Business Outlook

The UK’s economy vies with France for the position of fourth-largest economy in the world, lying behind those of America, Japan, and Germany. Total GDP in 2002 amounted to £1,043.3bn.

Since the 1980s, the UK has turned away from the manufacturing sector, with services now accounting for over two thirds of total GDP. Foreign trade is dominated by the UK/US relationship, with the US market accounting for over 15% of UK trade. Germany, France and Ireland also hold significant proportions of total trade.

Since the mid-1990s, the UK economy has experienced steady growth of, on average, more than two percent per annum. While the recent dampened worldwide economic environment has had an impact, slowing growth, the outlook for the future remains strong. In the immediate future, the main concern is rising consumer debt that, according to the Bank of England, could potentially lead to a collapse in the housing market and a consequent national recession.

At the heart of the UK economy lies the capital city. London is one of Europe’s biggest financial marketplaces and is home to the London Stock Exchange. The size of the London economy alone, at over US$162bn, is larger than that of Norway, Poland, Finland, Portugal, Greece and Ireland and accounts for approximately 20% of the UK’s GPD. London’s financial district (“the City” or “the Square Mile”) has become an important player in international mergers and acquisitions – mainly due to the increased prominence and importance of large foreign investment banks.

Plainly, the workforce is highly skilled and multilingual. There are, at present, more than 6,000 registered US, European and Japanese companies in the UK. Major foreign investment interests include the energy and health sectors, communications, and the growing biotechnology industry.

On the export side, electronic equipment and computers have grown in importance. By far the most significant foreign investor into the UK economy is the US (around 40% of direct foreign investment in the UK comes from the US), followed by the Netherlands, France and Japan.

While the Euro has brought about greater financial integration, Britain remains noticeably outside the European economic venture. Although the UK Government has long shown signs of wishing to adopt the new currency, it is unlikely to do so in the immediate future as, for the moment at least, public opinion seems largely wary.

Economic divergence between “Euroland” and the UK economy also remains an obstacle to economic convergence. UK interest rates, for instance, remain significantly lower than those in Europe. Instead, it is likely that, for the near future, the UK economy will remain fundamentally more attached to that of the US. It’s an oft-quoted maxim that when America sneezes, the UK catches a cold and this will most likely continue to be the case in the immediate years ahead.

London salaries average at over £29,000 per year and the cost of living is high. It is rated the second most expensive city in Europe, after Oslo.