United Kingdom - Economy

The United Kingdom, one of the most highly industrialized countries in the world, lives by manufacture, trade, and financial and commercial services. Apart from coal and low-grade iron ore, some timber, building materials, hides and skins, and natural gas and North Sea oil, it has few natural resources. Agriculture provides 60% of the food needed with only 1% of the labor force. The remainder of the UK's food and most raw materials for its industries have to be imported and paid for largely through exports of manufactures and services. The United Kingdom is in fact one of the world's largest markets for food and agricultural products and the fifth-largest trading nation. Vast quantities of imported wheat, meat, butter, livestock feeds, tea, tobacco, wool, and timber have been balanced by exports of machinery, ships, locomotives, aircraft, and motor vehicles. The pattern of exports is gradually changing, however. Post World War II reduction in output of textiles—once a leading British export—due to competition from Asia, and in coal output, because of competition from oil and new mines in Europe, is being offset by industries such as electronics and chemicals. A major source of earnings is the variety of commercial services that stem from the UK's role as central banker of the sterling area. Shipping, income from overseas investment, insurance, and tourism also make up an important part of the economy.

Since the 1979–81 recession, the British economy has posted steady gains. Between 1983 and 1990, real GDP increased by nearly 25%. Individual productivity increased by 14% during the 1980–85 period and another 25% during 1985–90. In less than a decade, the United Kingdom went from heavy dependence on imported oil to energy self-sufficiency, but this ended in 1989, although the UK's dependence on energy imports in the 1990s was far lower than in the past. Inflation fell from 18% in 1980 to an annual rate of 1.9% by July 1987. However, it averaged 6.3% a year during 1988–92 before falling to 1.6% in 1993. It fell in both 1991 and 1992 but increased 2.1% in 1993. From 1994 to 1997, annual growth was over 3% (3.125%), but fell an average 2.5% 1998 to 1999. An increase to 3.1% in 2000 was slowed to 2% and 1.6% in the global economic slowdown of 2001 and aftereffects of the 11 September 2001 terrorist attacks on the United States. Inflation, which stood at 2.7% in 1998, had fallen to 2.2% in 2002. After falling to 5.8% in 1990, the unemployment rate crept up to 10.4% in 1993 but declined to 8% in 1995, and 7.5% in 1998. In 2002, estimated unemployment was 5.2%

Between 1979 and 1991, the government privatized 46 major companies, as well as a number of subsidiaries of nationalized industries and other businesses. This represented 65% of the state-owned industrial sector. Among the major companies privatized were British Telecom, British Gas, British Steel, British Airways, British Aerospace, Rolls-Royce, Austin Rover, Cable and Wireless, and ICL.