United Kingdom Country Snapshot: Trade Overview
A leading global trading power and financial center, the United Kingdom’s economy is dominated by the services sector, particularly banking and finance. The country’s highly developed, market-based economy has drawn foreign investments, making the UK one of Europe’s top destinations for inward foreign investment. Although the country possesses significant coal, natural gas, and oil resources, its oil and natural gas reserves are in decline as is its industrial segment. The 2008-2009 global economic crisis hit the UK especially hard, particularly its thriving financial sector. The government struggled to increase domestic demand and curb unemployment, despite monetary policy measures, including low interest rates and a quantitative easing program. Moreover, a decline in exports coupled with a rise in imports caused the UK’s trade deficit to hit a record high.
Trade History
The British Empire emerged as a powerful trading force in the 17th century, during which merchants deployed ships to trade with North America and the British colonial West Indies. Exports to the colonies mainly comprised textiles, while imports consisted of sugar, tobacco, and various tropical foodstuffs. Increasing overseas commerce with colonies stimulated demand for ships, as well as for goods for growing settler communities. The slave market also solidified British trade dominance in the Caribbean and southern American colonies, and stimulated demand for plantation goods.
Britain’s trade dominance significantly diminished in the first half of the 20th century. Domestic labor unrest and strikes disrupted trade, two world wars dealt a blow to the economy, and other nations emerged as strong trading forces. In 1969 the UK discovered oil, expanding its oil fields over the next decade. By 1979 in-country oil production exceeded imports.
In the coming decades, the UK pursued several trade activities with fellow European countries, resulting in heightened trade cooperation. In 1960 the UK, along with Austria, Denmark, Norway, Portugal, Sweden, and Switzerland founded the European Free Trade Association (EFTA), and in 1973 the UK left the EFTA for the European Economic Community (EEC), bringing the country one step closer to an integrated trade policy. Today, the UK’s trade policy mirrors that of other European Union (EU) members.
Top Export Partners
The US and Germany purchase roughly 11 percent each of Britain’s exports, the Netherlands buys more than 8 percent, and France purchases 7 percent. Ireland buys 6 percent and Belgium purchases 5 percent.
Major Export Products and Services
Exports account for nearly a third of the UK's GDP, with main export products comprising manufactured goods, fuels, chemicals, food, beverages, and tobacco.
Top Import Partners
The UK purchases 13 percent of its imports from Germany, 8 percent from China, about 7 percent each from the Netherlands and the US, 5 percent from France, and 4 percent each from Belgium and Norway.
Major Import Products and Services
A service-driven economy, the UK imports manufactured goods, machinery, fuels, and food products, among other items.
Barriers to Trade (Tariff and Non-Tariff)
The UK ranks 14th place out of 178 countries in the Heritage Foundation’s Index of Economic Freedom. British trade policy mirrors that of other EU members, with a weighted average tariff rate slightly above 1 percent. However, the EU levies high tariffs on agricultural and manufacturing products, and non-tariff barriers reflected in EU and UK policy also restrict trade, as do inconsistent regulatory and customs administration among EU members.
Major Ports
The UK’s major ports include Scapa Flow, Lieth, Immingham, Liverpool, Felixstowe, Southhampton, and London.
Article written for World Trade Press by Erin Eaton-Zaleski.
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