United Kingdom flag United Kingdom: Economic and Political Overview

The economic context of the United Kingdom

Economic Indicators

The United Kingdom is the 6th largest economy in the world. Following a severe contraction of -9.3% in 2020 due to the COVID-19 pandemic, UK GDP growth rebounded to 7.4% in 2021, before slowing down to 3.6% in 2022 amid persisting supply shortages and rising inflation (IMF). The IMF forecasts GDP growth to further reduce to 0.3% in 2023 and 0.6% in 2024. The OECD projections are more pessimistic, with an expected economic contraction of 0.4% in 2023 and a return to a positive growth rate of 0.2% in 2024. In addition to Brexit-related trade disruption, the UK is likely to continue being hit by significant supply-side constraints and acute labour shortages, exacerbated by the war in Ukraine. Business investment will remain subdued due to a higher cost of capital and lingering uncertainty (OECD).

The UK economy recovered strongly from the COVID-19 pandemic, thanks to emergency support measures and a rapid vaccine rollout. However, this rebound was accompanied by supply and labour shortages in the wake of rising global demand and higher shipping costs (OECD). In 2022, the economic recovery was further impeded by the consequences of the war in Ukraine. Fuelled by higher energy prices, inflation soared to 9.1% in 2022 from 2.6% in 2021, and is expected to remain at that level in 2023 (9%), before decreasing to 3.7% in 2024 (IMF). The government has adopted several support measures to help households and businesses to cope with rising energy prices, including the Energy Price Guarantee and the Energy Bill Relief Scheme. The Bank of England has responded to rising inflation with monetary tightening, raising the policy rate several times, and starting to sell government bonds. After soaring to -12.8% GDP in 2020 in the context of decreasing revenues and increasing emergency measures costs, the budget deficit reduced to -4.3% GDP in 2022 (IMF). It is expected to further decline to -2.3% GDP in 2023 and -1.5% GDP in 2024 through increased revenues (IMF). The debt-to-GDP ratio decreased from a high 102.6% in 2020 to 87% in 2022, and is expected to further reduce to 79.9% in 2023 76.7% in 2024 (IMF). Tackling inflation is the priority, in addition to addressing long-standing structural challenges such as low productivity growth, high inequalities of opportunity and achieving carbon neutrality, with the ‘Plan for Growth’ and ‘Levelling Up’ agenda (OECD).

The measures taken by the government to support employees and the self-employed helped to contain the rise of the unemployment rate, which decreased to an estimated 3.8% in 2022 (from 4.5% in 2021). Unemployment is expected to increase again to 4.8% in 2023 and 5% in 2024 due to weaker demand (IMF). The country’s GDP per capita (PPP) was estimated at USD 49,675 in 2021 by the World Bank, but the relatively solid macroeconomic performance of the United Kingdom conceals weaknesses and situations of inequality. Thus, as the IMF has emphasised, strengthening human capital is a key priority. The government's efforts to invest in infrastructure, increase the supply of housing and increase the participation of women in the labour market will also help support more sustainable and inclusive growth.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 3,081.873,332.063,587.753,830.054,083.25
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 45,46148,91352,42655,73259,190
General Government Balance (in % of GDP) -3.8-3.3-2.4-3.1-3.4
General Government Gross Debt (in % of GDP) 101.9104.1105.9107.3108.5
Inflation Rate (%) n/a7.
Unemployment Rate (% of the Labour Force)
Current Account (billions USD) -116.14-121.96-131.37-138.28-146.50
Current Account (in % of GDP) -3.8-3.7-3.7-3.6-3.6

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

The agricultural sector accounts for 0.7% of GDP, but is very productive, the country managing to produce enough to meet around 60% of its food demand. The primary sector employs 1% of the active population (World Bank, latest data available). The main crops produced in the UK are potatoes, beets, wheat and barley. Livestock farming (especially sheep and cattle) remains a major agricultural activity. The fishing sector is also well developed but is currently suffering from the depletion of fish volumes in traditional fishing areas (the subject was a key issue of the trade deal concluded with the EU, which states that the UK will have the right to completely exclude EU boats after 2026). According to the latest data from the Office for National Statistics (ONS), the utilised agricultural area stands at 8.9 million hectares in 2022. The country’s total income from farming in 2021 was GBP 5,998 million, +14% year-on-year (ONS, latest data available).

The United Kingdom is one of the world's largest producing countries, with particularly important civil and military aerospace and pharmaceutical industries, and has considerable mineral resources. Once the 10th-largest oil producer in the world with huge natural gas reserves, its production is declining rapidly. Nevertheless, groups such as British Petroleum (BP) continue to be among the world leaders in the petroleum industry. The industrial sector, which accounts for 17.5% of GDP and employs 18% of the working population, is not very competitive, mainly due to low productivity. Some of the main sectors include machine tools, transport equipment and chemicals. Among the sectors with strong potential are information and communication technologies, biotechnologies, aviation, renewable energies and defence. In 2021, the manufacturing sector accounted for 9.8% of total UK economic output (ONS). For the three months to November 2022, manufacturing output decreased by 6.2% compared with the same period the previous year (UK Parliament).

Despite Brexit, London remains the largest financial centre in Europe, on par with New York, and it is also home to the headquarters of many multinationals. The banking sector has been very dynamic, same as for the tourism sector, which generates around 10% of GDP. In the three months to November 2022, services output increased by 1.4% compared with the three months to November 2021 (UK Parliament). There are more than 370 monetary financial institutions in the UK, with just under half the sector balance sheet being held in GBP, less than a fifth in EUR and less than a third in other currencies (European Banking Federation).

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.0 18.0 81.0
Value Added (in % of GDP) 0.7 17.9 71.0
Value Added (Annual % Change) 3.3 -0.5 5.3

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.


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Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

World Rank:
Regional Rank:

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation


Business environment ranking


The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

World Rank:

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024


Country Risk

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Latest Update: November 2023

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