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United Kingdom Economy

United Kingdom economic overview

A dominant services sector:

The United Kingdom, comprising England, Scotland, Wales, and Northern Ireland, has one of the world's largest economies. The economy is characterized by its service sector dominance, particularly in finance, insurance, and professional services—as a whole, services activity accounts for around 80% of GDP. The UK also maintains a significant industrial base, including automotive and aerospace industries, though the relative importance of manufacturing has waned in recent decades.

Financial hub:

The UK's financial services sector, centered in London, is a pivotal part of its economy. It is one of the largest global financial centers, home to major banks, insurance companies, and investment funds. This sector significantly contributes to the country's GDP and employment, though it faces post-Brexit challenges in maintaining its global influence.

Brexit:

The runup to and aftermath of Brexit in 2020 has been marked by significant domestic political uncertainty and tensions with the EU, which have depressed investment in recent years. Moreover, leaving the EU has resulted in a permanent increase in trade barriers with the EU, which has led to weaker investment and exports than the status quo of EU membership. The government has attempted to pivot towards the Asia-Pacific—most notably by applying to join the CPTPP trade pact—although this will not compensate for lost trade with Europe.

Contrasting economic fortunes:

In the years leading up to the 2016 Brexit referendum, UK GDP growth comfortably outpaced the G7 average. However, the economy has tended to underperform relative to G7 peers since then, amid higher prices and soft investment and exports due to Brexit.

Challenges:

Looking forward, the UK economy faces several challenges, including managing the post-Brexit transition, addressing gaping regional economic disparities, tackling labor shortages in certain sectors, and reining in a public debt that is currently over 100% of GDP.

UK economic outlook:

The UK economy will continue to benefit from key economic strengths such as a strong legal system, flexible labor market, well-performing higher education system and robust population growth. However, it will be constrained by permanently reduced competitiveness stemming from Brexit, which will likely keep GDP growth slightly below the G7 average over our forecast horizon.

The United Kingdom's economy in numbers:

Nominal GDP of USD 3,087 billion in 2022.

GDP per capita of USD 45,540 compared to the global average of USD 10,589.

Average real GDP growth of 1.7% over the last decade.

Share of the region's population
Share of the region's GDP

Economic structure:

In 2021, services accounted for 82% of overall GDP, manufacturing 9%, other industrial activity 8%, and agriculture 1%. Looking at GDP by expenditure, private consumption accounted for 61% of GDP in 2021, government consumption 22%, fixed investment 17%, and net exports 0%.

GDP by economic sector
GDP by type of expenditure

International trade:

In 2021, manufactured products made up 63% of total merchandise exports, mineral fuels 8%, food 6%, ores and metals 7% and agricultural raw materials 1%, with other categories accounting for 15% of the total. In the same period, manufactured products made up 64% of total merchandise imports, mineral fuels 10%, food 9%, ores and metals 5% and agricultural raw materials 1%, with other goods accounting for 11% of the total. Total exports were worth USD 521 billion in 2022, while total imports were USD 791 billion.

Key exports
Key imports
Key export partners
Key import partners

Economic growth:

The economy recorded average annual growth of 1.7% in the decade to 2022. To read more about GDP growth in the United Kingdom, go to our dedicated page.

Fiscal policy:

United Kingdom's fiscal deficit averaged 5.4% of GDP in the decade to 2022. Find out more on our dedicated page.

Unemployment:

The unemployment rate averaged 5.2% in the decade to 2022. For more information on United Kingdom's unemployment click here.

Inflation:

Inflation averaged 2.5% in the decade to 2022. Go to our United Kingdom inflation page for extra insight.

Monetary Policy:

The United Kingdom monetary policy rate ended 2022 at 3.50%, up from 0.50% a decade earlier. See our United Kingdom monetary policy page for additional details.

Exchange Rate:

From end-2012 to end-2022 the pound weakened by 33.3% vs the U.S. dollar. For more info on the pound, click here.
GDP grew by 0.6% in Q1, rebounding from a 0.3% decline in the previous quarter and marking the strongest reading in more than two years. This growth—which surpassed market expectations—was fueled by higher private consumption and fixed investment. The former was likely buoyed by increased real wages and significant inward migration, and the latter was driven by real estate investment. In contrast, exports declined for the fifth consecutive quarter due to lower goods sales. Our Consensus anticipates continued economic expansion in Q2, driven by persistent growth in private and government spending and an expected recovery in exports. In particular, private spending is likely being supported by tax cuts, hikes to benefits, pensions and the minimum wage, and a 12% reduction in the energy price cap—all these measures were implemented in April. However, fixed investment is seen losing steam.
Projections out to 2033.

55 indicators covered including both annual and quarterly frequencies.

Consensus Forecasts based on a panel of 60 expert analysts.

Want to get insight on the economic outlook for United Kingdom in the coming years? FocusEconomics collects projections out to 2033 on 55 economic indicators for United Kingdom from a panel of 60 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the United Kingdom economy. To download a sample report on the United Kingdom's economy, click here . To get in touch with our team for more information, fill in the form at the bottom of this page .

United Kingdom Economic Data

2018 2019 2020 2021 2022
Population (million) 66.4 66.8 67.1 67.3 67.8
GDP (USD bn) 2,870 2,850 2,699 3,141 3,087
GDP per capita (USD) 43,200 42,671 40,235 46,690 45,540
GDP (GBP bn) 2,152 2,234 2,104 2,284 2,506
Economic Growth (Nominal GDP, ann. var. %) 3.4 3.8 -5.8 8.5 9.7
Economic Growth (GDP, ann. var. %) 1.4 1.6 -10.4 8.7 4.3
Domestic Demand (ann. var. %) 1.4 1.9 -11.9 9.1 4.8
Private Consumption (ann. var. %) 2.0 1.1 -13.2 7.4 5.0
Government Consumption (ann. var. %) 0.6 4.0 -7.9 14.9 2.3
Fixed Investment (ann. var. %) -0.5 2.2 -10.8 7.4 8.0
Exports (G&S, ann. var. %) 3.1 2.0 -11.5 4.9 9.0
Imports (G&S, ann. var. %) 3.1 2.7 -16.0 6.1 14.6
Industrial Production (ann. var. %) 3.1 1.7 2.3 -3.9 -3.4
Retail Sales (ann. s.a. var. %) 2.4 3.2 -1.8 5.2 -3.3
Home Prices Index (ann. var. %) 3.3 0.9 2.8 8.1 9.4
Disposable Income (ann. var. %) 2.0 2.1 -0.5 1.4 -1.4
Wages (ann. var. %) 2.9 3.4 1.8 5.9 6.1
Unemployment (% of active population, rolling qt) 4.1 3.9 5.3 4.2 3.9
Unemployment (% of active population, aop) 4.2 3.9 4.7 4.6 3.9
Fiscal Balance (% of GDP) -2.3 -2.5 -13.1 -7.9 -4.7
Public Debt (% of GDP) 86.3 85.7 105.8 105.2 100.4
Money (ann. var. of M2 %) 3.8 3.9 14.3 6.6 3.0
Inflation (CPI, ann. var. %, eop) 2.1 1.3 0.6 5.4 10.5
Inflation (CPI, ann. var. %, aop) 2.5 1.8 0.9 2.6 9.1
Inflation (PPI, ann. var. %, aop) 3.4 1.4 -1.0 5.2 16.0
Bank Rate (%, eop) 0.75 0.75 0.10 0.25 3.50
SONIA Rate (%, eop) 0.70 0.71 0.04 0.19 3.43
10-Year Gilt Yield (%, eop) 1.27 0.82 0.20 0.97 3.67
Exchange Rate (USD per GBP, eop) 1.27 1.32 1.37 1.35 1.20
Exchange Rate (USD per GBP, aop) 1.33 1.28 1.28 1.38 1.23
Exchange Rate (EUR per GBP, eop) 1.11 1.18 1.12 1.19 1.13
Exchange Rate (EUR per GBP, aop) 1.13 1.14 1.13 1.16 1.17
Current Account Balance (USD bn) -113 -77 -77 -15 -95
Current Account Balance (% of GDP) -3.9 -2.7 -2.9 -0.5 -3.1
Merchandise Trade Balance (USD bn) -188 -185 -163 -225 -267
Foreign Direct Investment (USD bn) 87.8 53.9 58.2 -71.2 14.1

Q&A:

  1. What is the economic outlook for the UK?

  2. The UK's economic outlook is mixed. While the economy is expected to grow in the coming years, growth will remain below pre-pandemic rates. Meanwhile, inflation and interest rates are likely to come down in the coming years after surging in 2022 and 2023.

  3. What is the main economic system in the UK?

  4. The UK's economy is a mix of market capitalism and government intervention. Private businesses are key drivers of economic activity, but the government also plays a substantial role through industry regulation and social welfare initiatives. This blend seeks to harmonize economic growth with social equity and stability.

  5. Is the UK a powerful economy?

  6. Yes, the UK is a powerful economy, consistently ranking as one of the world's largest by nominal GDP. It's a leading financial center, particularly in banking and insurance, and has significant contributions from the services, manufacturing, and technology sectors, although Brexit has diminished the economy's competitiveness.

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