The United Kingdom (UK) has a competitive, independent, and industrialized economy, with good gross domestic product (GDP) growth. The country’s economy was leading the industrial revolution of the 19th century.
Understanding the United Kingdom GDP
The United Kingdom’s gross domestic product (GDP) is a crucial indicator of the country’s economic performance and growth. It measures the total value of all final goods and services produced within the country’s borders over a specific period. The UK’s GDP is a widely used metric to compare the economic performance of different countries. Various factors influence it, including consumer spending, investment, government spending, and net exports.
The UK’s GDP is calculated using three approaches: the output approach, the expenditure approach, and the income approach. The output approach measures the value of goods and services produced by businesses. In contrast, the expenditure approach measures the amount spent by households, businesses, and the government on goods and services. The income approach measures the income earned by households and businesses.
The UK’s GDP is also broken down into different sectors, including the service sector, manufacturing sector, and construction industry. The service sector is the largest contributor to the UK’s GDP, accounting for around 80 percent of the country’s economic output. The manufacturing sector is also a significant contributor, accounting for around 10 percent of the country’s economic output.
What is the UK’s GDP?
In 2023, the UK’s GDP was 2.27 trillion British pounds, a marginal gain over the year before. The UK economy experienced zero growth in June and July 2023. The COVID-19 pandemic and subsequent shutdowns severely damaged numerous businesses, especially the service sector, which is critical to the UK economy. As per the report by Statista, this caused a substantial drop in GDP between 2019 and 2020.
After two quarters of negative growth after the U.S., China, Japan, Germany, and India, the UK had the sixth-largest economy globally by the end of 2023.
After a notable downturn since late 2021, economic activity increased in 2024. High inflation hampered private spending, a major engine of post-pandemic recovery, until nominal wage growth overtook it in the second half of 2023 to produce real wage gains. With GDP expanding by 0.7 per cent in the first quarter and 0.6 per cent in the second, and inflation reducing to 2.2 per cent year-over-year in July, momentum improved in the first half of 2024, according to an OECD report.
In 2024, UK’s GDP is expected to increase by 1.1 percent. Although there have been negative adjustments of 0.1 percentage points in quarter 1 (Jan to Mar) 2023 and quarter 2 2024, the quarterly pattern of real GDP at an aggregate level has remained mostly stable since 2023.
Historical growth of the UK’s GDP
Despite its military victory in World War II, the UK’s manufacturing sector was severely damaged. The postwar recovery was comparatively sluggish, and the British economy took over 40 years to become much more competitive. After 1973, participation in the European Economic Community (later replaced by the European Union, or EU) provided further stimulus. In the 1990s, economic growth rates were favourable compared to those of other highly developed nations. More than half of the UK’s commerce involving tangible commodities now comes from nations in the EU rather than its old empire.
From 1960 to 2023, the UK’s GDP averaged $1345.39 billion, hitting a record low of $73.23 billion in 1960 and an all-time high of $3340.03 billion in 2023, as per the report by Trading Economics. Following a growth rate of 4.3 per cent in 2022, the UK economy expanded by 0.1 per cent in 2023. This represents a significant slowdown compared to the same period in the previous year. The drop was a record 10.4 percent in 2020 and 8.7 percent in 2021. The largest yearly decline in GDP before 2020 was recorded in 2009, during the global financial crisis in the late 2000s, when the UK economy shrank by 4.5 percent. The UK economy increased by 6.5 percent in 1973, the year with the greatest annual GDP growth rate between 1949 and 2020.
Key factors driving UK’s GDP
Many factors have contributed to the growth of the UK’s GDP over the years. Early estimates of GDP rely on initial calculations that may differ from final estimates. Below are some pointers:
Manufacturing and exports
The impact of the manufacturing sector on the UK economy is significantly greater than the manufacturing businesses themselves, according to the Oxford Economics research. In 2022, the UK’s manufacturing industry directly employed 2.6 million people, generating £184 billion in total revenue, as usually reported in national accounts. However, the report shows that the sector’s contribution to the UK economy goes far beyond manufacturing firms. According to the analysis, the overall GDP impact of UK manufacturing in 2022 was estimated to be £518 billion, or nearly a quarter (23 percent) of the country’s GDP. This figure is an important output measure, reflecting the total value of goods and services produced by the manufacturing sector. Manufacturers’ supply chain purchases play a significant role in this, since UK manufacturers depend on an intricate web of supply networks situated in the UK.
Interestingly, manufacturing output in the UK grew by 1.1 percent in August 2024. Manufacturing is part of the wider production sector, which grew by 0.5 percent in August 2024.
As for exports, in the 12 months ending in April 2023, the value of UK exports was £847 billion. Cars and crude oil were the next most valuable listed commodities shipped, after mechanical power generators. The value of all commodities and other market services offered to the rest of the world is represented by exports. The value of goods, products, freight, insurance, transportation, royalties, license fees, and other services, including government, business, personal, financial, information, and communication, are all included. They do not include transfer payments, investment income (formerly known as factor services), or employee remuneration.
According to the World Bank’s collection of development indicators, produced from officially recognized sources, the UK’s exports of goods and services (as a percentage of GDP) were recorded as 32.17 percent in 2023.
Services sector, wholesale and retail trade, and domestic consumption
With 80 percent of gross value added (GVA), a metric of economic activity comparable to GDP, the services sector is the biggest in the UK, according to the Office for National Statistics (ONS). Retail, food and beverage, entertainment, and business and financial services are just a few consumer-focused businesses that comprise the UK service sector. Retail trade is significant in the consumer-facing services sector, contributing substantially to growth, particularly in August 2024. Furthermore, the ONS reports that in 2020, the largest GVA contributions to the UK’s economy came from the government, health, and education sectors. Along with the production and real estate sectors, the distribution, transportation, hotel, and restaurant businesses all made major contributions. Another significant source of income for the UK is tourism. The foreign tourists spent $34.3 billion on travel and tourism in the UK in 2022.
In June 2024, the UK’s domestic consumption made up 63 percent of its nominal GDP, up from 60 percent in the previous quarter. With an average share of 63.4 percent, this contribution to the nominal GDP ratio is updated every quarter and is accessible from March 1955 to June 2024. The statistics hit a record low of 55.8 percent in March 2021 and a record high of 70.2 percent in December 1955.
UK GDP in 2024: Current statistics
After no growth in July 2024, the UK’s economy expanded by 0.2 percent in August. The UK economy is around 3.3 percent bigger as of August 2024 than in February 2020, right before COVID-19 lockdowns began. The UK economy rapidly recovered from a historic 19.6 percent GDP contraction in April 2020, and it continued to rise through the entire year of 2021, according to a report by Statista. The wholesale and retail trade sector, significant within the service sector, has notably contributed to this economic growth, particularly in relation to motor vehicle activities.
Here is the distribution of GVA in UK in 2023 by industry:
| Industry | GVA |
|---|---|
| Real estate | 13.1% |
| Retail and wholesale | 9.9% |
| Manufacturing | 9.1% |
| Finance and insurance | 8.8% |
| Professional and technical | 8.3% |
| Health and social care | 8.3% |
| Construction | 6.3% |
| Education | 6.2% |
| IT and communications | 5.9% |
| Business admin and support | 5.3% |
Impact of global trade and economic policies
A significant global commercial power, the UK has a population of 67 million and a GDP of $3.1 trillion as of 2022. The UK has the second-largest economy in Europe and topped the G7 in GDP growth (4.0 percent) in 2022, despite its modest size. The UK continues to be a vital market for U.S. exports of products and services, despite ongoing regulatory obstacles brought on by the consequences of the UK’s withdrawal from the EU (Brexit), high inflation brought on by rising energy prices, and the COVID-19 pandemic’s aftereffects. In 2022, U.S. exports to the UK were $157.1 billion, up 21.5 percent from 2021, placing the UK in fifth position among export destinations for American goods and placing it in the 2nd spot for trading in services, as per the report by International Trade Administration.
In 2023, the UK’s exports of goods and services totalled £861 billion, and imports totalled £876 billion. The EU accounted for 41 percent of UK exports and 51 percent of imports in 2023.
UK economy and Covid-19
The UK’s drastic governmental response to the COVID-19 epidemic is remarkable. Based on the findings of widely reported model forecasts from the Imperial College of London, the UK government substantially altered its course after first declaring its intention to shield the weak while fostering herd immunity. The country then imposed harsh lockdown regulations, first a nationwide lockdown from March to July 2020 and then a number of further ones until the middle of 2021.
In the second quarter of 2020, the UK’s GDP decreased by a record 20.4 percent, and throughout the first half of 2020, it fell by 22.1 percent. These decreases were most noticeable in industries like services, production, and construction, which were most subject to government limitations during the extremely restrictive measures implemented in response to the epidemic. In comparison to other nations, the UK’s economy has declined more due to the lengthy lockdown and the limitations put in place.
Read more | China GDP: Growth trends and economic forecasts for 2024
Future projections for UK’s GDP
Being one of the most developed and industrialized nations, the UK will certainly have a robust plan to grow its GDP in the future. Below are some key pointers:
UK economic growth outlook
The Quarterly Economic Forecast (QEF), which won the 2024 FocusEconomics award for best GDP estimate, projects that the UK economy will rise by 1.1 percent in 2024 and by the same amount in 2025. In 2026, the GDP is predicted to rise by 1.1 percent, a modest increase. This year’s primary engine of GDP is government expenditure, and overall growth conditions are still very poor. As lower inflation and interest rate decreases take effect in 2025, household spending is predicted to rise sharply, accoring to the British Chambers of Commerce (BCC).
By the end of 2024, the CPI is predicted to reach 2.6 percent, somewhat higher than originally predicted, due to wage growth, rising energy prices, and uncertainty surrounding global trade. In Q4 2025 and Q4 2026, it is anticipated to slow down and approach the Bank of England’s 2 percent objective, hitting 2.2 percent and 2.1 percent, respectively.
Quarterly growth to be modest
The UK economy has done better than expected in 2024, following a good comeback from the brief recession that ended last year. The BCC has revised its Q3 growth projection to 0.4 percent from the ONS’s 0.6 percent estimate for Q2. However, it is anticipated that this pace would slow, dropping by 0.2 percent in Q4 and each quarter of 2025.
In 2024, business investment is predicted to rise by 0.3 percent, less than the prior estimate. After that, it is anticipated that business investment will increase by 1.4 percent in 2025 and 2.0 percent in 2026. Over the projection period, the services sector is expected to increase at the fastest rate in the economy, with annual growth above 1 percent.
Trade outlook remains bleak
Due to persistent trade obstacles with the EU and broader trade disputes, the future outlook for global trade will remain poor. In 2024, imports and exports are forecast to decline by -0.6 percent and -1.1 percent, respectively, before gradually increasing in 2025 and 2026. This is a modest improvement above the previous prediction.
Data sources and quality
The data used to calculate the UK’s GDP comes from various sources. That includes the Office for National Statistics (ONS), the Bank of England, and the World Bank. The ONS is responsible for collecting and publishing data on the UK’s GDP. And, its data is widely regarded as high quality.
The ONS uses a range of data sources to calculate the UK’s GDP. That includes business surveys, data from government departments, and data from other statistical agencies. It also uses a range of methods to ensure the accuracy and reliability of its data. That includes data validation and quality control checks.
The UK’s GDP data is also subject to revision as new data becomes available and methods and sources are improved. The ONS publishes revisions to its GDP data on a regular basis, and these revisions can significantly impact the country’s economic growth rate.
The UK’s GDP data is considered to be of high quality, with a high level of accuracy and reliability. The ONS has a strong reputation for producing high-quality data, and policymakers, businesses, and researchers widely use its GDP data.
However, the UK’s GDP data has some limitations, including the fact that it does not capture the value of unpaid work, such as childcare and household chores. Additionally, changes in the country’s population and labor market can affect the accuracy of the data.
Overall, the UK’s GDP data is a valuable tool for understanding the country’s economic performance and growth, and is widely used by policymakers, businesses, and researchers.
Comparing UK’s GDP to other major economies
The UK is competitive with all major economies, but let’s compare it to the U.S.
UK GDP vs U.S. GDP
United States
- Nominal GDP: $28.78 trillion
- PPP adjusted GDP: $28.78 trillion
- GDP growth: 2.7 percent
- Nominal GDP per capita: $85,370
In terms of nominal GDP, the U.S. economy is the biggest in the world. The economy’s service sector encompasses real estate, insurance, healthcare, professional and commercial services, and finance. These are the largest contributor to its GDP. Foreign direct investment and flexible corporate investment are made possible by the comparatively open economy of the U.S. Being the world’s leading geopolitical force and the creator of the key reserve currency, it is able to sustain a sizable external national debt. Although the U.S. economy leads the world in many technological fields, it is increasingly threatened by issues including income inequality, the expense of healthcare and social safety nets, and failing infrastructure.
United Kingdom
- Nominal GDP: $3.5 trillion
- PPP adjusted GDP: $4.03 trillion
- GDP Growth: 0.5 percent
- Nominal GDP per capita: $51,070
The economy of the UK is the sixth largest in the world. The substantial service sector in the UK, especially in the areas of business, insurance, and finance, is the engine of the country’s economy. The outcome of Brexit following the 2016 decision to leave the EU has significantly affected the country’s considerable commercial connection with continental Europe. Although the UK is not formally a member of the EU as of January 31, 2020, there are still heated discussions about economic ties between the two sides.
Frequently Asked Questions (FAQs)
What is UK’s current GDP?
The UK’s current GDP is estimated to be $3.495 trillion in nominal terms and $4.029 trillion in PPP terms for 2024.
How has UK’s GDP grown over the last decade?
The UK’s GDP growth over the last decade has been pretty much unpredictable, with the economy witnessing a record fall in 2020, which was subsquently followed by an impressive growth in 2021, and then a recession in 2023:
- 2020: The UK economy experienced a record 10.4 percent decline in GDP
- 2021: The UK economy grew by 8.7 percent
- 2022: The UK economy grew by 4.3 percent
- 2023: The UK economy grew by 0.1 percent and ended the year in recession. The third quarter of 2023 saw a -0.1 percent growth, and the fourth quarter saw a -0.4 percent growth
- 2024: The UK economy grew by 0.6 percent in the second quarter of 2024. That is the strongest quarterly GDP growth since 2021. In August 2024, the UK economy grew by 0.2 percent
What are the predictions for UK’s GDP in the next few years?
The Quarterly Economic Forecast (QEF), which won the 2024 FocusEconomics award for best GDP estimate, projects that the UK economy will rise by 1.1 percent in 2024 and by the same amount in 2025. In 2026, the GDP is predicted to rise by 1.1 percent. That is the modest increase.
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