Essay Paper on British Economy
The basis of the British economy is its industry, which produces about half of GDP and 90% of exports. Recently, industry of the country has undergone significant restructuring, “reindustrialization”. ‘As a result, many traditional industries have reduced output, fell into downswing, while the latest high-tech sector, such as electronics, electrical engineering, etc., gained the status of the priority industries and began to flourish. Leading position is now occupied by chemistry, electrical engineering, aerospace and electronic industry, automotive, clothing, footwear, food processing.
Britain is described with a high degree of development of services: banking, insurance, freight, tourism, giving actual 50% of export earnings. This area of the economy is growing much faster than industry. The share of services in GDP for the period from 1960 to the present time has increased from 45 to 60%. In the future, the government policy will be aimed at further stimulating of the development of this sphere of the economy, it largely determines the place of the country in the world economy in the context of increasing specialization.
It should be noted that, starting from 50-ies country chronically lagged behind its partners in the pace of development. There was some weakening of the UK in the world capitalist economy. Today, the country’s economic growth is stabilized.
Thus, over the last decade, average annual GDP growth (2.2%) is higher than in other Western countries. And yet, even while maintaining the same advancing other countries pace of development, in the short term Britain will fall behind not only the U.S. and Japan but also from the leading Western European countries. According to the calculations of British experts, in order to catch up with France, it would require more than 20 years and more than 50 years to catch up with Germany (the latter while maintaining the current rate of development).
UK lags behind other capitalist countries, and on such indicators as productivity. This figure is 1,5 times lower than in Germany and 2 times lower than in the U.S. The lag in productivity affects the level of competitiveness of British exports and the portfolio building of British export firms.
Despite the fact that manufacturing is a very important sector of national economy and its position in the past three decades has deteriorated, there has been a decline in its share of GDP. At the same time UK firms not only worsened their export position, but lost some of its own domestic market.
Despite the fact that in the past ten years in this group of industries growth rate exceeded the average one for the manufacturing industry, the gap between the UK and other leading capitalist countries – the U.S., Japan, Germany, France – in the production and export of high technology products (chemicals, office equipment, electronic equipment and electrical products, automotive products and instrument) appeared. The degree of import in the UK market in this area is higher than for the entire group of manufacturing industries.
The reasons for this underperformance were smaller compared with other leading capitalist countries, expenditure on R & D (and this is not only in comparison with Japan and the United States but also with European countries – Germany, France), the existence of the gap in time between developing ideas and their realization (in the form of the creation of industrial designs), on the one hand, and the deployment of large-scale production – on the other. If during the development of ideas and the creation of industrial prototypes and successfully operated small and medium-sized promotional or so called venture capital, firms have received in the UK much more than other Western European countries, the development of total amount of venture capital has grown over the past 10 years and its volume in relation to GDP is 90 times higher than the U.S., the assembly line mass production new developments are not the British discovery. The reason is seen in smaller, compared with the U.S., Japan, Germany, size of large firms in the UK, carrying out a direct large-scale production of high-tech industries.
Backlog of Great Britain in the production and export of high technology products is to some extent determined by the fact that the world markets of these products is dominated by TNCs of non-British origin, which in recent years often do not consider the UK as a country with a comparative advantage for the deployment of its industrial branches. Thus, the position of the UK in sectors of high technology, as well as the positions of many other countries, is significantly affected by the global strategy of the dominant TNCs in these industries…
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