Economy of England

2008/9 Schools Wikipedia Selection. Related subjects: Economics

The Economy of England is the largest economy of the four constituent countries of the United Kingdom.

England is a most highly industrialised country. It is an important producer of textiles and chemical products. Although automobiles, locomotives, and aircraft are among England’s other important industrial products, the bulk of the country's income comes from the City (see next paragraph).

Since the 1990s the financial services sector has played an increasingly greater role in the English economy and the City of London is the world's largest financial centre. Banks, insurance companies, commodity and futures exchanges are heavily concentrated in the City.

The service sector of the economy as a whole is now the largest in England, with manufacturing and primary industries in decline. The only major secondary industry that is growing is the construction industry, fueled by economic growth provided mainly by the growing services, administrative and financial sector.

The British pound sterling is the official currency of England and the central bank of the United Kingdom, the Bank of England, is located in London.

In medieval times (c. 11th Century-15th Century) the wool trade was the major industry of England and the country exported wool to Europe. Many market towns and ports grew up on the industry. Poor infrastructure hampered the development of large scale industry. This changed when the canals and railways began to be built, in the late 18th Century and early 19th Century.

England became the world's first industrialized nation, with the industrial revolution taking place in the late 18th Century. This was also the age of British overseas expansion, where England relied upon colonies (such as America, Canada, or Australia) to bring in resources such as cotton and tobacco. English factories then processed the goods and sold them on in both the quickly growing domestic market or abroad. Cities grew and large industrial centres were established, especially in the Midlands and North England.

Heavy industries, such as coal mining, steel production and ship building, declined in England during the second half of the 20th Century and were replaced by service industries and hi-tech industries, such as the computer and pharmaceutical industries.

Today England is one of Europe's, as well as the world's, wealthiest nations and is the wealthiest of the four nations that make up the UK (GDP per capita).

Economic sectors

Agriculture and Fishing

Agriculture is intensive, highly mechanized, and efficient by European standards, producing about 60% of food needs with only 1% of the labor force. It contributes around 2% of GDP. Around two thirds of production is devoted to livestock, one third to arable crops. Agriculture is heavily subsidized by the European Union's Common Agricultural Policy and it is not known how large a sector it would be if the market was unregulated. The GDP from the farming sector is argued by some to be a small return on the subsidies given but is argued by others that subsidy boosts security. And therefore is justified in the same way defence spending is.

The main crops that are grown are wheat, barley, oats, potatoes, sugar beets, fruits and they use the euro vegetables. The livestock that is raised is cattle and sheep. In the drier east, farmers raise wheat, barley, oats, potatoes, and sugar beets. Apples are grown in the west. Cornwall and the nearby Isles of Scilly, that have the mildest climate and longest growing season in England, raise winter vegetables, fruits, and flowers for the London Market.

England is one of the world’s leading fishing nations. Its fleets bring home fish of every kind, ranging from sole to herring. Kingston upon Hull, Grimsby, Fleetwood, Great Yarmouth, and Lowestoft are among the coastal towns that have large fishing industries.

Investing and banking

England's capital is London. The City of London is London's major financial district, and one of the world's leading financial centres. The city is where the London Stock Exchange, as well as many other exchanges, are based.

Service industries, particularly banking, insurance, and business services, account by far for the largest proportion of GDP and employ around 70% of the working population.

Manufacturing

Manufacturing continues to decline in importance. In the 1960s and 70s manufacturing was a significant part of England's economic output. However a lot of the heavy manufacturing industry was government run and had failed to respond to world markets. State industries were sold off and over the 20th century many closed as they were unable to compete; a situation largely reflected in other Western industrialized countries. However, manufacturing still accounts for some 26% of the UK's GDP. England remains a key player in the aerospace, defense, pharmaceutical and chemical industries and British companies world wide continue to have a role in the sector through foreign investment. Closure of English factories and movement of manufacturing to Eastern Europe and the " Far East" in search of lower costs (especially through lower wages and less strict employment laws) continues to benefit share-holders, consumers and the UK economy as a whole, although areas that were formerly dependent on manufacturing such as the Midlands and North East have experienced severe economic decline.

Tourism

Tourism is the 6th largest industry in the UK, contributing 76 billion pounds to the economy. It employs 1,800,000 full-time equivalent people — 6.1% of the working population (2002 figures) . The largest centre for tourism is London, which attracts millions of international tourists every year.

Currency

The currency of England is the Pound Sterling, or British pound. The central bank of the United Kingdom, where interest rates are set and monetary policy is carried out, is the Bank of England in London.

There is considerable debate as to whether the UK should join the Euro currency, which would replace the Pound. The relatively good economic performance has complicated the Blair government's efforts to make a case for Britain to leave the Pound Sterling and join the Euro. The British Prime Minister has pledged to hold a public referendum if membership meets Chancellor of the Exchequer Gordon Brown's " five economic tests". The tests are:

1. Are business cycles and economic structures compatible with European interest rates on a permanent basis?
2. If problems emerge, is there sufficient flexibility to deal with them?
3. What impact would entry into the Euro have on the UK's financial services industry?
4. Would joining the Euro create better conditions for firms making long-term decisions to invest in Britain?
5. Would joining the Euro promote higher growth, stability and a lasting increase in jobs?

When assessing the tests, Gordon Brown concluded that while the decision was close, the United Kingdom should not yet join the Euro. In particular, he cited fluctuations in house prices as a barrier to immediate entry. The tests will be reassessed in the future. Public opinion polls show that a majority of Britons are opposed to joining the single currency at this time. The same polls point towards slightly stronger opposition to the Euro in England than in the other UK nations.

Regional variation

The strength of the English economy varies from region to region. GDP, and GDP per capita is highest in London. The following table shows the GDP (2004) per capita of England as a whole and each of the nine regions.

Two of the 10 economically strongest areas in the European Union are in England. Inner London is number 1 with a €71 338 GDP per capita (303% above EU average); Berkshire, Buckinghamshire & Oxfordshire is number 7 with a €40 937 GDP per capita (174% above EU average).

Although being in South West England, which is the 4^th strongest region in England, Cornwall and the Isles of Scilly (combined into a NUTS:3 region for statistical purposes) is the weakest area in England, with a GDP per capita of €18 645 per capita, or 79% of the EU average of €21 503.