Source: Trading Economics; iFund/ Noble Apex Advisors Ltd.
The population of the UK was 66.19 million in 2018. The number of births keep exceeding the number of deaths (see Figure 1) and the number of immigrants also keep exceeding the number of immigrants in the UK, resulting in an upward trend in the UK’s population. In 2018, people aged between 15 to 64 contributed 64.22% of the total UK’s population (see Figure 2). According to the projection of United Nations, the population of this age group will grow to around 44 million in the next decade (see Figure 3).
Figure 1: Number of births and deaths in UK (1956 – 2017)
Source: Office for National Statistics; iFund/ Noble Apex Advisors Ltd.
Figure 2: Population distribution in UK (2018)
Source: Central Intelligence Agency
Figure 3: Population (Age 15 – 64) in UK
Source: United Nations (2019)
The United Kingdom (UK) comprises four countries, which are England, Scotland, Wales and Northern Ireland. After the Second World War, the international status of UK was weakened, but it is still the third largest economy and financial centre in Europe after Germany and France. After the Second World War, the G7 countries shifted the economic focus from industrial sector to service industry. Even though the UK is the first industrialized country in the world, the importance of manufacturing sector has declined. It currently accounts for only about 10% of the UK’s economic output, which is similar to that of other G7 countries. The service industry, especially the financial services industry, is now the main driver of UK GDP growth.
The global financial crisis broke out in 2008, which caused a serious impact on the UK that highly relied on the financial industry. Falling property prices (see Figure 4), high consumer debt, and the global economic slowdown have exacerbated the UK’s economic problems, resulting in a recession in the second half of 2008. At that time, the government led by Labour Party, implemented a series of stimulus measures, with an aim to stabilize the financial market. However, the measures lead to rapid increase in public deficits and debt levels (see Figure 5). In 2010, the coalition government led by the Conservative Party and the Liberal Democratic Party came to power and launched an austerity plan. The International Monetary Organization estimated that the UK’s debt-to-GDP ratio will fall to 82.5% in 2023, the third lowest level within the G7 countries (see Figure 6).
Figure 4: Price changes in the UK property market (2006 – Mar 2019)
Source: HM Land Registry; iFund/ Noble Apex Advisors Ltd.
Figure 5: United Kingdom public sector net debt to GDP (2001 – 2018)
Source: Trading Economics
Figure 6: Projected debt-to-GDP ratios in G7 countries in 2023
Source: Bloomberg, International Monetary Fund
Britain is a constitutional monarchy. The head of state is Queen Elizabeth II, and her designated successor is Prince Charles. Queen Elizabeth II is the longest monarch in Britain.
The parliament is the legislative body of the United Kingdom consisting of the House of Lords and House of Commons. Both of the Houses participate in the legislative process, review the work of the government, and debate current issues, but only members of the House of Commons are responsible for determining financial costs, such as proposed new taxes. Members of the House of Lords can only consider these bills, but they cannot ban or modify the bills. Members of the House of Commons are elected by voters. The legal term is 5 years with a total of 650 seats. Most of the members of the House of Lords are appointed by the Queen on the advice of the main political parties, and most of the seats are lifelong.
Cameron, prime Minister of the UK from 2010 to 2016, dealt with the issue of Brexit in Scotland and the United Kingdom by referendum. Cameron resigned after the referendum as majority of the voters support Brexit, which is distinct with the view of Cameron. After the resignation of Cameron, Theresa May served as the Prime Minister of UK from July 2016. However, she resigned on June 2019 due to the Brexit issues. Currently, Boris Johnson and Jeremy Hunt are competing for the next British prime minister. The popular candidate, Johnson, said on June 28 that he did not rule out the possibility of a no-deal Brexit. He also claimed that delivering Brexit is the key to keep unity in UK, which implies the determination of Johnson on Brexit.
In the next article of this series, we would focus on the financial industry of UK and the prospect of UK in the political and economic areas.