Economic Analysis
United Kingdom

United Kingdom

Population 65.6 million
GDP per capita 40,050 US$
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Synthesis

major macro economic indicators

  2015 2016 2017(f) 2018(f)
GDP growth (%) 2.3 1.8 1.5 1.2
Inflation (yearly average, %) 0.0 0.7 2.7 2.5
Budget balance (% GDP) -4.3 -2.9 -2.4 -2.1
Current account balance (% GDP) -5.2 -5.9 -4.6 -4.7
Public debt (% GDP) 89.0 89.3 86.9 87.2

(f): forecast

 

SECTOR RISK ASSESSMENTS

Royaume_UniEN

STRENGTHS

  • Hydrocarbon production covering three quarters of energy needs
  • Cutting-edge sectors (aeronautics, pharmaceuticals, automotives)
  • Financial services
  • Competitive and attractive fiscal regime

WEAKNESSES

  • Uncertainty over the implementation and consequences of the decision to leave the EU
  • High levels of public and household debt (140% of disposable income)
  • Low productivity and lack of training not conducive to innovation
  • Regional disparities with London and the Southeast and the rest of the UK, especially regarding transport and energy infrastructure

Risk Assessment

Decline in activity continues

Growth, still suffering from the uncertainties associated with Brexit, is expected to weaken in 2018. Household consumption, which represents over 60% of GDP, is set to continue to slow. Indeed, while inflation, following the depreciation of the British pound sterling after the referendum, is outstripping nominal wage growth, the pressure on household disposable income will persist, leading to an erosion of consumer confidence. However, the drop in consumption’s contribution to growth will be gradual if households continue to reduce their savings (4.8% of disposable income in 2017 compared with 9.2% in 2015). The slowdown in domestic demand has already impacted the automotive sector, which posted a fall in new registrations in 2017. The contribution of private investment is expected to fall, with businesses choosing to delay their investment decisions due to political uncertainty. The fear of a post-Brexit slowdown and the rising cost of credit, following the hike in the benchmark interest rate, will continue to weigh on the construction sector. Despite a more accommodative fiscal policy, the contribution of public consumption will likely remain weak. Buoyed in 2017 by a devalued pound and by robust demand in EU partner economies, exports should continue to contribute positively to growth in 2018. The effect of sterling’s depreciation on export competitiveness is, however, likely to ease, reducing the contribution of exports to growth. The economic slowdown could be reflected in a rise of about 8% in bankruptcies.

The increase in consumer prices is expected to moderate slightly, benefiting from the weakening effects of the sterling’s devaluation on imported goods and a less pronounced increase in energy prices. After the Bank of England raised its benchmark interest rate – for the first time since 2007 – to 0.5% in November 2017, a second intervention to raise rate by 25 basis points in 2018 to bring inflation down towards the 2% target cannot be ruled out.

 

Slower fiscal consolidation

While the economy is facing a less favourable context and is still struggling to overcome certain structural weaknesses, such as anaemic productivity growth, the pace of fiscal consolidation is expected to ease. In particular, cuts to current expenditures are expected to be smaller than initially foreseen. Rising spending on the National Health Service (NHS) and measures to “repair” the property market imbalances were announced in the budget statement in November 2017. Capital spending is expected to rise only moderately. Although these measures are unlikely to stop the downward path of the deficit in 2018, financing them is expected to push up the debt ratio, which came down due to an accounting change in 2017.

The current account balance will continue to show a large deficit in 2018. After benefiting from a buoyant global trade environment and the pound sterling’s depreciation in 2017, the balance of goods deficit is expected to increase slightly in 2018. This will not be offset by the services surplus. Even if it could recede, the income balance deficit, which has widened since the start of the decade in connection with the decline in investment income, will continue to impact the current account balance. Transfers, which make a low contribution, are not expected to influence the current account overall balance. Even though the UK has recorded the biggest current account deficit of the G7, and political uncertainty presents certain threats, the country is expected to be in a position to finance its current account deficit thanks to investment flows.

 

Thorny Brexit negotiations on the agenda of a weakened government

After triggering Article 50 of the EU treaty governing the EU withdrawal process in March 2017, Theresa May, Prime Minister since July 2016, called early general elections so that she could begin Brexit negotiations from a position of strength. However, during the June 2017 elections, even though Theresa May’s Conservative party won, it lost its absolute majority in the House of Commons - a significant setback. Only a fragile alliance with the Democratic Unionist Party (DUP), a conservative protestant party from Northern Ireland, enabled Mrs May to remain in position at the head of government. From its weakened negotiating position, on the 5th December 2017 the government nonetheless managed to conclude the first phase of talks with the European Commission, reaching agreement on the EU divorce terms. This compromise, earned after drawn-out negotiations, marks a rare positive moment for the government. The Irish issue will return in the next round of negotiations. The second phase, covering future relations with the EU, will be even more complicated, with the effective exit date of 29th March 2019 looming. An amendment adopted thanks to the rebellion of some Conservative MPs providing for any final deal to be ratified by Westminster exposed Mrs May’s weakness and her reduced room for manoeuvre to find an agreement that will satisfy her majority.

 

Last update : January 2018

Payment

 

Cheques are generally used for both domestic and international commercial transactions.

 

Bank transfers are common with SWIFT transfers being utilised regularly.

 

Direct Debits and Standing orders are recognised as an effective method of making payment for regular and expected financial transactions.

 

 

Debt collection

 

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, debt value permitting, personal visits and debtor meetings. Each stage of the collection process is designed to escalate from an amicable – pre-legal- collection phase towards litigation should the debtor fail to remedy the debt.

 

The Court judiciary consists of:

 

1)The County Court, has a purely civil jurisdiction.

Judges handle claim for collection of debts, personal injury, breach of contract concerning goods or property, recovery of land, family issues (divorce, adoption). Cases valued at less than GBP 25,000 (and GBP50,000 inpersonal injuries cases) must start in the county court.

 

2)The High court of Justice,

The High Court is based inLondonand also has provincial districts known as “District Registries” all acrossEnglandandWales. There are three divisions.

 

3)The Court of Appealconsists of two divisions: the “Civil Division” and the “Criminal Division”

 

4)The Supreme Courtis composed of 12 professional justices, with a president and a deputy president.

 

 

 

 

The United Kingdom has a “common law” system.

 

 

A) The Civil Procedure Rules

 

The Civil Procedure Rules / CPR (cf. Lord Woolf reform) were implemented inEnglandandWales, on 26 April 1999. The rules aim to simplify and speed up the process of taking cases through the courts.

 

There is an identical procedure and jurisdiction in both the County Court and the High Court.

 

Ø A number of litigation “tracks” have been created, each having their own procedural timetables.

Claims are allocated to a track by a procedural judge according to their monetary value.

 

B) The litigation process

 

1)Pre-action protocols

They are transactions process which should be followed before starting an action in court. These transactions are in place to encourage parties to try to settle a dispute without the need for court proceedings, thus minimising costs and court time.

 

2)Proceedingsare formally started when the claimant (formerly “the plaintiff”) issues a Claim Form in the County Court or the High Court.

 

There is a standard claim form for both High Court and County Court actions.

 

ð Full details of the complaint are set out in the Particulars of Claim.

 

ð The Claim Form must be served either by the court, or by the claimant, on the defendant.

The defendant then has the opportunity to respond to the claim form within 14 days of service.

An extension of time for a total of 28 days is agreed for debtor’s filing a defence and/or a counterclaim.

 

3) Once the parties have exchanged these formal documents, the court will order the parties to complete an “Allocation Questionnaire”.

 

4) Disclosure of documents

The parties will be required to make a reasonable search for documents which are relevant to the case.

 

The new rule states the parties should only have to disclose (i.e. provide to each other) documents which are necessary to determine the issues.

The purpose of disclosure is to prevent either party being taken by surprise in the course of the trial.

When the court requires technical evidence or expert opinion, the court may appoint a single expert to assist the judge. The court can direct the parties to appoint a single joint expert.

Experts are required to give independent evidence to assist the court.

 

5) Cross-examination

This is only permitted on limited issues upon application to the court where it is established that such cross-examination is necessary.

However, cross-examination of all factual witnesses and experts often is automatic and broad.

The claimant’ witnesses may be cross-examined by the opponent’s counsel and then re-examined on behalf of the claimant.

 

6) Freezing order (formerly Mareva Injunction)

A "freezing injunction" or "freezing order" is a special issue of interim order stopping a party from disposing of assets or removing them out of the country.

 

7) Judgment

- The judge adjudicates on the evidence put before him and does not make his own independent enquiries.

- The judge will consider previous court decisions in similar matters (common law system) and is usually bound to follow these.

- The judge will either give his judgment immediately, or if the matter is complex, will give judgment at a later date.

 

C) Enforcement of judgment.

 

If the claimant is successful in obtaining a monetary judgment, but if the defendant does not pay voluntarily, the methods are:

 

1)The garnishee order (third party debt order).

The claimant may obtain a court order which directs a third party who owes a debt to the defendant to pay directly the debt to the claimant.

 

2)The charging order.

The claimant may obtain a court order which grants a charge on certain assets of the defendant (e g. property, stocks, shares) .

 

3)The writ of execution (execution order).

The court bailiff seizes personal goods (except essential livings items) at the defendant’s home or premises to be sold by auction and to pay off the debt.

 

4)The attachment of earnings.

If the debtor has a professional activity, the claimant may apply for a court order that the employer deduct a proportion from the debtor’s wages each week or month in order to pay off the debt.

 

5)The winding up petition or the bankruptcy petition.

Ø Insolvency Act 1986 - regularly amended.

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