major macro economic indicators
|2017||2018||2019 (e)||2020 (f)|
|GDP growth (%)||1.9||1.4||1.3||0.9|
|Inflation (yearly average, %)||2.7||2.5||1.8||1.8|
|Budget balance * (% GDP)||-2.4||-2.3||-2.2||-2.5|
|Current account balance (% GDP)||-3.5||-4.3||-4.3||-4.3|
|Public debt (% GDP)||86.2||85.9||85.2||85.2|
(e): Estimate. (f): Forecast. *Fiscal year from April to March.
- Hydrocarbon production covering three quarters of energy needs
- Cutting-edge sectors (aerospace, pharmaceuticals, automotive)
- Financial services
- Competitive and attractive tax regime
- Uncertainties about the future trade relationship with the EU
- High government and household debt (120% of disposable income)
- Low productivity and lack of training that is not conducive to innovation
- Regional disparities between London and the southeast, and the rest of the country, particularly in terms of transport and energy infrastructure
EU withdrawal would not remove all uncertainty
At the beginning of January 2020, the British Parliament was preparing to vote on the agreement presented by the government and thus to take the United Kingdom out of the European Union (EU) at the end of the month. While such a scenario would avoid a no-deal Brexit, uncertainty would persist in 2020, in relation to negotiations on the future trade agreement with the EU, and would continue to hamper growth. If the country exits with a deal, the economic environment would remain unchanged during the transition period, which is scheduled to end on December 31, 2020, as the United Kingdom would retain access to the European single market and the customs union. However, companies would likely continue to reduce their investment in equipment and construction pending clarification of trade relations with the EU, which will be crucial for most sectors. In addition, the government has suspended the corporate tax rate cut from 19% to 17% planned for 2020, to finance additional expenditure on the national health system (GBP 6.2 billion, or 0.3% of GDP). Fiscal policy will remain accommodative to support activity. However, household consumption will remain the main driver of growth in an environment that continues to be favourable, with rock-bottom unemployment (3.8% in September 2019) – leading to a consequent rise in real wages – and low interest rates due to the Bank of England’s prudent monetary policy (key interest rate held at 0.75% throughout 2019). Foreign trade is expected to be much less volatile than in 2019, a year marked by major shocks, particularly in imports, amid stockpiling in readiness for a no-deal Brexit. Accordingly, exports are expected to rebound slightly, despite a persistently weak international environment featuring a major US slowdown and muted Eurozone growth. As the UK economy continues to cool, the number of corporate insolvencies will increase in 2020 (+3%) for the third consecutive year.
The automotive sector will remain one of the most exposed sectors as 80% of its production is dedicated to exports. During the first three quarters of 2019, automotive production collapsed (-15%) owing to the decline in the export segment (-17%). Beyond the difficulties specific to the European market (slacker demand, new environmental standards), the future of the sector will largely depend on negotiations with the EU, which receives half of its exports.
Continued increase in public spending
The 2020 budget is expected to be expansionary, with a further increase in public spending (39% of GDP). Outside the health sector, increases in spending will be allocated to education (GBP 3.8 billion, 0.2% of GDP), defence (GBP 1.8 billion), social affairs and home affairs (GBP 1 billion each). With activity slowing down, and the government not announcing any major savings measures other than the suspension of the corporate tax rate cut, the public deficit is expected to widen in 2020 and public debt will remain high.
The current account will remain largely in deficit, due to the substantial structural deficit in the goods balance (6.7% of GDP in 2018). This is not offset by the significant surplus in services (4.9% of GDP), attributable to financial and insurance services (two-thirds of the surplus) and other business services. The income balance shows a persistent deficit (1.3% of GDP) due to the repatriation of income from significant foreign investments in the country. As the country will continue to contribute to the EU budget during the transition period, the transfer deficit (1.3% of GDP) is expected to remain stable in 2020. The United Kingdom, a key player in the global financial system, finances its current account deficit through foreign investment, mainly portfolio investment.
Boris Johnson’s gamble pays off
Prime Minister Boris Johnson, who has been in power since being elected Conservative Party leader in July 2019, strengthened his parliamentary majority in the December 2019 elections, winning 365 of the 650 seats (50 more than in the previous election). Mr Johnson’s gamble thus paid off, vindicating his decision to dissolve Parliament, where he inherited a fragile majority negotiated in June 2017 by former Prime Minister Theresa May with the Democratic Unionist Party (DUP), a conservative protestant group in Northern Ireland. Backed by his strong majority, Boris Johnson was preparing at the beginning of January to take the United Kingdom out of the EU on January 31, 2020, following three earlier postponements. If Parliament approves the withdrawal, the UK and the EU will enter a transition period to negotiate the free trade agreement that will govern their future trade relations. While the government may benefit this time around from clear parliamentary support, these negotiations will be long and difficult, given the stakes. They are expected to occupy the bulk of the political agenda in 2020, insofar as, since it will remain a member of the EU customs union during the transition period, the UK will be unable to start negotiating new trade agreements with other partners, such as Australia, India, New Zealand and especially the United States.
Last update: February 2020
Cheques are frequently used for domestic and international commercial payments, although bills of exchange and letters of credit are preferred for international transactions. Bank transfers – particularly SWIFT transfers − are also often used and are viewed as a fast and reliable method of payment. Direct Debits and Standing orders are also recognised as practical solutions for making regular or anticipated payments and are particularly widely used in domestic transactions. It is acceptable to issue invoices both before and after the supply of goods or services.
The debt collection process usually begins with the debtor being sent a demand for payment, followed by a series of further written correspondence, telephone calls and (if the value of the debt permits), personal visits and debtor meetings. The collection process has been designed as a progression of stages, beginning with an amicable (pre-legal) collection phase and escalating up to litigation, should the debtor fail to meet his obligations.
The County Court only has civil jurisdiction. Judges handle claims for debt collection, personal injury, breach of contract concerning goods or property, land recovery and family issues (such as divorce and adoption). Cases valued at less than GBP 25,000 (or under GBP 50,000 for personal injury cases) must have their first hearing in the county court.
The High Court is based in London, but also has provincial districts known as “District Registries” all over England and Wales. It has three divisions: the Queen’s Bench Division, the Chancery Division, and the Family Division.
The Court of Appeal has two divisions – the Civil Division and the Criminal Division.
The Supreme Court is composed of a president, a deputy president, and twelve professional justices.
Fast-track proceedings (Summary Judgments)
In order to apply for a summary judgment, the claimant must obtain an Application Notice Form from the court. This should be supported by a Statement in which the claimant sets out why he believes that summary judgment should be given − either because the defendant has no real prospect of successfully defending the claim, or because there is no reason why the case should be decided by a full trial.
A copy of this statement is served on the opponent seven days before the summary judgment hearing. The opponent also has the opportunity of presenting a statement, but this must be sent no later than three days before the hearing. The claimant cannot apply for summary judgment until the debtor has either returned an acknowledgment of service form, or has filed a defence. If the court agrees with the claimant, it will return a favourable judgment. The application will be dismissed if the court does not agree with the claimant.
There are now identical procedures and jurisdictions for the County Court and the High Court. A number of litigation “tracks” have been created, each with their own procedural timetables. Claims are allocated to a track by a procedural judge, according to their monetary value. There are transaction processes that need to be followed before initiating a court action. These processes have been designed to encourage the parties concerned to settle disputes without the need for court proceedings, thus minimising costs and court time.
Proceedings formally commence when the claimant (formerly “the plaintiff”) files a Claim Form with the County Court or the High Court. Full details of the complaint are set out in the Particulars of Claim, which is usually a separate document which supports the Claim Form. The Claim Form must be served on the defendant by the court, or by the claimant. The defendant can then respond to the claim form within 14 days of service. A time extension of 28 days is agreed for the debtor to file a defence and/or a counter-claim. Once these formal documents have been exchanged, the court orders both parties to complete an “Allocation Questionnaire”.
Freezing order (formerly Mareva Injunction)
A freezing order (or freezing injunction) is a special interim order which prevents the defendant from disposing of assets or removing them from the country. One of the conditions attached to the granting of such an order is often that the applicant will pay full costs to the person against whom it was made, if it turns out to be inappropriate. A typical commercial dispute can take 18-24 months to reach a judgment, starting from the time legal action is first initiated.
Enforcement of a Legal Decision
A number of enforcement mechanisms are available. These include the Warrant of Execution (which allows a County Court Bailiff to request payment from the debtor) and the Writ of Fieri Facias for debts exceeding GBP 600, under which a High Court Enforcement Officer can make a levy on goods to the equivalent value of the judgment debt (for subsequent sale at auction and offsetting against the amount due).
As a member of the European Union, the UK has adopted several enforcement mechanisms for decisions rendered in other EU countries. These include EU payment orders which are directly enforceable in domestic courts and the European Enforcement Order, for undisputed claims. Judgments issued in non-EU countries are recognised and enforced if the issuing country has an agreement with the UK. If no such agreement is in place, an exequatur procedure is provided by English Private International Law.
Administration is intended as a rescue mechanism which enables companies (wherever possible) to continue with their business operations. The procedure is initiated either by applying to the court for an administration order, or by filing papers with the court documenting the out-of-court appointment of an administrator.
Company Voluntary Arrangement (CVA)
The CVA is an informal but binding agreement, between a company and its unsecured creditors, in which the company’s debts are renegotiated. It can be used to avoid or support other insolvency procedures, such as administration or liquidation. It provides for a restructuring plan which imposes the support of dissenting creditors.
Creditor’s Scheme of Arrangement
The Creditor’s Scheme of Arrangement is a court-approved compromise or arrangement, between a corporate debtor and all classes of its creditors, for the reorganisation or rescheduling of its debts. It is not an insolvency procedure and does not include a moratorium on creditor action. It can, however, be implemented in conjunction with formal insolvency proceedings, (administration or liquidation). It can also be implemented on a standalone basis by the debtor company itself.
There are three types of receivers. The first of these is a receiver appointed with statutory powers. The second type of receiver is one who is appointed under the terms of a fixed charge or a security trust deed. The third category is an administrator (who is appointed under the terms of a floating charge over all, or a substantial share, of the debtor company’s property.
A company can enter voluntary or compulsory liquidation. Voluntary liquidations can be either a “members’ voluntary liquidation” or a “creditors’ voluntary liquidation”. Both of these proceedings are initiated by the company itself, by passing a resolution during a meeting of members. The company then ceases trading and a liquidator collects the company’s assets and distributes the benefits to the creditors so as to satisfy, as far as possible, the company’s liabilities.