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Country Forecast United Kingdom

  • ID: 2131059
  • Country Profile
  • Region: United Kingdom, Great Britain
  • 50 Pages
  • The Economist Intelligence Unit
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Background: The end of the second world war coincided with the decline of the UK as an imperial power. Residual links with former colonial territories, close relations with the US and a separate sense of identity delayed UK membership of the European Community (now the EU) until 1973. Successive governments have resisted closer EU integration. In a referendum in June 2016 the UK electorate voted to leave the EU. The future contours of the UK's relationship with the EU are uncertain, but a diminution of UK influence in the region looks inevitable.

Political structure: The UK is a constitutional monarchy. The head of state is Queen Elizabeth II. Parliament has an elected House of Commons (the lower house, 650 seats) and a non-elected House of Lords (the upper house, non-fixed membership of about 800). The general election in June 2017 produced a minority centre-right Conservative Party government, dependent on the support of Northern Ireland's Democratic Unionist Party (DUP) for a working majority. The main opposition Labour Party increased its parliamentary seats by 30 in the June 2017 snap general election, but its ability to compete with the Conservatives will be undermined when the government redraws parliamentary constituency boundaries, which are currently favourable to Labour.

Policy issues: UK economic policy has yet to return to normal after the financial crisis, with an exceptionally loose monetary stance. Real GDP growth slowed modestly in 2016-17 compared with 2015. The fallout from the Brexit vote will dominate the policy agenda; The Economist Intelligence Unit expects the government to focus efforts on negotiating the terms of its departure from the EU and on reducing the damaging effect on the economy of the uncertainty created by the vote. This has led to a shift in the UK's monetary and fiscal policy mix, with fiscal policies becoming more significant. Managing Brexit could force policymakers to address structural deficiencies in the UK, such as weak productivity.
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Country Forecast United Kingdom

United Kingdom--highlights: Political outlook

United Kingdom--highlights: Business environment outlook

United Kingdom--highlights: Economic outlook

United Kingdom--highlights: Demographic outlook

United Kingdom--highlights: Market opportunities

United Kingdom--highlights: Long-term outlook

Fact sheet

Political outlook: Political forces at a glance

Political outlook: Political stability

Political outlook: Political and institutional effectiveness

Political outlook: Election watch

Political outlook: International relations

Business environment outlook: Business environment rankings
Its traditional strengths will still make UK a favoured destination for FDI

Business environment outlook: United Kingdom's business environment at a glance
Policy towards private enterprise and competition
Policy towards foreign investment
Foreign trade and exchange controls
Taxes
Financing
The labour market
Infrastructure
Technological readiness

Business environment outlook: Macroeconomic environment
Economic activity will firm as Brexit-related uncertainty recedes

Business environment outlook: Policy towards private enterprise and competition
Rising business uncertainty over future regulatory framework

Business environment outlook: Policy towards foreign investment

Business environment outlook: Foreign trade and exchange controls
Trade agreement between EU and UK will take some years to negotiate

Business environment outlook: Taxes
The headline corporation tax rate will be reduced to 17% by 2020

Business environment outlook: Financing
Restrictions on UK-EU financial services trade are likely to emerge

Business environment outlook: The labour market
Labour market conditions will remain favourable
Free movement of labour from the EU will continue for a limited time

Business environment outlook: Infrastructure
A long-term infrastructure investment strategy is overdue
Airport capacity constraints will remain severe

Business environment outlook: Technological readiness

Economic forecast: Policy trends

Economic forecast: Fiscal policy

Economic forecast: Monetary policy

Economic forecast: International assumptions

Economic forecast: Economic growth

Economic forecast: Sectoral trends
UK financial services will thrive after Brexit

Economic forecast: Inflation

Economic forecast: Exchange rates

Economic forecast: External sector

Economic forecast: Foreign direct investment in United Kingdom
Stocks and flows
Origin and distribution
Determinants
Impact
Potential

Demographic assumptions
Net international migration will be the main driver of steady population growth
An ageing population will add to fiscal pressures over the forecast period

Market opportunities: Market outlook
Brexit uncertainty will weigh on consumer spending in 2018-19

Market opportunities: Consumer expenditure
Demand for healthcare and leisure will increase as society ages

Market opportunities: Social indicators and living standards

Long-term outlook: The long-term outlook
Brexit notwithstanding, the UK is set to outperform its regional peers
The UK's trading relationships will be fundamentally altered by Brexit
Long-term prospects depend on an improvement in productivity

Long-term outlook: Long-term trends
Climate change and sustainability
Technological developments

Long-term outlook: Methodology for long-term forecasts
Growth projections
Definitions of variables
The independent variables include:
Summary of findings
Productivity growth

Data summary: Global outlook

Data summary: Gross domestic product, current market prices

Data summary: Gross domestic product, at constant prices

Data summary: Gross domestic product by sector of origin

Data summary: Growth and productivity

Data summary: Economic structure, income and market size

Data summary: Fiscal indicators

Data summary: Monetary indicators

Data summary: Employment, wages and prices

Data summary: Current account and terms of trade

Data summary: Foreign direct investment

Data sources and definitions
Global data
Domestic data
Abbreviations

Guide to the business rankings model
Outline of the model
Calculating the rankings
Measurement and grading issues

Indicator scores in the business rankings model
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