The United Kingdom (UK) is one of the preferred destinations for regional hubs and global headquarters. The country’s pro-business regulatory environment, educated and productive workforce, excellent institutions and international setting all contribute to its appeal as an investment destination for businesses.

Economy of the United Kingdom

The economy of the United Kingdom is a highly developed social market and market-orientated economy. It is the fifth-largest national economy in the world measured by nominal gross domestic product (GDP), ninth-largest by purchasing power parity (PPP), and twenty second-largest by GDP per capita, comprising 3.3% of world GDP.

In 2019, the UK was the fifth-largest 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 England, Scotland, Wales and Northern Ireland. With more than 52% of its imports and its exports, the European Union, including its 27 members states, remains in 2020 one notable trade partner from the UK.

London is the second-largest financial centre in the world

The service sector dominates, contributing around 80% of GDP; the financial services industry is particularly important, and London is the second-largest financial centre in the world. Edinburgh is ranked 17th in the world, and 6th in Europe for its financial services industry in 2020. 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 the largest city by GDP per capita in Europe.

The currency of the UK is the pound sterling, which is the world’s fourth-largest reserve currency after the United States dollar, the Euro and the Japanese yen, and is also one of the 10 most-valued currencies in the world.

United Kingdom Economic Indicators

United Kingdom GDP Growth Rate

The services sector is the most important and account for 79 percent of United Kingdom’s GDP. The biggest segments within services are: government, education and health (19 percent of total GDP); real estate (12 percent); professional, scientific and technical activities and administrative and support services (12 percent); wholesale and retail trade (11 percent); and financial and insurance (8 percent). Industry accounts for 21 percent of the GDP and the largest segments within this sector are: manufacturing (10 percent of total GDP) and construction (6 percent). The Agriculture sector accounts for only 1 percent of GDP. Composition of the GDP on the expenditure side: household consumption (65 percent), government expenditure (20 percent) and gross fixed capital formation (17 percent). Exports of goods and services account for 28 percent of GDP while imports account for 30 percent, subtracting 2 percent from GDP.

United Kingdom Interest Rate

In the United Kingdom, benchmark interest rate is set by the Monetary Policy Committee (MPC). The Bank of England official interest rate is the repo rate. This repo rate applies to open market operations of the Bank of England with a group of counterparties (banks, building societies, securities firms).

United Kingdom Inflation Rate

In the United Kingdom, the most important categories in the consumer price index are Transport (16 percent of the total weight) and Recreation and Culture (15 percent). Housing, Water, Electricity, Gas and Other Fuels accounts for 13 percent; Restaurants and Hotels for 12 percent and Food and Non-alcoholic Beverages for 10 percent. The index also includes: Miscellaneous Goods and Services (9 percent); Clothing and Footwear (7 percent); Furniture, Household Equipment and Maintenance (6 percent). Alcoholic Beverages and Tobacco; Health, Communication and Education account for remaining 11 percent of total weight.

United Kingdom Unemployment Rate

In the United Kingdom, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force.

United Kingdom Government Debt to GDP

The UK’s public sector net debt was equivalent to 80.8 percent of the country’s GDP in 2018-19 fiscal year.

United Kingdom Balance of Trade

The UK’s trade balance has been in deficit since 1998, due to deficits in trade in goods which are partly offset by surpluses in trade in services. The level of total UK trade in goods as a proportion of total trade in goods and services has been gradually declining since 1986 after peaking at 75 percent in 1985. This is consistent with the rising share of UK trade in services (35 percent of total trade in 2017). In 2017, the biggest goods deficits were recorded with Germany, China, the Netherlands, Norway, Belgium & Luxembourg and Italy; and the largest surpluses were recorded with the United States, Ireland and South Korea.

United Kingdom Currency Pound

The GBPUSD spot exchange rate specifies how much one currency, the GBP, is currently worth in terms of the other, the USD.

United Kingdom Stock Market

The FTSE 100 Index is a major stock market index which tracks the performance of 100 most capitalized companies traded on the London Stock Exchange. FTSE 100 companies represent about 80 percent of the entire market capitalization of the London Stock Exchange. It is a free-float index. The FTSE 100 has a base value of 1000 as of January 3, 1984.

United Kingdom Ease of Doing Business

The United Kingdom is ranked 8 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of the United Kingdom improved to 8 in 2019 from 9 in 2018.The Ease of doing business index ranks countries against each other based on how the regulatory environment is conducive to business operationstronger protections of property rights. Economies with a high rank (1 to 20) have simpler and more friendly regulations for businesses.

United Kingdom Business Confidence

The CBI’s quarterly gauge of manufacturing optimism in the UK was little-changed at 0 in the fourth quarter of 2020, compared to -1 in the previous period and an all-time low of -87 in the three months to June. At the same time, export sentiment fell at a slightly quicker pace than in the previous period (-21 vs -17 in Q3). Looking ahead to the coming quarter, manufacturers expect output to grow at a moderate pace. However, total new orders are anticipated to remain unchanged, reflecting steady growth in domestic orders and a slower fall in export orders. Employment is expected to be broadly unchanged in the next quarter, following six quarters of decline. Meanwhile, almost a third of manufacturers are concerned that access to materials or components may limit their output over the quarter ahead, while they are less concerned that access to finance could constrain near-term output or investment plans.

In the United Kingdom, the Business Optimism Index is published by the Confederation of British Industry’s in its Industrial Trends Survey. An average of 400 small, medium and large companies from the manufacturing sector is surveyed each quarter. The Questionnaire accesses the overall sentiment regarding general and export business situation, investment, capacity, order books, employment, output, stocks, prices competitiveness regarding domestic, EU and non-EU markets and innovation and training. For each assessment is computed a sub-index as the percentage of positive answers minus the percentage of negative answers. The composite index is then computed as the weighted average of the sub-indices. An Optimism Index of +100 indicates that all survey respondents are much more confident about future prospects, while -100 suggests that all survey respondents are much less confident about future prospects. An index level of 0 indicates neutrality.

United Kingdom Bank Lending Rate

Bank Lending Rate in the United Kingdom remained unchanged at 1.10 percent in November from 1.10 percent in October of 2020. In the United Kingdom, the prime lending rate is the average rate of interest charged on loans by major commercial banks to private individuals and companies.

United Kingdom Corruption Rank

The United Kingdom is the 12 least corrupt nation out of 180 countries, according to the 2019 Corruption Perceptions Index reported by Transparency International. The Corruption Perceptions Index ranks countries and territories based on how corrupt their public sector is perceived to be. A country or territory’s rank indicates its position relative to the other countries and territories in the index.

United Kingdom Credit Rating

Standard & Poor’s credit rating for the United Kingdom stands at AA with stable outlook. Moody’s credit rating for the United Kingdom was last set at Aa3 with stable outlook. Fitch’s credit rating for the United Kingdom was last reported at AA- with negative outlook. DBRS’s credit rating for the United Kingdom is AAA with negative outlook. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of the United Kingdom thus having a big impact on the country’s borrowing costs. This page includes the government debt credit rating for the United Kingdom as reported by major credit rating agencies.

Taxation in the United Kingdom

Income tax forms the single largest source of revenues collected by the government. The second largest source of government revenue is National Insurance Contributions. The third largest source of government revenues is value added tax (VAT), and the fourth-largest is corporation tax.

Corpo- rate tax	Perso- nal income tax	VAT or sales tax	Social Security Rate for Companies	Social Security Rate for Employees
19%	0-45%	20% (standard) 5% (home energy and renovations) 5% (tourism and hospitality sector for 6 months from the 8th of July 2020) 0% (life necessities)	13,8%	14%

How to Start a Business in United Kingdom

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