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UK and global economy outlook
Introduction
This chapter will mainly focus on the UK economy market, briefly introduce the structure of UK economy and currency siutation, especially the performance after recession and the new stimulate plan which the new government institute. Then using the key ratio(GDP, unemployment and capital ratio), explain the current global economy situation.
The structure of UK economy As a capitalist country, UK economy stay crucial position in the world. Nowaday, Unite Kingdom is the sixth largest economy in the world by both nominal GDP and PPP(Purchasing Power Parity).
In current UK national economy structure, it is divided by primary sector, secondary sector and tertiary sector.2 Among these, tertiary sector is the pillar industry from 1980s, most are banking, distribution, insurance and finance. According to the office for national statistics(ONS). The total output of tertiary industry occupied the 2/3 GDP and over 80% emplyment in 2007.
The private company is the main body in the UK economy, start from Margaret Thatcher era (Most state-owned enterprises in the industrial and service sectors, which since the 1940s had been nationalized, were privatized).4 According to the ONS, the output is over 60% and most of them are doing service business.5 But from 1960s, there is a continuation of the steady decline in the importance of this sector to the British economy, although the sector is still important for overseas trade, accounting for 83% of exports in 2009.7 Reasons are diverse, mainly due to the change of ideology in young citizen and bias of government economy plan. But recently, rely on the professional talent cultivation and immense capital input, the high-tech manufactory, bio-medical and aviation industry which have high added value become the most competitive sector in UK. The primary sector only stay less 2% in the UK GDP, with less than 1.6% of the labor force, and Agriculture is intensive, highly mechanized, and efficient by European standards.
The current situation of UK economy The UK entered a recession in Q2 of 2008, according to the UK Office of National Statistics (ONS)11 12 .The tertiary industry was suffered the dramatic impact, because the main body in UK economy is private company, facing the recession, bank and financial institutions usually adopt the credit crunch policy, the small and medium-sized enterprise cannot acquire the mortgage promptly, led to close down. The unemployment number escalating, led to the surge in government finance expenditure, exacerbate the fiscal burden. As of the end of November 2009, the economy had shrunk by 4.9%, making the 2008-2009 recession the longest since records began. In December 2009, the Office of National Statistics revised figures for the third quarter of 2009 showed that the economy shrank by 0.2%, compared to a 0.6% fall the previous quarter.
Gross Domestic Product (GDP) decreased by a (second revision) figure of 0.2 per cent in the third quarter of 2009, after a decrease of 0.6 per cent in the second quarter, according to the Office for National Statistics (ONS) There was a 2.4% decline in the first quarter of 2009.15 The economy has now contracted 5.9% from its peak before the recession began. The export factor, according the global recession, the traditional export goods and high added value industry, (e.g. technology, education, service) decreased sharply. The total value of UK export for the 12months ending March 2010 was 231,026m a decrease of 13,019m (5.3%) compared to the 12 months ending March 2009. The total value of UK import for the 12 months ending March 2010 was 313,545m, a decrease of 21,079m (6.3%) compared to the 12 months ending March 2009. UK domestic demand, Latest PMI (Markit Purchasing Managers’ Index) data indicated that UK manufacturers faced a restrictive combination of weak demand, especially from the domestic market, and intense cost inflationary pressure. Rates of increase for input costs and factory gate prices hit series record highs, with inflation of output charges having now broken new peaks through the first half of 2008. Like Roy Ayliffe (Director of Professional Practice at the Chartered Institute of Purchasing and Supply) said: Faced with a relentless onslaught of ever weaker domestic demand, slower global economic growth and record cost inflationary pressure, manufacturers scaled back production, which contracted at the most severe levels in nearly a decade. There was no good news for the sector’s labour market either, as the decline in order books led to a continued culling of jobs.
Meanwhile, as UK government plan to cut the public spending in order to decrease the fiscal deficit, people worried it will reduce the public service in medical and benefit area, so the CCI(consumer confidence index) fell to six-month low as Britons felt more pessimistic in the next future.19 Also, the fall of CCI will decrease the commodity demand in turn and aggravate the current vulnerable UK economy. |
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