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United Kingdom

Economics

Economic Overview

The United Kingdom is mid-sized industrial economy with a highly developed financial sector — its capital London is the centre of global foreign exchange trading. The immediate economic consequences of a 2016 decision to leave the European Union (“Brexit”) have not been as dire as feared, but markets remain concerned about longer-term effects. These include loss of access to skilled and semi-skilled European labor; greater frictions in goods exports to continental Europe; a corresponding reduction in inbound direct investment; and a regulatory squeeze on London’s status as a dominant centre for trading euro-denominated securities. This comes against a broader backdrop of wide regional inequalities, low productivity outside the financial services sector, and persistent twin deficits.

United Kingdom

Real Gross Domestic Product

Gross Domestic Product, Chained, Quarterly Annualized Change, %, SA

Real Gross Domestic Product measures the change in the inflation-adjusted value of all goods and services produced in the economy. It comprises private consumption and investment, inventory buildup, government spending and net exports. Markets watch this indicator to gauge the strength and composition of growth.

United Kingdom

Unemployment Rate

Unemployment Rate, Aged 16 and Over, %, SA, Updates Monthly

The Unemployment Rate measures the percentage of the labor force currently not working but actively seeking employment. Markets monitor the unemployment rate to assess the cyclical health of the economy and the likelihood that wage demands may increase inflationary pressures.

United Kingdom

Claimant Count Change

Monthly Change in Unemployment Claims, Thousands, SA, Updates Monthly

The Claimant Count Change records the monthly difference in the number of people claiming unemployment‐related benefits. The series has been used as the main indicator of labour market conditions in the United Kingdom since the 1970’s and figures are derived from records of claimants held at Job Benefit Offices. ‘Claimants’ include the severely disabled claimants, but exclude students seeking vacation work and the temporarily stopped.

United Kingdom

Consumer Prices

Consumer Price Index, Annual Change, %, SA, Updates Monthly

The Consumer Price Index is a measure of the change over time in the average prices paid by consumers for a market basket of consumer goods and services. As the most widely used measure of inflation, changes in the index are closely followed by policymakers, financial markets, businesses, and consumers. The Office for National Statistics reports both an ‘All Items’ number that includes all categories in the calculation basket, and a ‘Core’ number that strips out highly volatile food, energy, alcohol, and tobacco prices.

United Kingdom

Trade Balance

Total Trade Balance, 12-month moving average, billions GBP, SA, updates monthly

Measures the difference in value between imported and exported goods and services over the reported period. A positive number indicates that more goods and services were exported than imported – generating a trade surplus – and a negative number indicates a deficit. Trade imbalances may reflect fleeting differences in growth rates or more permanent factors in the composition of growth or the endowment and price of natural resources.

United Kingdom

Policy Rate

Bank of England Bank Rate, %

The Bank Rate is an overnight interest rate that the Bank of England targets in order to influence monetary variables in the economy, including consumer prices, exchange rates, and credit growth. The Bank adjusts the target for the Bank Rate on eight fixed dates each year.

United Kingdom

Money Supply Growth

M4 Money Supply, Annual Change, %, SA

M4 Money Supply, sometimes known as a “broad money aggregate”, is a measure of outstanding currency that includes notes and coin, funds in bank accounts: sterling deposits, commercial papers, bonds, repo trades, estimated holdings of sterling bank bills and other categories. Markets don’t typically respond directly to reported changes in M4, but growth in the money supply can influence inflation, interest rates, and exchange rates over longer time horizons.

United Kingdom

Central Bank Assets

Total Assets, Millions GBP, Updates Monthly

The Bank of England’s assets consist primarily of government bonds, commercial paper and corporate bonds, foreign exchange reserves, reverse repurchase agreements, and other instruments. Its liabilities are mostly currency in circulation, commercial bank reserves, and collateralized reverse repurchase agreements. The balance sheet is used to influence interest rates – when officials want to stimulate the economy, it expands, and when they wish to tighten financial conditions, it shrinks.

United Kingdom

Debt Ratios

Credit to General Government, Non-Financial Corporate, and Household Sectors, % of Gross Domestic Product at Market Value, Updates Quarterly

Aggregate Debt Ratios measure the total borrowing of the general government, non-financial corporate, and household sectors, expressed as a share of gross domestic product. Total debt is followed by investors as a gauge of the vulnerability of an economy to financial shocks. An overly fast pace of debt growth is also frequently associated with a buildup of unproductive investment and excessively high asset valuations.

United Kingdom

Net International Investment Position

Net International Investment Position, Millions USD, Updates Annually

The Net International Investment Position is the difference between the external financial assets and liabilities of a nation. A nation with a positive position is a creditor nation and is generally considered a safe haven in financial markets. A nation with a negative position is a debtor nation, with deeper balance of payments vulnerabilities.

United Kingdom

Currency Reserves

Official Reserve Assets, Foreign Currency Reserves (in Convertible Foreign Currencies), Billions USD, Updates Monthly

Currency Reserves show external holdings that are freely usable for settlement of international transactions, and are readily available to and controlled by monetary authorities for meeting balance of payments financing needs, for intervention in currency markets to affect exchange rates, and for other related purposes. Developed markets with widely used, freely tradeable international currencies typically provide reserve assets rather than engaging in reserve accumulation.