4 views left Get unlimited views with a free account

Explore United Kingdom's latest macroeconomic trends and forecasts to inform business strategy and pinpoint opportunities and risks

United Kingdom: Macroeconomic Country Outlook

GlobalData revised UK’s real GDP growth forecast for 2022 from 4.3% in February to 3.9% in April, amid higher inflation and the Russia-Ukraine crisis.
The UK was ranked 23rd out of 136 nations in the GCRI Q4 2021.
According to GlobalData estimates, UK’s exports grew by 3.4% in 2021, compared to contraction of 13.5% in 2020.

The UK’s political landscape is deeply entrenched in the ethos of democracy. The country’s stable governance system ensures that there is remarkable consistency in its policies. The World Bank's governance indicators illustrate, that the UK is one of the most successful nations in terms of application of the rule of law, corruption control, government effectiveness, and regulatory quality.

Key Findings

The government introduced new laws to strengthen national security: On January 4, 2022, the National Security and Investment (NSI) Act came into effect which will help the government to scrutinize and intervene in acquisitions, including businesses and investors, that could harm the UK’s national security. From an investor’s perspective, the new law will give more information, transparency, and clarity on relevant acquisitions. The investment screening process has simple procedures, thereby increasing overall investor confidence.
Good performance in terms of EPI: According to Environmental Performance Index (2020), released by Yale University, the UK ranked 4th out of 180 countries in the 2020 EPI Index. The EPI ranked 180 countries on nine performance indicators, including health impacts, air quality, water and sanitation, water resources, agriculture, forests, fisheries, biodiversity and habitat, and climate and energy. The UK ranked first in the parameter of sanitation and drinking water, marine protected areas, and pollution emissions. The country has set ambitious targets that aim to decarbonize power generation by 2035 and envisage cutting down CO2 emissions by 78% by 2035.
Developing R&D: Given the UK’s competitiveness in high-technology exports, the country must maintain its pace of innovation in the export-oriented sectors. Providing impetus to R&D is the key to raising productivity and living standards. The government has created technology and innovation clusters for scientists, engineers, and businesses to turn R&D into new products and services. The government has identified various areas for development: high-value manufacturing, offshore renewable energy, cell and gene therapy, digital economy, and transport systems. According to GlobalData, the total expenditure on R&D increased from $44.7 billion (1.6% of GDP) in 2016 to $48.3 billion (1.8% of GDP) in 2020.
The UK is ranked eighth out of 190 countries in World Bank’s doing business ranking in 2020: The UK’s score (83.5 out of 100) is ahead of other peer nations such as Germany (79.7) and France (76.8) in Doing Business Report (2020). It takes 4.5 days to start a business in the UK as compared to the OECD high-income average of 9.2 days. The country was ranked seventh in the parameter of protecting minority investors, eighth in the parameter of getting electricity, 14th in resolving insolvencies, and 18th in terms of starting a business in 2020.
Electric car demand on rise in the UK: In March 2022, the UK oil and gas giant BP announced to invest $1.3 billion in electric vehicle charging amid the rise in demand for electric cars. These new investments will accelerate the roll-out of state-of-the-art 300-kilowatt ultra-fast charging points across the country. In April 2022, according to the Society of Motor Manufacturers and Traders (SMMT), new-car registrations in the UK fell 14% to reach 243,479, the weakest since 1998 as semiconductor shortages continued to hit car supplies. However, demand for full-electric vehicles hit an all-time high during the same time. Furthermore, amid the Russia-Ukraine crisis, oil prices have gone up which may retard demand for cars and shift to alternatives such as EVs. In March 2022, according to the SMMT, around 39,315 new EVs were sold which was up by 79% (YoY). This accounts for nearly a sixth of the car market.
The UK rules out windfall tax on North Sea oil firms to help fund energy bills: In April 2022, the Government of UK effectively ruled out a windfall tax on oil and gas profits despite soaring energy bills to fund a national package of support to households. Energy bills have been on the rise because of dependence on Russia oil and gas amid Russian invasion of Ukraine. The government however plans higher investment in solar panels, wind and nuclear to reduce reliance on Russian oil and gas. The government is aiming to triple the number of solar panels, more than quadruple offshore wind power and double onshore wind and nuclear energy by 2030.

Key Fundamentals

Sectoral Outlook

Support for sale of electric cars: Tighter emission controls and localized emission limits in Central London and other European cities are rapidly bringing the era of diesel car engine to an end. In November 2020, the government announced its plan to stop selling new diesel and petrol (gasoline) cars and vans from 2030. In terms of funding, $1.72 billion will go towards improving electric vehicle (EV) charging infrastructure, while $802.8 million will be set aside for grants to lower the cost of electric vehicles and encourage uptake. In addition, almost $689.7 million will be spent over 2021–2025 on the development and mass-scale production of electric vehicle batteries. The move is part of a wider 10-point plan for a so-called “green industrial revolution” aimed at meeting its legally binding target of net-zero greenhouse gas emissions by 2050 and generating as many as 250,000 jobs.
Positive outlook for the UK’s pharmaceutical sector: The UK pharmaceutical sector is a major global center for the production of pharmaceuticals and is critical to the UK economy. Two of the world’s top 15 pharmaceutical companies, namely GlaxoSmithKline (GSK) and Astra Zeneca, are headquartered in the UK, The UK’s innovative pharmaceutical industry has been able to sustain its strength through wide-ranging web support from the government, that links the NHS with research institutions, private companies, and universities, fostering a virtuous cycle of innovation that boosts the whole sector. UK’s pharma industry registered an 8.6% rise in IT hiring activity in February 2022 when compared with the previous month, according to GlobalData’s Job Analytics database. The industry’s overall hiring increased by 0.86% in February 2022 when compared with January 2022.
R&D sector gets a boost: In the UK’s 2021 Budget, in a bid to make the UK a world leader in science and research, the government laid out an ambitious target to raise total investment in R&D to 2.4% of UK GDP by 2027. Not only will this boost the UK’s already strong reputation for R&D, but also help speed up the economic recovery from effects of COVID-19. As per the Research and Development Roadmap published on 1st July 2020, the public funding for R&D will be increased to GBP22 billion ($30.3 billion) per year by 2024–2025. In March 2022, the government announced a GBP39.8 billion ($52.3 billion) R&D budget for 2022–2025, which will help deliver the government's Innovation Strategy and drive forward ambitions as a science superpower.

GlobalData Country Risk Index (GCRI) - Q4 2021

The UK was ranked 23rd out of 136 nations in the GCRI Q4 2021. The country’s score is in the very low-risk nations band (below 30). The UK’s overall risk score is lower than the West Europe and world average in GCRI Q4 2021. The country had an overall score of 25.7 and stable political framework makes it one of the safest countries for doing business in the world. However, its risk score was relatively higher in environment parameter as compared to West Europe and the world average.

GCRI Methodology

GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.

The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Western European countries in this publication include Austria, Belgium, Denmark, Finland, France, The UK, Greece, Italy, the Netherlands, Norway, Portugal, Ireland, Spain, Sweden, the UK, Luxembourg, Iceland, and Switzerland.

About the Report

GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.

More details: Macroeconomic Outlook Report: United Kingdom

Explore United Kingdom's latest macroeconomic trends and forecasts to inform business strategy and pinpoint opportunities and risks Explore United Kingdom's latest macroeconomic trends and forecasts to inform business strategy and pinpoint opportunities and risks Visit Report Store