
in 1979 with the election of Margaret
Thatcher
• During the 1980s most state-owned
enterprises were privatised
• Taxes cut and markets deregulated.
• GDP fell 5.9% at first but growth rose to 5% at
its peak in 1988
– one of the highest rates of any European nation

12. Battle against inflation resulted in
mass unemployment
• the jobless count passing 3,000,000 by the
start of 1982 compared to 1,500,000 in 1979.
– This was in part due to the closure(closing) of
outdated factories and coal pits which were no
longer economically viable.
• Another recession during the second half
of 1990
– concurrent with a global recession, and caused
the economy to shrink by a total of 8% from peak

13. Severe Unemployment
• Unemployment to increase from around
1,600,000 to nearly 3,000,000 by early 1993
• Recovery saw a rapid and substantial fall in
unemployment, which was down to 1,700,000
by 1997.

14. The Labour Party, led by Tony Blair
• Returned to power in May 1997 after 18 years
in opposition
• successive decades of economic growth,
lasting until the second quarter of 2008
• Rapid increasement og GDP growth
Contributed by finance sector growth.
• This extended period of growth ended in 2008
when the UK suddenly entered a recession

15. The roots of the USA Financial Crisis
• Beginning with the collapse of Northern Rock,
which was taken into public ownership in
February 2008
• The Royal Bank of Scotland Group: 05th
largest
in the world by market capitalization, was
nationalised on 13 October 2008.
• Unemployment rise from just over 1,600,000 in
January 2008 to nearly 2,500,000 in October
2009

16. GDP and Foreign Trade
Agriculture products
cereals, oilseed, potatoes, vegetables;
cattle, sheep, poultry; fish
Exported
commodities
manufactured goods, fuels, chemicals; food,
beverages , tobacco
Imported
commodities
manufactured goods, machinery, fuels;
foodstuffs
Year 1925 1950 1975 2000 2011
GDP 4,466 13,162 105,773 953,576
$2.480 tn

17. Trading Nation
• Britain is a trading nation. (Why?)
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.
• Eg. Each year Britain exports some one-third of
its gross domestic product. It is the fourth
largest exporter in the world. Its exports
account for about 5% of the world’s total
trade volume.

18. Poverty condition in USA
• The United Kingdom is a developed country
with social welfare infrastructure, thus
discussions surrounding poverty tend to be of
relative poverty.
• According to the OECD, the UK is in the lower
half of developed country rankings for poverty
rates, doing better than Germany, Italy and the
US
• But less well than France, Austria, Hungary,
Slovakia and the Scandinavian countries

19. Poverty cont’d
• The poverty line in the UK was calculated to
be £115 per week for single adults with no
dependent children by 2007
• £199 per week for couples with no dependent
children
• £195 per week for single adults with two
dependent children under 14
• £279 per week for couples with two
dependent children under 14

20. High living cost and shrinking family size
• In 2007–2008, 13.5 million people, or 22% of
the population, lived below this line.
• This is a higher level of relative poverty than
all but four other EU members.
• In the same year, 4.0 million children, 31% of
the total, lived in households below the
poverty line, after housing costs were taken
into account. This is a decrease of 400,000
children since 1998–1999.

21. Industrial background
• The aerospace industry of the UK is the 03rd
-largest national aerospace industry
• The pharmaceutical industry plays an
important role
– The third-highest share of global pharmaceutical
R&D expenditures (after the United States and
Japan).
The British economy is boosted by North Sea
oil and gas reserves

22. Government income
• UK government introduced indirect taxes
rather than direct taxes to the public

23. Absolute 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).

24. Absolute Decline
• The reasons of the economic decline:
• 1) Being in debt;
• 2) The end of the empire;
• 3) Large military spending;
• 4) A catching-up by Germany and Japan;
• 5) Lack of a close relationship between
industry and banks.

25. Absolute Decline
• A Characteristic of the UK economy----A low
rate of domestic industrial investment
coupled with a very high rate of overseas
investment.

26. The resent history of UK

27. Recent History
• Britain’s slow growth of productivity, soaring
inflation, and large unemployment gave birth
to the mocking term “British Disease”.
• In 1979, Margaret Thatcher became Britain’s
first-ever woman Prime Minister. She carried
out an extensive program of privatization. The
new doctrine advocated reduction of taxes so
as to stimulate investment and consumption.

28. 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) Profitability of industrial companies was high.

29. Recent History
• Thatcher’s policy was like a coin with two sides:
1) High Unemployment;
2) Widened gap between the poor and the rich;
3) High crime rates;
4) Unsatisfactory social services.

30. Recent History IMF
• The IMF (International Monetary Fund) is an
international organization of 185 member
countries.
• It was established to promote international
monetary cooperation, exchange stability, and
orderly exchange arrangements; to foster
economic growth and high levels of
employment; and to provide temporary
financial assistance to countries to help ease
balance of payments adjustment.

31. Recent History IMF
• Since the IMF was established its purposes
have remained unchanged but its operations
—which involve surveillance,
financial assistance, and technical assistance
—have developed to meet the changing
needs of its member countries in an evolving
world economy.

32. The Current U.K. Economy
• Division of the economic sectors:
• 1. primary industry
• 2. secondary industry
• 3. tertiary industries/service industry

33. Case Study: The Aerospace
• Aerospace industry
• Large companies

34. • “Big Four”
• Lloyds
• Barclays
• Midland
• The National Westminster Bank Group