Recent UK Macroeconomic Performance
some background knowledge for your essays
It might be a good idea for you to memorise and apply some of these facts in your exams, as they will allow you to more confidently answer questions.
Economic Growth
2000-2008
UK enjoys continuous GDP growth, just under 3% a year on average. Chancellor Gordon Brown promises there will never be a return to “boom and bust” economies
2008 – 2010
UK economy enters a recession within this period with negative growth rates as low as -6%. It will take a long time to recover from this
2010 – 2012
UK starts a slow recovery with short bursts of growth accompanied by slowdowns.
2012
UK almost slips back into recession. People fear a ‘double-dip recession.’
2013 – 2014
UK enjoys continuous growth. GDP has returned to pre-recession levels. Recovery appears more or less complete.
2016 – Present
23rd June 2016 – UK votes in an historic referendum to leave the EU, dubbed as ‘Brexit.’ Sterling falls in value on the foreign exchange market by almost 20% in this year. Uncertainty lies ahead with regards to economic growth.
Inflation
1997
Chancellor Gordon Brown grants independence to Bank of England for setting of interest rates and achieving an inflation target of 2.5% RPI-X.
2003
Inflation target changed to 2% CPI with a +/-1% buffer.
2000-2007
UK enjoys price stability staying within the inflation target
2007
Inflation target missed for the first time. Governor Mervyn King writes first open letter to Chancellor, explaining why inflation exceeded target by 0.1% (3.1%).
Between 2007-2013, the governor writes 14 such letters.
2008 and 2011
Inflation rises to highs approx. 5%, well above the target.
Unemployment
2000-2008
Unemployment remains low – between 1.4 and 1.7 million people unemployed.
2008-2011
Unemployment rises to 2.7 million people (8% unemployment)
2011
Unemployment begins to fall but not yet at the level pre-recession
Current Account on the Balance of Payments
1984 – 2014
Current account deficit for the whole period. Deficit steadily rises with largest deficits toward the end of the period.
De-industrialisation and a decline in manufacturing.
Service sector in the UK now make up between 75 and 80% of GDP while manufacturing only making up about 10%.
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