Britain: Changing economic landscape

Abstract

The author attempts to identify the factors driving shifts in the UK economic landscape. It explains the factors affecting economic growth in Britain and shows reasons behind changing trends in recent two decades. The economy of the UK was hit hard by the 2007-2009 global economic and financial crisis. As its negative consequences have diminished the emphasis in economic polices was shifting to the solution of the long- term structural problems, in particular, where Britain is lagging behind the major competitors. They are capital investment; in particular in upgrading of the infrastructure, labour productivity growth, research and development intensity. Economic policy has become mainly orientated towards the fostering of a macroeconomic environment which helped to reduce structural and regional disparities, budget deficits, debt levels, well-being inequalities. Since the UK economy is too heavily dependent on credit-fuelled consumer spending and on financial services, a shift towards more manufacturing and exports is required if a sustainable economic future is to be built. Fiscal and monetary measures should be used more efficiently to encourage businesses, including small and medium, to increase its efficiency and international competiveness. In November 2017, the government launched ambitious Industrial Strategy with a long-term plan to boost the economy, the productivity and earning power of people throughout the UK, to build on the country's strengths and embrace the opportunities of technological change. The government intends to use this strategy to work with industry, academia and civil society over the years ahead to make more of the UK untapped potential and create a more productive economy that works for everyone across the UK. Once Britain recovered from the worst of the crippling damage done by the crisis, the economy started to tick along at a reasonable pace. Moreover, in post-crisis years Britain was among the fastest growing economies in the G7. But in 2017 it has fallen to the bottom of the table. The moderation in the economic activity of this country reflects the heightened uncertainty following the decision to leave the European Union. The UK slowdown came as GDP growth in the eurozone and the US picked up strongly. Brexit will have an important bearing on the UK economic prospects. The main challenge facing the authorities in the future is to implement it at a minimum cost. The impact of Brexit will depend on the nature of the final agreement, and it may take many years to fully materialize.