THE BRITISH ECONOMY

Past
Present
Future
 LEARNING OBJECTIVES

Introduction
Foundation of British Economy
Nature of The Economy
Britains Current Economic Scenario
London Stock Exchange
London vs. Economy
Role of The Government
Involvement in International Trade
Forecast on British Economy
Summary
INTRODUCTION
 INTRODUCTION

Britains known for its rich blend of art and science, and
also renound for its strong Economy. Due to which world has
seen some great Economists such as Adam Smith, Milton
Friedman, John Stuart Mill etc. Presence of such brilliant minds
helped Britain to form a firm fundamental base and knowledge
in the development of Economics.

It also had an affluent availability of natural resources

which was strategically used for domestic consumption and
International Trade.

Thus, it is important to understand the formation and

functioning of British Economy.
FOUNDATION OF BRITISH ECONOMY
 FOUNDATION OF BRITISH ECONOMY

Background and History

The history of British economy can be traced back from 1700. Since
then the economy has grown in several different ways which has led to
the prosperity of the nation and worldwide.

18 th Century Industrial Revolution (1770-1820)

Since the inception of the United Kingdom, the Industrial Revolution

acted as a major significance of development in the nation. It originated
steam engine and upgraded its rail and road network. A lot of factories
was set up which rendered substantial revenue to the country. It was
therefore the first country in the world to industralise.
19 th Century Imperialism

Britain patronized free trade which led to fewer barriers and tariffs.
Pre and post world war, Britain produced tones of raw materials such as
coal &steel and imported it globally.
Invented the modern railway system and began foreign trade, all over
the world.

The Great Depression(1929-39)

In 1929, the Wall Street crash affected the international economy.

United Kingdom too had faced major crisis on unemployment and
poverty.
On the contrary, it was a phase of prosperity in the Midlands and
Southern England which was less industrial and more agricultural. It
experienced a rapid boom in agro industry and also modern electricals.
20 th Century Renaissance

Britain experienced major growth in its economy as it was not much

effected by the economic recession until 1973. Thus it developed its
economy and experienced a rapid growth and prosperity.
It became member of various international organization such as
International Monetary Fund, World Trade Organization, United Nations,
European Union etc.
UKs economy became unstable after 2008 due to the economic melt
down and euro crisis.

Did you know: Agriculture and Livestock

is an important source of revenue for UK.
In 2001, there were overall 180 million
chickens, 36 million sheep & 10 million
cattle.
NATURE OF THE ECONOMY
 NATURE OF THE ECONOMY

The Mixed Economy

UK is one of the many nations which follows a mixed economy

system.
A mixed economy is an economic system in which both state
and public sector direct the economy.
Thus, the private firms are free to produce and sell goods but
it would be subject to an indirect regulation and control by the
government. It induces to monitor the interest of weaker
industry.
Over the time the businesses have grew and formed different
types of business organization.
Forms of Business Organization

Sole Proprietor: It has one owner who is liable for all his
assets and profit or debts. It is mostly witnessed in small and
micro sector. Example: Shopkeeper and Farmers.
Partnerships: More than one owner initiates a partnership
firm/business. Each partner is liable for its own share and
profit is distributed equally or as agreed upon.
C o - o p e r a t i ve s : I t i s g e n e r a l l y c o n t ro l l e d by wo rke r s o r
consumers of products. Usually the co-operative workers have
share of profits. It is restricted to limited liability of the
amount of shares by individual member s. Co-operatives
generally involve in retail trade.
Joint stoc k Companies: The company is owned by the
shareholders, which is restricted to the limited liability of
each investor. There are mainly two types of companies-
Public companies and Private Companies.
 BRITAINS CURRENT ECONOMIC SCENARIO

The UK economy is the seventh largest economy of the world

in terms if Nominal GDP and eighth largest in terms of PPP
(purchasing power parity).
The most developed industries of UK is its national aerospace
industry which is ranked third largest in the world.
Pharmaceutical Industry and Oil & Gas are also the major
source of revenue to economy.
Current State of the Economy due to Recession

The UK economy is recovering from the biggest financial crisis

in generation.

It has been hit by a series of shocks which have significantly

weakened the economic and fiscal outlook.

Higher than expected inflation, driven by a sharp increase in

global commodity prices.

The Euro area crisis has increased instability and uncertainty.

LONDON STOCK EXCHANGE
 LONDON STOCK EXCHANGE (LSE)

The London Stock Exchange is one of the worlds oldest stock

exchanges and can trace its history back more than 300
years.

The LSE is at the heart of the global financial market and is

home to some of the largest, most successful and dynamic
companies in the world.

The LSE involves in Capital Market Trading, Stock Information

Services and Derivatives.
Did you know: - The Exchange is the most international of all the
worlds stock exchanges, with around 3,000 companies from over
70 countries admitted to trading on its markets.

-Live nancial broadcasts are transmitted throughout the day
from the Exchange's own TV studios.

-Over 400 rms, mainly investment banks and stockbrokers, are
members of the London Stock Exchange.

Source: London Stock Exchange, National Website

LONDON VS. ECONOMY
 LONDON VS ECONOMY

London is the capital of England and the United Kingdom.

It is worlds leading financial center alongside New York City.

London is the most populated city not only in UK but Europe as

a whole. About 12.5% of UKs population reside in London
which nearly 13 million (2010).

London generates about 20% of UKs GDP.

City of London is home for Bank of England and London Stock

Exchange.
ROLE OF THE GOVERNMENT
 ROLE OF THE GOVERNMENT

D e s p i t e t h e d i f f e r e n t a t t i t u d e t o w a r d s n a t i o n a l i s m ,
government influence in the economy has grown during the
20 t h century.
The government rises money through stock exchange i.e. via
selling bonds etc.
Most of the government revenue is, however, raised through
taxation.
UK adopts the progressive taxation system, which means
higher the income, higher tax to be paid. Thus there are
different tax slabs for different level of income.
Consumer pay tax against the of purchase of any product in
terms of VAT (Value Added Tax, 20%). In China its 17%.
 The Government tend to spend 623 Billion on the welfare of
the citizen. The amount is approximately 6,230,000,000,000
INVOLVEMENT IN INTERNATIONAL TRADE
 INVOLVEMENT IN INTERNATIONAL TRADE

Being just 1% population of the world, Britain is fourth or fifth

largest trading nation of the world.

Since 20 t h Century, UK has been involved in wide range of

International trade. Thus it developed a strong relationship
with many different countries for continuous import and
export.

After the formation of European Union, UK has been one of the

most impor tant trader of goods along with France and
Germany.

In 2006, Britain exported 470 Billon and imported 603

Billion worth goods and services
FORECAST ON BRITISH ECONOMY
 FORECAST ON BRITISH ECONOMY

The British Economy has been hit by recession and various

economic crisis.

Its GDP and PPP has depleted over the past couple of years.

But over the last quarter it has witnessed the growth of 1%

which gives tremendous hope to the nation.

We know what it takes to win, to win in the tough world of

today, to win for all our people, to win for Britain.So let's get
out there and do it.
-David Cameron, Prime Minister, United Kingdom
(10 t h October,201 2; Troy Conference)
Source: Office for Budget Responsibility and HM Treasury.

Chart 1.7: Receipts and expenditure

49
Per cent of GDP Forecasts
48
47
46
45
44
43
42
41
40
39
38
37
36
35
34
33
1997-98 1999-00 2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16

Total Managed Expenditure

Public sector current receipts

Source: Office for Budget Responsibility and Office for National Statistics.

Performance against the mandate

SUMMARY
 SUMMARY

British Economy is one of the most diversified economy of the

world. It is a gre at le arning cur ve for deve lope d and
developing economies to adapt adequate changes to enhance
their own economy like the United Kingdom.

Although the country has seen a lot of economic instability in

recent times, but gradually it has overcome all obstructions
and is in the right track towards progression.
THANK YOU