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Economy of the United Kingdom
The United Kingdom has a highly developed social market economy. From 2017 to 2025 it has been the sixth-largest national economy in the world measured by nominal gross domestic product (GDP), tenth-largest by purchasing power parity (PPP), and about 18th by nominal GDP per capita, constituting 3.38% of world GDP and 2.13% by purchasing power parity (PPP).
The United Kingdom has one of the most globalised economies and comprises England, Scotland, Wales and Northern Ireland. In 2022, the United Kingdom was the fifth-largest exporter of goods and services in the world and the fourth-largest importer. It also had the fourth-largest outward foreign direct investment, and the fifteenth-largest inward foreign direct investment. In 2022, the United Kingdom's trade with the European Union accounted for 42% of the country's exports and 48% of its total imports. The United Kingdom has a highly efficient and strong social security system, which comprises roughly 24.5% of GDP.
The service sector dominates, contributing 82% of GDP; the financial services industry is particularly important, and London is the second-largest financial centre in the world. Edinburgh was ranked 17th in the world, and 6th in Europe for its financial services industry in 2021. The United Kingdom's technology sector is valued at US$1 trillion, third behind the United States and China. The aerospace industry in the United Kingdom is the second-largest national aerospace industry. Its pharmaceutical industry, the tenth-largest in the world, plays an important role in the economy. Of the world's 500 largest companies, 17 are headquartered in the UK. The economy is boosted by North Sea oil and gas production; its reserves were estimated at 2.5 billion barrels in 2021, although it has been a net importer of oil since 2005. There are significant regional variations in prosperity, with South East England and North East Scotland being the richest areas per capita. The size of London's economy makes it the wealthiest city by GDP per capita in Europe. In 2022, the UK spent around 2.8% of GDP on research and development.
In the 18th century, Britain was the first nation to industrialise. During the 19th century, through its expansive colonial empire and technological superiority, Britain had a preeminent role in the global economy, accounting for 9.1% of the world's GDP in 1870. The Second Industrial Revolution was also taking place rapidly in the United States and the German Empire; this presented an increasing economic challenge for the UK, leading into the 20th century. The cost of fighting both the First and Second World Wars further weakened the UK's relative position. Despite a relative decline in its global dominance, in the 21st century the UK retains the ability to project significant power and influence around the world. During the Great Recession of 2008, the UK economy suffered a significant decline, followed by a period of weak growth and stagnation.
Government involvement is primarily exercised by His Majesty's Treasury, headed by the Chancellor of the Exchequer, and the Department for Business and Trade. Since 1979, management of the economy has followed a broadly laissez-faire approach. The Bank of England is the UK's central bank, and since 1997 its Monetary Policy Committee has been responsible for setting interest rates, quantitative easing, and forward guidance.
The Second World War net loss to UK national wealth amounted to 18.6% (£4.59 billion) of the nation's pre-war wealth (£24.68 billion) at 1938 prices. After the war, a new Labour government fully nationalised the Bank of England, civil aviation, telephone networks, railways, gas, electricity, and the coal, iron and steel industries, affecting 2.3 million workers. Post-war, the United Kingdom enjoyed a long period without a major recession; there was a rapid growth in prosperity in the 1950s and 1960s, with unemployment staying low and not exceeding 3.5% until the early 1970s. The annual rate of growth between 1960 and 1973 averaged 2.9% although this figure was far behind France, West Germany and Italy.
Gradual deindustrialisation meant the closure of operations in mining, heavy industry, and manufacturing, resulting in the loss of highly paid working-class jobs. The UK's share of global manufacturing output had risen from 9.5% in 1830, during the Industrial Revolution, to 22.9% in the 1870s. It fell to 13.6% by 1913, 10.7% by 1938, and 4.9% by 1973. Overseas competition, lack of innovation, trade unionism, the welfare state, loss of the British Empire, and cultural attitudes have all been put forward as explanations. It reached crisis point in the 1970s against the backdrop of a worldwide energy crisis, high inflation, and a dramatic influx of low-cost manufactured goods from Asia.
During the 1973 oil crisis, which saw oil prices quadruple, the 1973–1974 stock market crash, and the Secondary banking crisis of 1973–1975, the British economy fell into the 1973–1975 recession and the government of Edward Heath was ousted by the Labour Party under Harold Wilson, which had previously governed from 1964 to 1970. Wilson formed a minority government in March 1974 after the general election on 28 February ended in a hung parliament. Wilson secured a three-seat overall majority in a second election in October that year. The UK recorded weaker growth than many other European nations in the 1970s; even after the recession, the economy was blighted by rising unemployment and double-digit inflation, which exceeded 20% more than once and was rarely below 10% after 1973.
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Economy of the United Kingdom
The United Kingdom has a highly developed social market economy. From 2017 to 2025 it has been the sixth-largest national economy in the world measured by nominal gross domestic product (GDP), tenth-largest by purchasing power parity (PPP), and about 18th by nominal GDP per capita, constituting 3.38% of world GDP and 2.13% by purchasing power parity (PPP).
The United Kingdom has one of the most globalised economies and comprises England, Scotland, Wales and Northern Ireland. In 2022, the United Kingdom was the fifth-largest exporter of goods and services in the world and the fourth-largest importer. It also had the fourth-largest outward foreign direct investment, and the fifteenth-largest inward foreign direct investment. In 2022, the United Kingdom's trade with the European Union accounted for 42% of the country's exports and 48% of its total imports. The United Kingdom has a highly efficient and strong social security system, which comprises roughly 24.5% of GDP.
The service sector dominates, contributing 82% of GDP; the financial services industry is particularly important, and London is the second-largest financial centre in the world. Edinburgh was ranked 17th in the world, and 6th in Europe for its financial services industry in 2021. The United Kingdom's technology sector is valued at US$1 trillion, third behind the United States and China. The aerospace industry in the United Kingdom is the second-largest national aerospace industry. Its pharmaceutical industry, the tenth-largest in the world, plays an important role in the economy. Of the world's 500 largest companies, 17 are headquartered in the UK. The economy is boosted by North Sea oil and gas production; its reserves were estimated at 2.5 billion barrels in 2021, although it has been a net importer of oil since 2005. There are significant regional variations in prosperity, with South East England and North East Scotland being the richest areas per capita. The size of London's economy makes it the wealthiest city by GDP per capita in Europe. In 2022, the UK spent around 2.8% of GDP on research and development.
In the 18th century, Britain was the first nation to industrialise. During the 19th century, through its expansive colonial empire and technological superiority, Britain had a preeminent role in the global economy, accounting for 9.1% of the world's GDP in 1870. The Second Industrial Revolution was also taking place rapidly in the United States and the German Empire; this presented an increasing economic challenge for the UK, leading into the 20th century. The cost of fighting both the First and Second World Wars further weakened the UK's relative position. Despite a relative decline in its global dominance, in the 21st century the UK retains the ability to project significant power and influence around the world. During the Great Recession of 2008, the UK economy suffered a significant decline, followed by a period of weak growth and stagnation.
Government involvement is primarily exercised by His Majesty's Treasury, headed by the Chancellor of the Exchequer, and the Department for Business and Trade. Since 1979, management of the economy has followed a broadly laissez-faire approach. The Bank of England is the UK's central bank, and since 1997 its Monetary Policy Committee has been responsible for setting interest rates, quantitative easing, and forward guidance.
The Second World War net loss to UK national wealth amounted to 18.6% (£4.59 billion) of the nation's pre-war wealth (£24.68 billion) at 1938 prices. After the war, a new Labour government fully nationalised the Bank of England, civil aviation, telephone networks, railways, gas, electricity, and the coal, iron and steel industries, affecting 2.3 million workers. Post-war, the United Kingdom enjoyed a long period without a major recession; there was a rapid growth in prosperity in the 1950s and 1960s, with unemployment staying low and not exceeding 3.5% until the early 1970s. The annual rate of growth between 1960 and 1973 averaged 2.9% although this figure was far behind France, West Germany and Italy.
Gradual deindustrialisation meant the closure of operations in mining, heavy industry, and manufacturing, resulting in the loss of highly paid working-class jobs. The UK's share of global manufacturing output had risen from 9.5% in 1830, during the Industrial Revolution, to 22.9% in the 1870s. It fell to 13.6% by 1913, 10.7% by 1938, and 4.9% by 1973. Overseas competition, lack of innovation, trade unionism, the welfare state, loss of the British Empire, and cultural attitudes have all been put forward as explanations. It reached crisis point in the 1970s against the backdrop of a worldwide energy crisis, high inflation, and a dramatic influx of low-cost manufactured goods from Asia.
During the 1973 oil crisis, which saw oil prices quadruple, the 1973–1974 stock market crash, and the Secondary banking crisis of 1973–1975, the British economy fell into the 1973–1975 recession and the government of Edward Heath was ousted by the Labour Party under Harold Wilson, which had previously governed from 1964 to 1970. Wilson formed a minority government in March 1974 after the general election on 28 February ended in a hung parliament. Wilson secured a three-seat overall majority in a second election in October that year. The UK recorded weaker growth than many other European nations in the 1970s; even after the recession, the economy was blighted by rising unemployment and double-digit inflation, which exceeded 20% more than once and was rarely below 10% after 1973.