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UK Economy Update
Tutor2u Economics, April 2019
Contextual knowledge
is gold dust
Know your charts!
Knowledge /
application deepens
the evaluation
Which country ranks higher than the UK in standardised scores for Maths?
Poland
Vietnam
Singapore
Estonia
Income inequality in the UK is lower than it was at
the start of the Global Financial Crisis in 2007
Income
inequality
0
10
20
30
40
50
60
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
Income Inequality in the UK - the Gini Coefficient
Original income Gross income Disposable income
Income inequality has
been falling in the UK in
recent years.- this goes
against the
conventional
interpretation /
preconception
What is the average house price in Watford?
£426,000
UK Economy Update_2019
18.2%
15.28%
7.43%
4.27%
3.29%
3.15%
2.55%
2.55%
2.29%
2.24%
1.93%
1.82%
1.76%
1.6%
1.4%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%
China
United States
India
Japan
Germany
Russia
Indonesia
Brazil
United Kingdom
France
Mexico
Italy
Turkey
Korea
Spain
Countries with the largest proportion of global gross domestic
product (GDP) based on Purchasing Power Parity (PPP) in
2017. Source: IMF World Economic Outlook.
There are many uncertainties in macro at the moment –
make sure the examiner is aware that policy operates in
a highly uncertain domestic and external environment.
0
200
400
600
800
1000
1200 1/1/97
10/1/97
7/1/98
4/1/99
1/1/00
10/1/00
7/1/01
4/1/02
1/1/03
10/1/03
7/1/04
4/1/05
1/1/06
10/1/06
7/1/07
4/1/08
1/1/09
10/1/09
7/1/10
4/1/11
1/1/12
10/1/12
7/1/13
4/1/14
1/1/15
10/1/15
7/1/16
4/1/17
1/1/18
10/1/18
Economic Policy Uncertainty Index
37%
37%
28%
27%
23%
19%
19%
13%
13%
9%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%
Business interruption (including supply chain disruption and
vulnerability)
Cyber incidents (cyber crime, IT failure, data breaches, etc.)
Natural catastrophes (storm, flood, earthquake)
Changes in legislation and regulation (government change, economic
sanctions, protectionism, etc.)
Market developments (volatility, intensified competition/new
entrants, M&A, market stagnation, market fluctuation)
Fire/explosion
New technologies (e.g impact of increasing interconnectivity,
nanotechnology, artificial intelligence, 3D printing, drones, etc.)
Climate change/increasing volatility of weather
Loss of reputation or brand value
Shortage of skilled workforce
Biggest threats facing business in 2019
Brexit
uncertainty
Chinese
slowdown
Rising US
interest rates
Fragile
confidence
Economic growth
2014: 2.9%
2015: 2.7%
2016: 1.8%
2017: 1.7%
2018: 1.4%
2019?:
BoE says there is a
25% chance of
recession this year
-8
-6
-4
-2
0
2
4
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
2012Q1
2012Q3
2013Q1
2013Q3
2014Q1
2014Q3
2015Q1
2015Q3
2016Q1
2016Q3
2017Q1
2017Q3
2018Q1
2018Q3
UK Economic Growth, annual percentage change in
real GDP
Quarter on same quarter a year ago (right hand side)
UK economic growth relative to other G7 UK inflation relative to other G7
Source: www.niesr.ac.uk/sites/default/files/publications/NIESR%20Report%20Brexit%20-%202018-11-26.pdf
UK output and decomposition of estimated potential supply (LRAS)
Date Actual output
Potential
supply =
Potential
productivity
Potential
labour supply
1998-07 2.9 2.9 2.2 0.7
2008-10 -0.9 0.2 0.1 0.1
2011-14 2.0 1.6 0.1 1.5
2015-18 1.9 1.7 0.7 1.0
2018-22 1.6 1.4 0.9 0.5
Labour migration
Net migration
continues to add to the
population of the UK.
Over 2018, 627,000
people moved to the
UK (immigration) and
345,000 people left the
UK (emigration).
Non-EU migration is at
highest for 15 years
-10
-8
-6
-4
-2
0
2
4
6
8
10
Business investment in the UK, Percent quarter on quarter growth
Business investment has now fallen for four
consecutive quarters – the first such instance
since 2009 –driven mainly by declines in
transport equipment as well as IT
60
80
100
120
140
160
180
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42
Real business investment in previous UK recessions and recoveries
1979 Q4 1990 Q2 2008 Q1
Index = 100 at start of
the recession
Investment accounted for 42% of China's GDP in 2017, the
highest share of any major economy, while household
consumption accounted for about 38%. In comparison,
investment accounts for 17% of UK GDP, consumption 66%.
(Source: Deloitte)
Consumer Spending
Tutor2u Economics, April 2019
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5 Jan.2012
Apr.2012
Jul.2012
Oct.2012
Jan.2013
Apr.2013
Jul.2013
Oct.2013
Jan.2014
Apr.2014
Jul.2014
Oct.2014
Jan.2015
Apr.2015
Jul.2015
Oct.2015
Jan.2016
Apr.2016
Jul.2016
Oct.2016
Jan.2017
Apr.2017
Jul.2017
Oct.2017
Jan.2018
Apr.2018
Jul.2018
Oct.2018
Jan.2019
Indicators of consumer confidence
General economic situation expectations Personal financial situation expectations Headline balance
Household debt
and consumer
credit
Average UK household
debt (including
mortgages) was
£58,540 in June 2018
-6
-4
-2
0
2
4
6
8
10
12
14
1/1/11
6/1/11
11/1/11
4/1/12
9/1/12
2/1/13
7/1/13
12/1/13
5/1/14
10/1/14
3/1/15
8/1/15
1/1/16
6/1/16
11/1/16
4/1/17
9/1/17
2/1/18
7/1/18
Annual growth of consumer credit, percent, source:
Bank of England
Credit cards Other loans and advances Total
To the nearest £50,000, what is the average house
price in the UK economy?
100000
120000
140000
160000
180000
200000
220000
240000
2005Jan
2005Jun
2005Nov
2006Apr
2006Sep
2007Feb
2007Jul
2007Dec
2008May
2008Oct
2009Mar
2009Aug
2010Jan
2010Jun
2010Nov
2011Apr
2011Sep
2012Feb
2012Jul
2012Dec
2013May
2013Oct
2014Mar
2014Aug
2015Jan
2015Jun
2015Nov
2016Apr
2016Sep
2017Feb
2017Jul
2017Dec
2018May
2018Oct
UK average house price, £s £226,000
In 2018, the ratio of median house prices to median earnings was 7.8
-20
-15
-10
-5
0
5
10
15 2006Jan
2006May
2006Sep
2007Jan
2007May
2007Sep
2008Jan
2008May
2008Sep
2009Jan
2009May
2009Sep
2010Jan
2010May
2010Sep
2011Jan
2011May
2011Sep
2012Jan
2012May
2012Sep
2013Jan
2013May
2013Sep
2014Jan
2014May
2014Sep
2015Jan
2015May
2015Sep
2016Jan
2016May
2016Sep
2017Jan
2017May
2017Sep
2018Jan
2018May
2018Sep
2019Jan
12 month percentage change in house prices
-5
0
5
10
15
20
25 Jan.14
Mar.14
May.14
Jul.14
Sep.14
Nov.14
Jan.15
Mar.15
May.15
Jul.15
Sep.15
Nov.15
Jan.16
Mar.16
May.16
Jul.16
Sep.16
Nov.16
Jan.17
Mar.17
May.17
Jul.17
Sep.17
Nov.17
Jan.18
Mar.18
May.18
Jul.18
Sep.18
Nov.18
Annual Percentage Change in House Prices for Selected Regions
UK London North East
0
2
4
6
8
10
12
UK Household Savings Ratio, percent of disposable income
0
2
4
6
8
10
12
14
16 1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
UK Household Savings Ratio, per cent of disposable income
Inflation & Unemployment
Tutor2u Economics, April 2019
0
1
2
3
4
5
6
Feb-08
Jul-08
Dec-08
May-09
Oct-09
Mar-10
Aug-10
Jan-11
Jun-11
Nov-11
Apr-12
Sep-12
Feb-13
Jul-13
Dec-13
May-14
Oct-14
Mar-15
Aug-15
Jan-16
Jun-16
Nov-16
Apr-17
Sep-17
Feb-18
Jul-18
Dec-18
CPI Inflation for the UK
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Jan.2004
Jun.2004
Nov.2004
Apr.2005
Sep.2005
Feb.2006
Jul.2006
Dec.2006
May.2007
Oct.2007
Mar.2008
Aug.2008
Jan.2009
Jun.2009
Nov.2009
Apr.2010
Sep.2010
Feb.2011
Jul.2011
Dec.2011
May.2012
Oct.2012
Mar.2013
Aug.2013
Jan.2014
Jun.2014
Nov.2014
Apr.2015
Sep.2015
Feb.2016
Jul.2016
Dec.2016
May.2017
Oct.2017
Mar.2018
Aug.2018
Pay and Inflation in the UK Labour Market
Annual percentage change
Inflation Pay growth (excl. bonuses)
UK Economy Update_2019
UK unemployment is at the lowest rate since which year?
2006
1989
1975
Unemployment
2014: 6.2%
2015: 5.4%
2016: 4.9%
2017: 4.4%
2018: 4.0%
March 2019 – the UK
unemployment rate
falls to 3.9%
0
2
4
6
8
10
12
14
1972Q1
1974Q1
1976Q1
1978Q1
1980Q1
1982Q1
1984Q1
1986Q1
1988Q1
1990Q1
1992Q1
1994Q1
1996Q1
1998Q1
2000Q1
2002Q1
2004Q1
2006Q1
2008Q1
2010Q1
2012Q1
2014Q1
2016Q1
2018Q1
UK unemployment rate, LFS measure, per cent of the
labour force, seasonally adjusted
Disaggregate the data on big macro topics
NEETs
10.0
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
14.5
Oct-Dec2013
Jan-Mar2014
Apr-Jun2014
Jul-Sep2014
Oct-Dec2014
Jan-Mar2015
Apr-Jun2015
Jul-Sep2015
Oct-Dec2015
Jan-Mar2016
Apr-Jun2016
Jul-Sep2016
Oct-Dec2016
Jan-Mar2017
Apr-Jun2017
Jul-Sep2017
Oct-Dec2017
Jan-Mar2018
Apr-Jun2018
Jul-Sep2018
Oct-Dec2018
Percentage of all 16 to 24 year olds who are NEET
Why is the number of
NEETs falling?
Is there an irreducible
core of youth
unemployment?
60
65
70
75
80
85
Jun-Aug2000
Dec-Feb2001
Jun-Aug2001
Dec-Feb2002
Jun-Aug2002
Dec-Feb2003
Jun-Aug2003
Dec-Feb2004
Jun-Aug2004
Dec-Feb2005
Jun-Aug2005
Dec-Feb2006
Jun-Aug2006
Dec-Feb2007
Jun-Aug2007
Dec-Feb2008
Jun-Aug2008
Dec-Feb2009
Jun-Aug2009
Dec-Feb2010
Jun-Aug2010
Dec-Feb2011
Jun-Aug2011
Dec-Feb2012
Jun-Aug2012
Dec-Feb2013
Jun-Aug2013
Dec-Feb2014
Jun-Aug2014
Dec-Feb2015
Jun-Aug2015
Dec-Feb2016
Jun-Aug2016
Dec-Feb2017
Jun-Aug2017
Dec-Feb2018
Jun-Aug2018
Dec-Feb2019
UK employment rates (aged 16 to 64 years), seasonally adjusted, per cent
People Men Women
18
19
20
21
22
23
24
25
NovtoJan1990
JultoSep1990
MartoMay1991
NovtoJan1992
JultoSep1992
MartoMay1993
NovtoJan1993
JultoSep1994
MartoMay1995
NovtoJan1996
JultoSep1996
MartoMay1997
NovtoJan1998
JultoSep1998
MartoMay1999
NovtoJan2000
JultoSep2000
MartoMay2001
NovtoJan2002
JultoSep2002
MartoMay2003
NovtoJan2004
JultoSep2004
MartoMay2005
NovtoJan2006
JultoSep2006
MartoMay2007
NovtoJan2008
JultoSep2008
MartoMay2009
NovtoJan2010
JultoSep2010
MartoMay2011
NovtoJan2012
JultoSep2012
Mar-May2013
Nov-Jan2014
Jul-Sep2014
Mar-May2015
Nov-Jan2016
Jul-Sep2016
Mar-May2017
Nov-Jan2018
Jul-Sep2018
UK economic inactivity rate
(people aged 16 to 64), seasonally adjusted, per cent
26.6
24.8
21.8
21.8
21.6
21.4
21.2
20.9
20.7
20.3
18.4
18.2
17.8
0 5 10 15 20 25 30
Northern Ireland
North East
North West
Scotland
London
West Midlands
Yorkshire and The Humber
Wales
UK
East Midlands
South East
East
South West
Economic inactivity rates: Dec 2018 to Feb 2019, per cent
UK Economy Update:
Monetary & Fiscal Policy
Tutor2u Economics, April 2019
UK Economy Update_2019
Bank Base Rate
0.75%
Quantitative Easing
£445 billion
0
1
2
3
4
5
6
7
1/1/04
7/1/04
1/1/05
7/1/05
1/1/06
7/1/06
1/1/07
7/1/07
1/1/08
7/1/08
1/1/09
7/1/09
1/1/10
7/1/10
1/1/11
7/1/11
1/1/12
7/1/12
1/1/13
7/1/13
1/1/14
7/1/14
1/1/15
7/1/15
1/1/16
7/1/16
1/1/17
7/1/17
1/1/18
7/1/18
1/1/19
Bank Base Interest Rate for the United Kingdom
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Fixed rate, greater
than two years
Fixed rate, less than
or equal to two years
Standard variable
rate
Bank Rate tracker Other floating rate
Distribution of mortgage lending in the UK, per cent of total mortgage loans,
Source: Bank of England Inflation Report
Jan. 2011 Sep. 2017
80.0
85.0
90.0
95.0
100.0
105.0
04
Jan
16
04
Mar
16
04
May
16
04
Jul
16
04
Sep
16
04
Nov
16
04
Jan
17
04
Mar
17
04
May
17
04
Jul
17
04
Sep
17
04
Nov
17
04
Jan
18
04
Mar
18
04
May
18
04
Jul
18
04
Sep
18
04
Nov
18
04
Jan
19
Sterling Exchange Rate Index
Jan 2016 = 100
UK Economy Update_2019
30.0
32.0
34.0
36.0
38.0
40.0
42.0
44.0
46.0
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
UK Government Spending and Taxation as a % of GDP
Taxation Government spending
33.8
40.9
86.5 85.3
0
10
20
30
40
50
60
70
80
90
100
UK Gross Government Debt (Per cent of GDP)
5.7
4.6
3.4
1.1
0
-1
-1.5
0.4
2.4
2.9 3.2 3 2.6 2.9
6.9
10
8.8
7.5 7.2
5.6
4.8
3.9
2.3 2.1
-4
-2
0
2
4
6
8
10
12
UK Fiscal Balance, Percentage of GDP
0
1
2
3
4
5
6
7
1/1/00
9/1/00
5/1/01
1/1/02
9/1/02
5/1/03
1/1/04
9/1/04
5/1/05
1/1/06
9/1/06
5/1/07
1/1/08
9/1/08
5/1/09
1/1/10
9/1/10
5/1/11
1/1/12
9/1/12
5/1/13
1/1/14
9/1/14
5/1/15
1/1/16
9/1/16
5/1/17
1/1/18
9/1/18
10 Year UK Government Bond Yield (Per Cent)
Trade & Competitiveness
Tutor2u Economics, April 2019
UK Economy Update_2019
UK external trade
(X-M)
In 2018, the UK’s
exports of goods and
services totalled £635
billion and imports
totalled £664 billion.
This meant a trade
deficit of £29 billion.
-8
-6
-4
-2
0
2
4
6
8
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Balance of Trade in Goods and Services for
the UK , percent of GDP
Trade in services balance Trade in goods balance
Current account
(% of GDP)
2014: -4.9%
2015: -4.9%
2016: -5.2%
2017: -3.7%
2018: -3.3%
-12
-10
-8
-6
-4
-2
0
2
4
6
8
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Components of the UK Current Account
(percent of GDP, annual data)
Secondary income balance Primary income balance
Trade in services balance Trade in goods balance
How to finance a current account deficit
-60
-40
-20
0
20
40
60
80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Outward investment and inward investment for the UK, per cent of GDP
Outward UK Investment Inward UK Investment
UK Economy Update_2019
International
competitiveness
UK was ranked 8th in the 2018 Global
Competitiveness Rankings published
by the World Economic Forum. This
makes the UK the fourth most
competitive economy in Europe
behind Germany, Switzerland and the
Netherlands.
The 2018 WEF report flagged up relative weaknesses in
human capital in the UK including a ranking of 47th for
internal labour mobility. Ranked 28th for quality of
vocational education and 32nd for digital skills. Ranked
59th for pupil-to-teacher ratio in primary education
70.0
75.0
80.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
120.0
1998Q1
1998Q4
1999Q3
2000Q2
2001Q1
2001Q4
2002Q3
2003Q2
2004Q1
2004Q4
2005Q3
2006Q2
2007Q1
2007Q4
2008Q3
2009Q2
2010Q1
2010Q4
2011Q3
2012Q2
2013Q1
2013Q4
2014Q3
2015Q2
2016Q1
2016Q4
2017Q3
2018Q2
Index of Hourly Labour Productivity for G7 Nations
Canada France Germany Italy Japan United Kingdom United States
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
UK research and development expenditure as a share of nominal output
Top 15 companies for global spending on research and development
Creative
industries
Surge in
renewables
Life sciences
Close to full
employment
UK Economy Update
Tutor2u Economics, April 2019

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UK Economy Update_2019

Editor's Notes

  1. Given the fog of Brexit it is important to stand back and look at the bigger picture. Adjusting for purchasing power parity, the UK is now the 9th biggest economy in the world with a 2.3% share of measured global GDP. Both Indonesia and Brazil (on a PPP basis have overtaken the UK using data for 2017). Policy has in many ways become fixated with the Brexit pathway but 98% of the world’s annual output does not come from the UK.
  2. Global and UK policy uncertainty remains high
  3. Growth of 1.4% in 2018 was the weakest pace of growth since 2012. Clearly Brexit uncertainty is having an impact but so too are external factors such as the slowing Chinese economy and signs that the US economy (the fastest growing developed country in 2018) is also seeing a softening of growth which in turn is a reflect of the Fed’s decision to raise interest rates. Germany – the anchor country for the EU is also experiencing a growth slowdown and overall, world trade is expanding less quickly.
  4. These two charts taken from a recent Brexit analysis from the National Institute of Economic and Social research show that UK economic growth relative to other G7 countries has slowed down and that our inflation rate has been relatively high. In large part, this is the direct result of the steep depreciation of sterling post June 2016 which increased the prices of imported goods and services. The UK economy was the fifth-fastest growing G7 economy in 2018 with signs of a loss of momentum in the wider global economy
  5. This table comes from the Bank of England’s latest inflation report (February 2019) and is important for those who fear that the trend growth rate for the UK is declining. The bank now estimates that the growth of potential supply (or long run aggregate supply) has weakened to 1.75 between the years 2015-18 and will dip further to just 1.45% over the next four years. Productivity growth may improve (although it contributes less to potential output than from 1998-2007 but the noticeable drift is in the rate of growth of the potential labour supply. Net inward migration is forecast to slow down and the employment rate is at an all-time high, suggesting some constraints on getting more people into the active labour labour force.
  6. We've still got net immigration but the composition of it has changed: the number of EU migrants has fallen to the lowest level in 10 years, but the number of non-EU migrants is at its highest for 15 years. Either way the size of the working population is rising, and this is good for potential growth.
  7. One important sign that the UK economy is slowing down is that business capital investment has fallen in each of the last four quarters and there have also been some high profile announcements especially in the car industry that future investment in capacity or manufacturing new car models is being postponed or shelved.
  8. ​This is the second in a series of short revision videos updating students on key recent developments in the UK economy in 2019. In this video we look at developments in household spending and saving. What is happening to consumer confidence, borrowing and house prices? Should we be worried about the steep fall in the savings ratio?
  9. Consumer confidence is dropping – it is hard not to make a link here with the wider security surrounding Brexit – but developments in the housing market might also be contributing
  10. Household debt peaked in Q2 2008 at 148% of household disposable income. It then declined to 127% by late 2015. It has remained steady at around 135% of GDP in recent times. The average UK household debt (including mortgages) was £58,540 in June, according to financial charity The Money Charity. Overall in the UK, people owed nearly £1.6 trillion at the end of June 2018, up from £1.55tn a year ago. he cost of servicing debt for households remains relatively low, due to very low interest rates including mortgage rates. But there are widespread concerns about the surge in unsecured consumer borrowing where the ability to repay is highly sensitive to changes in interest rates, real incomes and employment. Consumer credit includes dealership car finance, personal loans, and credit cards. Commercial banks provide around 80 percent of lending in credit and personal loans, but less than half of dealership car finance.
  11. The average UK property price increased from £224,968 to £226,234 in the year to 1 February 2019, a 0.6% increase.
  12. This has also been reflected in the household saving ratio, which has been on a downward trend in recent years. Having peaked at 10.7% in 2009 following the effects of the financial crisis as households rebuilt their financial positions, the saving ratio has trended downwards, which has been particularly pronounced in the last couple of years. This reached a record low of 3.9% in 2017. Whilst there has been a slight increase to 4.2% in 2018, this is still low by historical standards – the saving ratio in 2017 and 2018 are the two lowest since records began in 1963 
  13. ​This is the third in a series of short revision videos updating students on key recent developments in the UK economy in 2019. In this video we take a quick look at the latest data for inflation and also the major developments in the UK labour market.
  14. The Consumer Prices Index (CPI) is the main measure of inflation. It is the measure used for the Bank of England’s 2% inflation target. The post-referendum depreciation of sterling caused an increase in inflation, depressing private consumption because of the impact on real incomes. Inflation is now falling back towards target and, with nominal earnings increasing in excess of 3 per cent, for many people in work real wages are now starting to rise again after a lengthy period of stagnation. The CPI inflation rate was 1.9% in March 2019, unchanged from February.
  15. In its February Inflation Report, the MPC downgraded its forecast for GDP growth in 2019 from 1.7% to 1.2% and lowered its expectations for inflation. The MPC targets an inflation rate of 2%. These forecasts assume a smooth Brexit transition.
  16. 500,000 young people aged 16-24 were unemployed, up slightly from the previous quarter but down 35,000 from the year before. The unemployment rate for 16-24 year olds was 11.5%.
  17. The UK unemployment rate was estimated at 3.9%; it has not been lower since November 1974 to January 1975.
  18. 347,000 people had been unemployed for over 12 months, down slightly from the previous quarter and 17,000 fewer than a year ago.
  19. This is the fourth in a series of short revision videos updating students on key recent developments in the UK economy in 2019. In this video we update students on monetary and fiscal policy including the latest data on interest rates, quantitative easing, the budget deficit, national debt and yields on government bonds.
  20. Monetary policy seems to have become becalmed in recent years with barely a ripple in the chart showing the main monetary policy interest rate. The Bank of England’s Monetary Policy Committee (MPC) voted unanimously to leave interest rates unchanged at 0.75% at its November policy meeting. The last change occurred at August’s meeting when the MPC raised rates from 0.5% to 0.75%. Interest rates have moved more decisively in the United States where the Federal Reserve has moved rates to 2 per cent – still low by historical standards but their highest rate for the decade since the Global Financial Crisis. The Bank of England’s quantitative easing (QE) programme, where the Bank creates new money to buy financial assets, remains active and unchanged. QE now totals £445 billion of assets, £435 billion of which are government bonds and £10 billion of commercial debt. Mark Carney has agreed to extend his term as Governor of the Bank of England. He will now remain until end January 2020.
  21. 60 percent of mortgages are on fixed rates – great contextual point to add into any essay on monetary policy
  22. General government gross debt was £1,837.5 billion at the end of 2018, equivalent to 86.7% of gross domestic product (GDP) and 26.7 percentage points above the reference value of 60% set out in the Protocol on the Excessive Deficit Procedure. In 2018, UK general government deficit was £32.3 billion, equivalent to 1.5% of gross domestic product (GDP) (Table 2 and Figure 2); the lowest annual deficit since 2001. This represents a decrease of £5.8 billion compared with borrowing in 2017.
  23. This is the fifth in a series of short revision videos updating students on key recent developments in the UK economy in 2019. In this video we bring students up to date with the latest data concerning the UK’s external trade and current account with the rest of the world.
  24. Britain continues to run a sizeable trade deficit in goods and services. A deficit of £138 billion on trade in goods was partially offset by a surplus of £108 billion on trade in services in 2018
  25. The current account, which includes investment income and transfers as well as trade, saw a deficit of £68 billion in 2017, compared with £103 billion in 2016. The current account deficit was 3.3% of GDP in 2017 compared with 5.2% in 2016. The need to finance the large current account deficit makes the UK economy vulnerable to shifts in investors' preferences for UK assets. At present, the UK remains a favoured venue for inflows of foreign capital which makes it relatively straightforward for the UK to finance an external deficit. Difficult post-Brexit headwinds might change this especially if there is a further decline in sterling and multinationals decide to curtail their planned capital investment in Britain.
  26. The UK was ranked 8th in the 2018 Global Competitiveness Rankings published by the World Economic Forum. This makes the UK the fourth most competitive economy in Europe behind Germany, Switzerland and the Netherlands. The 2018 WEF report flagged up relative weaknesses in human capital in the UK including a ranking of 47th for internal labour mobility ( geographical mobility of labour is hampered by unaffordable housing). Ranked 28th for quality of vocational education and 32nd for digital skills. Ranked 59th for pupil-to-teacher ratio in primary education, Britain was ranked 22nd for research and development spending as a percentage of GDP.