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The U.K. Economy

Unit 5

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Contents: 1. A Brief Introduction to U.K. Economy

2. Absolute Decline and Relative Decline

3. Recent History

4. The Current U.K. Economy

5. Case Study: The Aerospace

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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 characteristic of the economic system of

capitalism is that it protects private

enterprise.

Britain began its market economy about 300

years ago.

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A Brief Introduction to U.K. Economy

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 worlds total trade

volume.

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A Brief Introduction to U.K. Economy

Britain is also one of the worlds largest

importers.

Because Britain lacks raw materials, or we

may say its home supply of raw materials is

inadequate, Britain has to buy up a large

proportion of the raw materials sold in the

world market. Britains major trading partnersare industrialized countries.

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Absolute Decline and Relative Decline

What is absolute decline?

What is relative decline?

Does British economy belong to theformer one or the latter one?

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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 overtakenby both the US and Germany.

In the Post-war period, the U.K. economyexperienced boom and bust (the fluctuation of

U.K. economy).

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Absolute Decline and Relative 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 betweenindustry and banks.

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Absolute Decline and Relative Decline

A Characteristic of the UK economy----A

low rate of domestic industrial investment

coupled with a very high rate of overseas

investment.

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Recent H istory

Britains slow growth of productivity, soaring

inflation, and large unemployment gave birth

to the mocking term British Disease.

In 1979, Margaret Thatcher became Britains

first-ever woman Prime Minister. She carried

out an extensive program of privatization. The

new doctrine advocated reduction of taxes soas to stimulate investment and consumption.

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Recent H istory

Thatchers 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 workers take-home pay increased by 20

percent.

4) Profitability of industrial companies was high.

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Recent History

Thatchers 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.

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Recent H istory IMF

The IMF (International Monetary Fund) is aninternational organization of 185 membercountries.

It was established to promote internationalmonetary cooperation, exchange stability, andorderly exchange arrangements; to fostereconomic growth and high levels ofemployment; and to provide temporaryfinancial assistance to countries to help easebalance of payments adjustment.

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Recent H istory IMF

Since the IMF was established its purposes

have remained unchanged but its operations

which involve surveillance, financial

assistance, and technical assistancehave

developed to meet the changing needs of its

member countries in an evolving world

economy.

http://www.imf.org/external/np/exr/facts/surv.htmhttp://www.imf.org/external/np/exr/facts/howlend.htmhttp://www.imf.org/external/np/exr/facts/howlend.htmhttp://www.imf.org/external/np/exr/facts/tech.htmhttp://www.imf.org/external/np/exr/facts/tech.htmhttp://www.imf.org/external/np/exr/facts/howlend.htmhttp://www.imf.org/external/np/exr/facts/howlend.htmhttp://www.imf.org/external/np/exr/facts/surv.htm

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The Current U.K. Economy

Division of the economic sectors:

1. primary industry

2. secondary industry 3. tertiary industries/service industry

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Case Study: The Aerospace

Aerospace industry

Large companies

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Big Four

Lloyds

Barclays Midland

The National Westminster Bank Group