Story of the UK

by GAO Xueshengnan (1200013251)

CHEN Yan ran (W13194121)

YAN Xuqian (1200013513)

YU Xiaoyu (W13194022)

ZHAO Bingbing (W13194082)

OUTLINE

Historical Phases of UK’s Economy

UK Economic Growth Framework- Factors of Production, Productivity

- Natural Environment, Government, Income Distribution

Potentials for UK to Grow Faster

Historical Phases of UK’s Economy

1. Transformation Period(1500-1700)2. Became The Hegemon(1700-1820)3. Rapid Growth Period(1820-1913)4. The British Disease(1918-1945)5. Continued Economic Stagnation(1946-2000)6. Slow Increase Period(2000- )

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-9.4

0

9.4

18.8

28.1 GDP growth rate CPIunemployment rate

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-15

-10

-5

0

5

10

15

Figure 1 The Growth Rate of GDP of the Britain (1918-1945)Figure 2 Three Main Economic Indexes of the Britain (1950-2000)

Data Source: Office for National Statistics(1950-2000)

UK Economic Growth Framework

Development AccountingDevelopment Accounting 2005

Development Accounting 2009

Country Output per worker, y

Physical Capital per Worker, k

Human Capital per Worker, h

Factors of Production, Productivity, A

US 1.00 1.00 1.00 1.00 1.00UK 0.76 0.69 0.97 0.87 0.87

Country Output per worker, y

Physical Capital per Worker, k

Human Capital per Worker, h

Factors of Production, Productivity, A

US 1.00 1.00 1.00 1.00 1.00UK 0.82 0.68 0.87 0.80 1.03

Factors of ProductionPhysical Capital

Human CapitalEducation

HealthUK US Germany France OECD-Av-

erage0

7000

14000

21000

28000

Financial and Human Resources Invested in Education

Expenditure Per Student

2000 2008 2009 2010 201160

75

90

105

120

Change in Expenditure Per Student, Primary, Sec-ondary, and Post-Secondary Non-Tertiary Education

(2005=100)

UKUSGermanyFranceOECD-Average

2000 2008 2009 2010 201160

77.5

95

112.5

130

Change in Expenditure Per Student, Tertiary Education (2005=100)

UKUSGermanyFranceOECD-Average

Productivity - TFPTechnology

Efficiency

Patents

R & DCountry Number of

ResearchersResearchers as a

Percentage of Labor Force

Research Spending ($

billions)Researchers as a

Percentage of GDP

UK 251357.56 0.80% 39.13 1.69%

US 1252948.35 0.81% 429.14 2.77%

Germany 338688.74 0.80% 96.28 2.80%

France 249246.60 0.88% 53.43 2.19%

OECD Total 4304005.24 0.72% 1056.09 2.33%

Comparative US/UK and German/UK TFP Levels by Sector, 1879-71 to 2007 (UK=100)

A US/UK

Agriculture Industry Services Aggregate Economy

1869-71 99.5 154.2 86.5 95.21889-91 123.0 139.6 64.3 83.31909-11 118.7 150.9 71.6 90.51919-20 133.1 158.3 92.1 108.2

1929 118.0 187.8 92.0 112.71937 119.2 161.2 89.1 105.91950 132.6 217.6 110.2 138.11973 125.9 202.2 120.6 137.41990 138.8 157.3 119.8 125.32007 184.2 167.9 115.7 122.0

B Germany/UK1871 58.4 90.5 67.2 61.61891 59.8 91.6 65.5 63.21911 71.6 106.1 76.4 75.41925 57.0 92.9 83.6 74.31929 59.3 96.0 90.0 78.51935 59.6 97.1 88.8 78.21950 44.7 89.4 89.3 76.21973 48.1 105.7 127.6 108.61990 65.4 98.5 139.0 116.52007 77.0 94.2 126.9 108.8

Government (1)Government Settings(2)Accumulation of other factors

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-9.375

0

9.375

18.75

28.125

37.5

the UKInflation RateGermanyInflation Rate

1943 1960 1978 1995 2013 20300

5.75

11.5

17.25

23

28.75

the UKgovernment expenditure percentag （ /GDP ）Germanygovernment expenditure percentag （ /GDP ）

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-4.375

0

4.375

8.75

13.125

17.5

the UKPublic education expenditure percentage(/government expenditure)GermanyPublic education expenditure percentage(/government expenditure)the UKpopulation growth rateGermanypopulation growth rate

1988 1995 2003 2010 20180

5

10

15

20

25

the UKPublic health care expenditure percenta （ /government expenditure ）GermanyPublic health care expenditure percenta （ /government expenditure ）

Part One: Government (2) Impact on technology

19871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020110

0.75

1.5

2.25

3

0

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600

900

1200

the UK R&D Funding percentage(/GDP) Germany R&D Funding percentage(/GDP)the UK Fundings in R&Dbillions in $ Germany's Funding in R&Dbillions in $

(3) Efficiency

Income Distribution

1920 1940 1960 1980 2000 20200.0

12.5

25.0

37.5

50.0

62.5

GNIN of the UK GNINI of Germany

1991 1994 1995 1999 2004 2007 20107 7 6 6 7 6 6

12 12 12 11 11 11 11

16 16 16 16 16 16 16

23 22 23 23 22 23 23

43 44 43 44 44 44 44

the UK 1st income sharethe UK 2nd income sharethe UK 3rd income sharethe UK 4th income sharethe UK 5th income share

1984 1989 1994 2000 2004 2007 2010

9 9 8 9 8 8 8

14 13 13 13 13 13 13

17 17 17 17 17 17 17

23 23 23 23 22 22 22

38 38 38 38 40 40 39

Germany 1st income shareGermany 2nd income shareGermany 3rd income shareGermany 4th income shareGermany 5th income share

DirectlyAs an input to the process of economic activity

IndirectlyThrough other factors of production.

Natural environment

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0.00

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4000.00

the UKGDP （ billions in $ ）GermanyGDP （ billions in $ ）

Natural environment

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

5.5

11

16.5

22

27.5

the UKCO2 emission （ MT per capital ） GermanyCO2 emission （ MT per capital ）

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0

1250

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3750

5000

the UK Energy Usage(oil equivalent(kg) per capital ）Germany Energy Usage(oil equivalent(kg) per capital ）

Potential for UK’s Economic Growth

Infrastructure

Labor productivity has flattened out since 2007.

Infrastructure is a key driver of productivity, as it improves efficiency via logistics, information etc..

Figure: Labor productivity flatted out(Index 2007= 100)

Figure: gross government investment on infrastructure, compared to peer countriesFigure: quality of general infrastructure of the UK

InfrastructureFocus on:

Transportation infrastructure:Road/Railway & Air/Sea

(connecting UK, an island country, to the outside world)

Attracting private finance(without long term plan-

>uncertainty, bank lending)

Figure: quality of transportation infrastructure

Industry ChoiceComparative advantage & history

Different market positioning with developing countryTraditional competitive industries

Focus on high quality, design, innovationHigh-end clients, high premium(溢价 )More input into research & development

Future-orientedMay not profit right nowBio-industry, gene, environment, low-carbon, etc.

Export services rather than goodsFinancial services & education services

Industry ChoiceAutomotive

has a world-class reputation for design and innovation, especially in premium brandsStrengthen the advantage in technology and innovation, more support for R&DCreate a longer-term automotive supply-chainDevelop free trade agreement and non-tariff to exportlow-carbon vehicles

Education

2011: overseas students studying in higher education in the UK paid £10.2bn in tuition fees and living expensesBoost the local economy and enhance UK’s cultural lifeEmerging economies: 13% in China, 11% in India and 10% in Brazil

Industry ChoiceGreen technology & services

Industrial expertise and research strengths in biotechnology, maths, advanced materials, control systems, electronics, engine technology and energy management drives growth. 

Market share grew in real terms by 2.3% in 2010, faster than the global average

Currently delivers a trade surplus of 5 billion pounds. By 2014-15, green growth is expected to halve the UK’s trade deficit(CBI analysis)

Creative industries

Music, literature and film

Exceeded by America

Explore international market, enhance digital literacy through the education system

Thank you for your listening!