The UK economy in a global context: an important second tier economy

In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the UK economy in a global context:

  • The UK remains (2018) the fifth largest economy (MER data), just ahead of France. The US and China are mega-economies, whilst Japan and Germany are still appreciably larger than the UK.
  • The UK is an important trading nation with the fifth highest current account receipts (exports of goods and services, primary and secondary income) in 2018. It is the sixth largest exporter of goods and services.
  • The WEF assessed that the UK was the 8th most competitive economy in 2018, scoring highly on business dynamism and innovation capability.
  • According to the World Bank’s latest assessment (released in 2018 for 2019), the UK was the 9th best country for the “ease of doing business”.
  • London remains the second highest rated global financial centre, just behind New York, according to Financial Centre Futures. It is comfortably the highest rated financial centre in Europe.

Concerning the latest UK data:

  • The ONS confirmed that GDP rose by 0.5% (QOQ) in 2019Q1, probably boosted by business preparedness ahead of the original Brexit Day (29 March 2019).
  • Labour productivity continues to disappoint. Output per job rose by 0.2% (QOQ) in 2019Q1, but output per hour slipped 0.6% reflecting the surge in hours worked in the quarter.
  • There was more evidence that the economy slowed in 2019Q2, probably reflecting the unwinding of some of the effects of the pre-Brexit Day (29 March) boost, as well as the dampening effects of continuing political uncertainty. The latest Markit surveys suggested that manufacturing and construction fell in June whilst services output stagnated. Markit estimate that GDP may have contracted 0.1% (QOQ) in 2019Q2.
  • Consumer credit growth eased further in May – to 5.6% (YOY), compared with April’s 5.9%.

Ruth Lea said, “Given the continuing political uncertainty and the general global economic slowdown, it is not surprising the economy is slowing. However, it is worth looking at the overall underlying strengths of the economy, within a global context, to put matters into some perspective. The UK is without doubt an important second tier global economy and a major trading nation. According to the WEF it is highly competitive and according to the World Bank it is one of the best places to do business. Moreover, London undoubtedly remains one of the world’s major financial centres.”

Ruth Lea CBE has been Arbuthnot Banking Group’s Economic Adviser since 2007 and was an Independent Non-Executive Director from 2005-2016.

Ruth co-founded Global Vision in 2007 and was Director until 2010, and was previously the Director of the Centre for Policy Studies (from 2004 to 2007), Head of the Policy Unit at the Institute of Directors (from 1995 to 2003) and Economics Editor at ITN (from 1994 to 1995).  Prior to ITN she was Chief UK Economist at Lehman Brothers, Chief Economist at Mitsubishi Bank, worked for 16 years in the Civil Service (the Treasury, the DTI, the Civil Service College and the Central Statistical Office) and was an economics lecturer at Thames Polytechnic (now the University of Greenwich).

She is the author of many papers and articles on economic issues and has been a Governor of the London School of Economics and Council Member of the University of London.

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