The economy of the United Kingdom is highly developed and market-oriented. It is the fifth-largest national economy in the world measured by nominal gross domestic product (GDP), ninth-largest measured by purchasing power parity (PPP), and nineteenth-largest measured by GDP per capita, comprising 3.9% of world GDP. It is the second-largest economy in the European Union by both metrics.
In 2016, the UK was the tenth-largest goods exporter in the world and the fifth-largest goods importer. It also had the second-largest inward foreign direct investment, and the third-largest outward foreign direct investment. The UK is one of the most globalised economies, and it is composed of (in descending order of size) the economies of England, Scotland, Wales and Northern Ireland.
The service sector dominates the UK economy, contributing around 80% of GDP; the financial services industry is particularly important, and London is the world’s largest financial centre. Britain’s aerospace industry 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, 26 are headquartered in the UK. The economy is boosted by North Sea oil and gas production; its reserves were estimated at 2.8 billion barrels in 2016, 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 one of the largest cities by GDP in Europe.
In the 18th century the UK was the first country to industrialise, and during the 19th century it had a dominant role in the global economy, accounting for 9.1% of the world’s GDP in 1970. From the late 19th century 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. The costs of fighting World War I and World War II further weakened the UK’s relative position. In the 21st century, however, it remains a global power and has an influential role in the world economy.
Government involvement in the British economy is primarily exercised by Her Majesty’s Treasury, headed by the Chancellor of the Exchequer, and the Department for Business, Energy and Industrial Strategy. Since 1979 management of the economy has followed a broadly laissez-faire approach. The Bank of England is the UK’s central bank and its Monetary Policy Committee is responsible for setting interest rates, quantitative easing, and forward guidance.
The currency of the UK is the pound sterling, which is the world’s third-largest reserve currency after the United States dollar and the euro, and is also one of the ten most-valued currencies in the world.
The UK is a member of the Commonwealth of Nations, the European Union (currently until 30 March 2019), the G7, the G8, the G20, the International Monetary Fund, the Organisation for Economic Co-operation and Development, the Organisation for Security and Co-operation in Europe, the World Bank, the World Trade Organisation, Asian Infrastructure Investment Bank and the United Nations.
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