The United Kingdom was the world's first industrialised country and throughout the 19th century the leading economic power on the planet. Today, with a gross domestic product of about £3 trillion, it is among the ten largest economies in the world and the second in Europe after Germany, but its structure has changed profoundly: it is an open, financialised services economy, living above all on finance, consultancy, universities, creativity and international trade.
What the British economy looks like
Services produce more than 80% of national output. The City of London and Canary Wharf form, together with New York, the world's leading financial centre: banking, insurance, fund management, foreign exchange and international commercial law. Other strengths are universities and research, which attract hundreds of thousands of foreign students, the creative industries (television, film, music, publishing, video games, fashion, advertising), tourism and professional services.
Manufacturing now accounts for less than 10% of GDP, but remains important in some sectors of excellence: aerospace (Rolls-Royce, BAE Systems, Airbus wings made in Wales), pharmaceuticals (AstraZeneca, GSK), cars (Jaguar Land Rover, the Mini in Oxford, Nissan in Sunderland, Toyota in Derbyshire), Formula 1 and precision engineering. Agriculture employs little more than 1% of the workforce, but is efficient and covers about 60% of the country's food needs. North Sea oil and gas are in decline, while the country has become a world leader in offshore wind.
From deindustrialisation to the cost-of-living crisis
In the 1980s Margaret Thatcher's governments privatised the great state industries, curbed trade union power and deregulated finance: the closure of mines and factories hit the North, Scotland and Wales hard, while London and the South East prospered. Twenty years of growth followed, interrupted by the 2008 financial crisis and years of austerity. Then came Brexit, which most economists believe has reduced trade and investment (see the economic effects of Brexit), the pandemic and finally the inflation of 2022-2023, the highest in forty years, caused by the surge in energy prices after Russia's invasion of Ukraine.
In autumn 2026 inflation stands at 3.5%, still above the 2% target of the Bank of England, which on 4 November raised Bank Rate to 4%. Unemployment is 4.7% and growth remains weak.
Structural problems
- Low productivity: since the 2008 crisis labour productivity has grown very slowly, less than in the United States, France and Germany; this is the so-called productivity puzzle, linked to weak public and private investment.
- Regional imbalances: London has a GDP per head far above the national average, while many northern regions, Wales and Northern Ireland are among the poorest areas of Western Europe (see inequality).
- Public finances: public debt is approaching 100% of GDP and interest payments weigh on the budget, leaving little room for investment and services such as health.
- Housing: house prices are among the highest in Europe relative to wages, especially in the South East (see housing and rents).
Foreign trade
The UK is a great trading economy. It exports above all services, especially financial and professional services, of which it is the world's second exporter after the United States, as well as machinery, cars, medicines, aircraft and whisky. The United States is the largest single-country partner, but the European Union as a whole remains the main market, with the Netherlands, Germany, Ireland and France at the top. After Brexit the country signed new trade deals, including one with India and accession to the trans-Pacific CPTPP, and in 2025-2026 began a partial rapprochement with the EU.
The currency and the Bank of England
The currency is the pound sterling, one of the oldest currencies still in use (see the pound). The Bank of England, founded in 1694, has been independent since 1997 and sets interest rates to keep inflation around 2%.
See also wages, the cost of living, working in the UK and the Industrial Revolution.