UNITED KINGDOM- INTRODUCTION

The economy of the United Kingdom is the sixth-largest national economy in the world measured by nominal GDP and seventh-largest measured by purchasing power parity (PPP). The British economy comprises (in descending order of size) the economies of the countries of England, Scotland, Wales and Northern Ireland. The UK is a member of the Commonwealth of Nations, the European Union, the G7,the G8,the G20, the International Monetary Fund, the Organization for Economic Cooperation and Development, the World Bank, the World Trade Organization and the United Nations. In the 18th century the UK was the first country in the world to Industrialize, and during the 19th century possessed a dominant role in the global economy. From the late 19th century the Second Industrial Revolution in the United States and the German Empire presented an increasing challenge to Britain's role as leader of the global economy. By the turn of the 20th century the German Empire had vastly outperformed the British economy. The size of the German economy had surpassed the British by 25%. The costs of fighting both the First World War and Second World War further weakened the relative economic position of the UK, and by 1945 Britain had been superseded not only by Germany but by the United States as the world's dominant economic power. However, the UK still maintains a significant role in the world economy.

The UK is one of the world's most globalised countries. London is the world's largest financial centre alongside New York and has The largest city GDP in Europe.

The United Kingdom of Great Britain and Northern Ireland, is commonly known as the United Kingdom (UK) or Britain of continental Europe. The country includes the island of Great Britain (a term sometimes loosely applied to the whole state), the north-eastern part of the island of Ireland, and many smaller islands. Northern Ireland is the only part of the UK that shares a land border with another state: the Republic of Ireland. Apart from this land border, the UK is surrounded by the Atlantic Ocean, with the North Sea in the east, the English Channel in the south and the Irish Sea in the west. The UK's form of government is a constitutional monarchy with a parliamentary system and its capital city is London. The current British monarch since 6 February 1952is Queen Elizabeth II. The United Kingdom consists of four countries: England, Scotland, Wales and Northern Ireland. The latter three

have developed administrations, each with varying powers, based in their capital cities, Edinburgh, Cardiff and Belfast, respectively. Guernsey, Jersey and the Isle of Man are Crown dependencies and are not part of the UK. The United Kingdom has fourteen British Overseas Territories. These are remnants of the British Empire which, at its height in the late 19th and early 20th centuries, encompassed almost a quarter of the world's land mass and was the largest empire in history. British influence can be observed in the language, culture and legal systems of many of its former colonies. The UK has been a permanent member of the United Nations Security Council since its first session in 1946. It has been a member of the European Union (EU) and its predecessor the European Economic Community (EEC) since 1973; it is also a member of the Commonwealth of Nations, the Council of Europe, the G7, the G8, the G20, NATO, the Organization for Economic Co-operation and Development (OECD) and the World Trade Organization (WTO).

Edinburgh is also one of the largest financial centres in Europe. Tourism is very important to the British economy and, with over 27 million tourists arriving in 2004, the United Kingdom is ranked as the sixth major tourist destination in the world and London has the most international visitors of any city in the world. The automotive industry is a significant part of the UK manufacturing sector and employs over 800,000 people, with a turnover of some 52 billion, generating 26.6 billion of exports. The aerospace industry of the UK is the second- or third-largest national aerospace industry depending upon the method of measurement and has an annual turnover of around 20 billion. The pharmaceutical industry plays an important role in the UK economy and the country has the third highest share of global pharmaceutical R&D expenditures (after the United States and Japan). Agriculture is intensive, highly mechanised and efficient by European standards, producing about 60% of food needs with less than 1.6% of the labour force (535,000 workers). Around two-thirds of production is devoted to livestock, one-third to arable crops. Farmers are subsidised by the EU's Common Agricultural Policy. The UK retains a significant, though much reduced fishing industry. It is also rich in a number of natural resources including coal, petroleum, natural gas, tin, limestone, iron ore, salt, clay, chalk, gypsum, lead, silica and an abundance of arable land.

FOREIGN DIRECT INVESTMENT

UK confirmed as leading European destination for foreign direct investment Final annual investment figures released today show the UK has continued to strengthen its position as the leading European destination for foreign direct investment. The UKs 2012/13 Inward Investment Annual Report, published today by UK Trade and Investment (UKTI), confirms rises in the number of projects and jobs secured compared to 2011 to 2012. The report shows that in the last financial year:

the UK saw 1,559 investment projects secured 11% more projects than the number recorded during the previous year these projects are estimated to have brought with them 170,000 jobs 51% higher than in the previous year. Of these, nearly 60,000 were new jobs and 110,000 existing jobs were safeguarded

UKTI and its partners were involved in delivering nearly 85% of the projects secured

These final investment figures published in the UKTI report show improvements on the preliminary results announced at the Global Investment Conference in London on 9 May. The annual report also shows that the recorded increases are spread throughout the UK. Wales and Northern Ireland in particular have recorded significant increases in investment projects 191% and 41% respectively while Scotland registered a 16% increase in the number of investments. The number of FDI projects landing in England (excluding London) increased by 10% reaching 759 projects. The investment results at the local level in England are also positive with most Local Enterprise Partnerships recording an increase in the number of investment projects in their areas.
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Trade and Investment Minister Lord Green said: The UK has received a major vote of confidence from foreign investors confirming that the UK remains a world leading business destination. Attracting foreign investment is an important element of the UK Governments economic and growth programme and UKTI will continue to work with companies to help create and sustain a globally attractive, highly competitive and truly international economy. The data published by UKTI bears out trends reported by independent reports including those published by Ernst and Young, Financial Times and UNCTAD, whose figures all showed the UK enjoyed a strong year for inward investment in 2012 to 2013 UNCTAD, in particular, reported recently that despite global FDI inflows declining by 18%, FDI inflows into the UK have risen by 22%. The UK continues to attract high quality investment from around the globe both from our established economic partners in Europe, North America and Japan but also from key growing markets such as India and China. Investments are also made across a broad range of innovative and economically important sectors. The combination of these factors means the UK continues to be in a strong international position for attracting foreign investment.

United Kingdom - Foreign direct investment Foreign direct investment, net outflows (% of GDP) Foreign direct investment, net outflows (% of GDP) in United Kingdom was 3.77 as of 2011. Its highest value over the past 6 years was 12.97 in 2007, while its lowest value was -1.19 in 2009. Throughout the past decade, the UK has remained Europes top recipient of foreign direct investment (FDI) projects. It retained this position in 2012, securing more investments and a higher market share of projects across Europe than in 2011. This strong performance in 2012 saw the number of projects coming to the UK rise by 2.6% to 697, the third highest number in the past ten years. And it achieved this increase against the background of the first decline since 2008 in total projects at the European level. These figures suggest that - despite the UKs relatively sluggish pace of recovery from the recent downturn - the Governments efforts to enhance the countrys attractiveness in areas such as taxation, trade missions and support for SMEs are going down well with cross-border investors. This view is borne out by our research study, which shows that overseas companies believe the UK has made advances in a number of areas over the past year. These include improvements in the countrys financial flexibility, policy regime for start-ups, and entrepreneurial culture

CHALLENGES ON THE HORIZON However, the research also points to some emerging challenges that mean the UK has no room for complacency. While staying ahead in overall projects, the UK slipped behind Germany in 2012 for the first time in new projects from first-time investors. Germany also maintained its lead over the UK in attracting projects from emerging sources of FDI such as China. Taken together, these findings suggest that Germany was well-placed to overtake the UK in the next few years as Europes number one location for FDI. Again, this v iew is supported by global our research among overseas investors, who rank the UK second behind Germany among Europes most attractive countries for FDI over the next three years. KEY STRENGTHS The overall message is clear: the UK needs to keep working hard to sustain its leadership in European FDI, by continuing to enhance its offer to foreign investors. As the UK strives to do this, it will be able to build on a number of established strengths. One of the most important of these is its continued position as the European destination of choice for US investors. With the US appearing to enter an economic upswing ahead of Europe, the UK needs to sustain its strong US relationship, while simultaneously building closer links with other sources of FDI, especially growth markets. Another key strength for the UK is its lead in fast-growing business services FDI, as well as in software and financial services. While projects from the financial services industry are currently declining, overseas companies expect this to be the number one sector

driving UK growth in the coming years - suggesting the UK is well-placed to capture any upturn. In an increasingly competitive global market for FDI, the UK cannot compete for every opportunity. So it needs to define a strategy for where to focus its efforts in terms of sector, function and region. Now is the time to act, while the UK is still leading the way as Europes top FDI location.

UNITED KINGDOM FOREIGN DIRECT INVESTMENT Foreign Direct Investment in the United Kingdom increased to 5841 GBP Million in the third quarter of 2013 from 5070 GBP Million in the second quarter of 2013. Foreign Direct Investment in the United Kingdom is reported by the Office for National Statistics. Foreign Direct Investment in the United Kingdom averaged 4895.29 GBP Million from 1963 until 2013, reaching an all time high of 70710 GBP Million in the third quarter of 2005 and a record low of -7354 GBP Million in the second quarter of 2010. This page provides - United Kingdom Foreign Direct Investment - actual values, historical data, forecast, chart, statistics, economic calendar and news. 2014-02-09

ACTUAL PREVIO US H IGH EST LO WEST FORECAST DATES

UNIT

FREQUENCY CURRENT QUARTERLY PRICES, NSA

5841.00

5070.00

70710.00

-7354.00 7083.16 | 2013/12

1963 2013

GBP MILLION

LEGAL ASPECTS OF UNITED KINGDOM

The United Kingdom has three legal systems. English law, which applies in England and Wales, and Northern Ireland law, which applies in Northern Ireland, are based on common-law principles. Scots law, which applies in Scotland, is a pluralistic system based on civil-law principles, with common law elements dating back to the High Middle Ages. While England and Wales, Northern Ireland, and Scotland diverge in the more detailed rules of common law and equity, and while there are certain fields of legislative competence devolved in Northern Ireland, Scotland, Wales and London, there are substantive fields of law which apply across the United Kingdom. Legal aspects on: 1. Sale of goods Sale of goods act 1979 The Sale of Goods Act 1979 is an Act of the Parliament of the United Kingdom which regulates English contract law and UK commercial law in respect of goods that are sold and bought. The Act consolidates the original Sale of Goods Act 1893 and subsequent legislation, which in turn had codified and consolidated the law. Since 1979, there have been numerous minor statutory amendments and additions to the 1979 Act. The Act applies to contracts where property in 'goods' is transferred or agreed to be transferred for a monetary consideration, in other words: where property (ownership) in personal chattels is sold.

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Property passing and delivery The main purposes of retention of title clauses are to ensure that where goods are supplied on credit, if the buyer subsequently goes into bankruptcy, the seller can repossess the goods. The methods of entering the foreign market, with choice made balancing costs, control and risk, include: 1. Export directly. 2. Use of foreign agent to sell and distribute. 3. Use of foreign distributor to on-sell to local customers. 4. Manufacture products in the foreign country by either setting up business or by acquiring a foreign subsidiary. 5. Licence to a local producer. 6. Enter into a joint venture with a foreign entity. 7. Appoint a franchisee in the foreign country.

2. Taxation Local and foreign companies are taxed alike. Inward investors may have access to certain EU and UK regional grants and incentives that are designed to attract industry to areas if high unemployment but no tax concessions are granted. The UK taxes corporations 24 percent on profits over GBP 1.5 MILLION (USD2.4 MILLION). Small companies are taxed at a rate of 20 percent for profits on to GBP 300000(USD 471000) and marginal tax relief is granted and marginal tax reliefs is granted on profits between these thresholds. Tax deductions are allowed for expenditure and depreciation of assets used for trade purposes. These include
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machinery, plants industrial buildings and assets used for research and development. A special rate of 20 percent is given to unit trusts and open ended investment companies Taxation in the United Kingdom may involve payments to a minimum of two different levels of government: the central government (Her Majesty's Revenue and Customs) and local government. Central government revenues come primarily from income tax, National Insurance contributions, value added tax, corporation tax and fuel duty. Local government revenues come primarily from grants from central government funds, business rates in England and Wales, Council Tax and increasingly from fees and charges such as those from on-street parking. In the fiscal year 2007-08, total government revenue was 39.2 per cent of GDP, with net taxes and national insurance contributions standing at 36.9 per cent of GDP. 3. Investment This law evaluates the legal issues surrounding the activities of multinational corporations operation overseas. An increasing number of bilateral investment treaties provide standards of protection for foreign investment, preventing host states from expropriating property and also require them to treat foreign investors the same as local investors. This key feature of globalization, including notably the growing phenomenon of investment arbitration in international tribunals, may conflict wit the sovereign rights of host states to regulate economic matters. International investment law therefore sits on the intersection of public international law and private international law and engages some of the most compelling issues of our times, such as environmental and human rights regulations instigated by the often less developed countries that receive foreign investment.

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ECONOMIC INTEGRATION
United Kingdom proposes novel ideas for economic integration

Economic integration is the abolition of the various restraints of trade between nations.
The European Free Trade Association (EFTA) is a free trade

organization between four European countries that operates in parallel with and is linked to the European Union (EU). The EFTA was established on 3 May 1960 as a trade bloc-alternative for European states who were either unable or unwilling to join the then-European Economic Community (EEC) which has now become the EU. The Stockholm Convention, establishing the EFTA, was signed on 4 January 1960 in the Swedish capital by seven countries (known as the "outer seven"). Today's EFTA members are Iceland, Liechtenstein and Norway and Switzerland, of which the latter two were founding members. The initial Stockholm Convention was superseded by the Vaduz Convention, which enabled greater liberalization of trade among the member states. EFTA states have jointly concluded free trade agreement with a number of other countries. Three of the EFTA countries are part of the European Union Internal Market through the Agreement on a European Economic Area (EEA), which took effect in 1994; the fourth, Switzerland, opted to conclude bilateral agreements with the EU. In 1999, Switzerland concluded a set of bilateral agreements with the European Union covering a wide range of areas, including movement of people, transport, and technical barriers to trade. This development prompted the EFTA states to modernize their Convention to ensure that it will continue to provide a successful framework for the expansion and liberalization of trade among themselves and with the rest of the world.

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THE UK BUSINESS ENVIRONMENT

A Proven Investment Location

In 2011, the cumulative stock of foreign investment in the UK was more than US$1.2 trillion, the second highest level of FDI stock globally.

The UK attracted 1,406 foreign direct investment projects in 2011/12, the highest in Europe, creating over 52,741 jobs.

The UK is the second largest single destination globally for US investment and in 2011 accounted for 26 per cent of all US investment stock in the European Union.

The UK has attracted more US investment than the combined totals of Germany, France, Spain, Italy and Ireland (Source: US Department of Commerce, 2012).

Economic Growth

Over the last ten years, GDP growth in the UK has regularly outpaced or matched growth in the European Union. As with other major countries globally, the UK economy contracted in 2009 before returning to growth in 2010. The Government department in the UK with responsibility for the economy is HM Treasury.

Exchange Rates

The UK Government has policies that encourage a stable and competitive pound, consistent with the objective of price stability.

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Interest Rates

The official Bank Rate in the UK which is set independently by the Bank of England is 0.5% as of March 2013. The rate is subject to review on a monthly basis.

Inflation

The Bank of England has full operational independence in setting interest rates to meet the Governments inflation target of two per cent for the annual increase in the Consumer Price Index CPI. The CPI is based on the internationally comparable Harmonised Index of Consumer Prices. In January 2013, the CPI stood at 2.7 per cent.

The UK as an Export Base

The UK is one of the leading trading nations in the world. It is the second largest exporter and fourth largest importer of commercial services, and the eleventh largest exporter and sixth largest importer of merchandise in the world. Leading destinations for UK products and services include the US - 16.2 per cent of all exports, Germany (8.9 per cent) and France (6.5 per cent). Exports of goods and services to the European Union as a whole accounted for 47.5 per cent of all UK exports. UKTI helps UK based companies to internationalize their products and services overseas.

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Corporate Tax Rates The UKs business-focused tax environment will become even more attractive over the next two years. The current corporation tax rate of 24 per cent is being reduced to 21 per cent by 2014 and then to 20% by 2015. Innovative companies will be able to benefit further from an additional reduction in corporation tax through the upcoming Patent Box initiative and through recent enhancements to the UKs generous R&D tax credit scheme.

Employer Social Security UK companies pay National Insurance Contributions (NIC) on the earnings of each individual employee earning over a threshold weekly salary. Employers pay less social security contributions in the UK than in most other European countries

Indirect Taxation

Value added tax (VAT) is due on goods and services supplied in the UK and on the importation and acquisition of goods and some services. A company has to charge VAT when their taxable turnover is above, or expected to be above, the registration threshold.

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INTERNATIONAL STRATEGY OF UNITED KINGDOM

MAKING SUSTAINABLE DEVELOPMENT A PART OF ALL GOVERNMENT POLICY AND OPERATIONS

ISSUE
Sustainable development means encouraging economic growth while protecting the environment and improving our quality of life - all without affecting the ability of future generations to do the same. The government takes account of sustainable development as a part of how it develops its policies, how it runs its buildings and how it buys its goods and services. All departments are responsible for making sure that their own policies and activities contribute to sustainable development. The Department for the Environment, Food and Rural Affairs (Defra) has a role in overseeing sustainable development across central government.

ACTIONS

BUSINESS PLANNING
We make sure that all departmental business plans contain actions that contribute to sustainable development. Business plans for 2012 to 2013 were the first to do this. Departments review their progress towards sustainable development every year and report on it in their annual reports and accounts.

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SUSTAINABILITY INDICATORS
We have developed a new set of sustainable development indicators (SDIs). These are statistics which help measure national progress on key issues that are important economically, socially and environmentally in the long term. Indicators about the economy include gross domestic product (GDP), median income and poverty.

Examples of indicators relating to society are healthy life expectancy, fuel poverty and housing provision. Environmental indicators include greenhouse gas emissions, renewable energy consumption and bird populations. Looking at the indicator set as a whole helps us to see whether the countrys development takes into account all of these issues.

GREENING GOVERNMENT
Greening government commitments are targets for central government departments and their agencies to reduce waste, water usage and carbon emissions by 2015. Theyre mainly meant to reduce impact on the environment (using less paper means cutting down fewer trees, for example) but theyre also there to improve operational efficiency. For example, reducing carbon emissions across government between 2009 to 2010 and 2011 to 2012 saved the taxpayer an estimated 45 million in fuel bills.

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SUSTAINABLE PROCUREMENT
Public sector spending is worth approximately 16% of the UKs Gross Domestic Product (GDP). Central government alone buys the equivalent of 9% of GDP. The public sector can use this buying power to encourage suppliers to make their products and services sustainable. It can also use its buying power to make the way contractors carry out works sustainable. Sustainable procurement is also about reducing costs to the buyer over the lifetime of a particular product. For example, the lifetime cost of a computer includes the initial price the customer pays and also the price of the energy it uses in its lifetime. An expensive, but energy-efficient, computer could be more cost-effective in the long run. Taking factors such as energy use into account means sustainable procurement also helps protect the environment, as well as reducing the risk of exposure to future rises in energy costs. Central government departments and agencies are expected to use the Government Buying Standards to comply with the Greening Government Commitments. Theyre also expected to collect and publish information about the impacts of their supply chain. These can include the environmental impacts of businesses such as facilities management companies, which provide them with services or products.

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BACKGROUND
They launched our vision for sustainable development in April 2011. In it we said that we wanted to make sustainable development central to the way we make policy, run our buildings and purchase goods and services. See more on government policy, action and support on sustainable development.

WHO WERE WORKING WITH

The Environmental Audit Committee reviews government progress towards sustainable development. Defras ministers are sometimes invited to give evidence to the committee on how the government is doing.

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INTERNATIONAL FINANCIAL MARKETS OF UNITED KINGDOM

Financial markets play an important role in the efficient allocation of financial resources and diversifying risks in the economy. The government has given high priority to develop financial markets that help lower the cost of raising liquidity and capital. Since financial markets represent a key segment of the overall financial system, safety and efficiency of financial markets are important to ensure its stability.

PRIMARY MARKETS
Issuer services help companies from around the world to join the London equity market in order to gain access to capital. The LSE allows company to raise money, increase their profile and obtain a market valuation through a variety of routes, thus following the firms throughout the whole IPO process. The London Stock Exchange runs several markets for listing, giving an opportunity for different sized companies to list. International companies can list a number of products in London including shares, depositary receipts and debt, offering different and cost-effective ways to raise capital. In 2004 the Exchange opened a Hong Kong Office and has attracted more than 200 companies from the AsiaPacific region. There are also two specialized markets: Professional Securities Market This market facilitates the raising of capital through the issue of specialist debt securities or depositary receipts (DRs) to professional investors. The market operates under the status as a Recognized Investment Exchange, and by July 2011 it had 32 DRs, 108 Eurobonds and over 350 Medium Term Notes.

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Specialist Fund Market Is the London Stock Exchange dedicated market, designed to accept more sophisticated fund vehicles, governance models and security. It is suitable only for institutional, professional and highly knowledgeable investors. The Specialist Fund Market is an EU Regulated Market and thus securities admitted to the market are eligible for most investor mandates providing a pool of liquidity for issuers admitted to the market

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SECONDARY MARKETS
The securities available for trading on the London Stock Exchange are:

Ordinary Shares Exchange-traded funds Exchange Traded Commodities Covered Warrants Structured Products Bonds Retail Bonds Global Depositary Receipts (GDRs)

There are two main markets on which companies trade on the LSE:

Main Market

The home to some of the most well-established, largest and recognized companies in the world. Over 1,300 companies from 60 different countries enjoy the balanced and globally respected standards of regulation and corporate governance that the London Stock Exchange offers. Over the past 10 years over 366 billion has been raised through new and further issues by Main Market companies. The FTSE 100 Index (footsie) is the main share index of the 100 most highly capitalised UK companies listed on the Main Market.

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Alternative Investment Market (AIM)

The London Stock Exchanges international market for smaller growing companies. A wide range of businesses including early stage, venture capital backed as well as more established companies join AIM seeking access to growth capital. The AIM falls within the classification of a Multilateral Trading Facility (MTF) as defined under the MiFID directive in 2004, and such is a flexible market with a simpler admission process for companies wanting to be publicly listed.

Derivatives

The trading of derivatives products is also available on the Turquoise platform (ex EDX London). The available products are Norwegian Futures and options on Norwegian single stocks and indices, Russian futures and options on the most liquid IOB Depositary Receipts, Futures and options on the FTSE RIOB index as well as futures on the FTSE 100. Futures and options on the most liquid European stock underlying as well as on European benchmark indices are expected to be launched in Q4 2011 and Q1 2012 subject to FSA approve

Regulation of capital markets and money market in the United Kingdom

The FCA has continued the FSAs role in relation to the regulation of the capital markets and as such the UK Listing Authority (UKLA) has become a department within the traded on financial markets. The international capital markets in the UK are regulated principally by the Financial Services and Markets Act 2000 (FSMA) and by the Listing FSMA and the LPDT Rules implement into UK domestic legislation relevant aspects of the Prospectus Directive, the Market Abuse Directive, the Transparency Directive and the Markets in Financial Instruments Directive (and other EU-wide regulation related to these directives). Where permitted by EU law and regulation, FSMA and the LPDT Rules also include certain super equivalent standards that go beyond the
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EU-wide directive minimum standards (e.g., the additional eligibility for listing requirements (LR 6), Listing Principles (LR 7), sponsor regime (LR 8) and continuing obligations (LR 9 to 12) that apply to applicants for admission to the premium (rather than standard) segment of the Official List and to premium listed companies on an ongoing basis). The Bank's operations in the sterling money markets have two objectives, stemming from its monetary policy and financial stability responsibilities - to implement the Monetary Policy Committee's decisions in order to meet the inflation target; and to reduce the cost of disruption to the liquidity and payment services supplied by banks to the UK economy.

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BALANCE OF PAYMENT OF UNITED KINGDOM

Released: 31 July 2013 (Latest)

The United Kingdoms (UK) current account deficit was 59.2 billion in 2012, up from a deficit of 22.5 billion in 2011. The deficit in 2012 equated to 3.8% of GDP at current market prices, the highest since 1989 (4.6%).

The trade deficit widened to 33.9 billion in 2012, from 23.3 billion in 2011.

The income balance switched to a deficit of 2.3 billion, from a surplus of 22.5 billion in 2011.

The financial account recorded net inward investment of 48.2 billion during 2012, up from 11.5 billion in 2011.

The international investment position recorded UK net liabilities of 141.6 billion at the end of 2012.

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CONCLUSION

This project study has provided a broad overview of the workings of the UK economy. Economic growth, fairness and opportunity go hand-in-hand. An economy in which a significant proportion of the population is unable to fulfill its potential will be poorer and less productive. United Kingdom should develop an economic strategy which will enable the Government to meet its key economic objective and provide a better climate for British business which means a better life for individuals within the UK and build a stronger economic future for Britain.

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