Recent UK Macroeconomic Performance

some background knowledge for your essays

 

It might be a good idea for you to memorise and apply some of these facts in your exams, as they will allow you to more confidently answer questions.

 

Economic Growth

2000-2008

  • UK enjoys continuous GDP growth, just under 3% a year on average. Chancellor Gordon Brown promises there will never be a return to “boom and bust” economies

2008 – 2010

  • UK economy enters a recession within this period with negative growth rates as low as -6%. It will take a long time to recover from this

2010 – 2012

  • UK starts a slow recovery with short bursts of growth accompanied by slowdowns.

2012

  • UK almost slips back into recession. People fear a ‘double-dip recession.’

2013 – 2014

  • UK enjoys continuous growth. GDP has returned to pre-recession levels. Recovery appears more or less complete.

2016 – Present

  • 23rd June 2016 – UK votes in an historic referendum to leave the EU, dubbed as ‘Brexit.’ Sterling falls in value on the foreign exchange market by almost 20% in this year. Uncertainty lies ahead with regards to economic growth.

 


Inflation

1997

  • Chancellor Gordon Brown grants independence to Bank of England for setting of interest rates and achieving an inflation target of 2.5% RPI-X.

2003

  • Inflation target changed to 2% CPI with a +/-1% buffer.

2000-2007

  • UK enjoys price stability staying within the inflation target

2007      

  • Inflation target missed for the first time. Governor Mervyn King writes first open letter to Chancellor, explaining why inflation exceeded target by 0.1% (3.1%).

  • Between 2007-2013, the governor writes 14 such letters.

2008 and 2011

  • Inflation rises to highs approx. 5%, well above the target.

 


Unemployment

2000-2008

  • Unemployment remains low – between 1.4 and 1.7 million people unemployed.

2008-2011

  • Unemployment rises to 2.7 million people (8% unemployment)

2011

  • Unemployment begins to fall but not yet at the level pre-recession

 


Current Account on the Balance of Payments

1984 – 2014

  • Current account deficit for the whole period. Deficit steadily rises with largest deficits toward the end of the period.

  • De-industrialisation and a decline in manufacturing.

  • Service sector in the UK now make up between 75 and 80% of GDP while manufacturing only making up about 10%.


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