UNITED KINGDOM January – December 2014
· Strongest economic growth of the G7: 2014 + 2,6 % , + 2,7 % expected for 2015
· Tense campaign revolving around the economy, Immigration, and the EU
· Continuing policy of cutbacks – consolidation should be reached by 2018
· Austria’s export of goods increase by an above-average 8.4% to EUR 3.9 billion
· Austrian export of services increase to EUR 1.5 billion from January to September
· Good opportunities for quality services and innovations from Austria
After a long period of stagnation, the British economy increased by 2.6% in 2014, more than the economies of the other G7 countries. It was the biggest increase since the beginning of the financial crisis. In the fourth quarter its momentum slowed slightly, but a GDP increase of 2.7% is still expected this year. In the second quarter, the economy returned to pre-crisis levels. This positive development is largely due to the services sector, which increased by 2.6% in 2014. The building sector remains far below –pre-crisis levels. It decreased by almost 19% in 2008 and its part in the GDP decreased by 6.3%. The manufacturing industry did not improve as expected, despite a growing considerably by 2.4%. It only carries 11% of the GDP.
Private consumption is traditionally an important driver of growth in the UK, which slightly dropped in the last few years, but increased once more in 2014. An increase of 3% is expected in 2015. With 8%, the unemployment rate reached its highest point ever. At the beginning of 2015 the unemployment rate dropped to 5.7%, the third lowest in the EU. As unemployment increased in the last few years, there was a simultaneous increase in employment for 73.2% of the population at that time. The industry remains around 10% below pre-crisis levels. It increased by around 2.4% in 2014, but the predicted increase for 2015 is just 1.1%. The marked increase of gross fixed capital formation by 7.4% in 2014 and the predicted 6.3% in 2015 appears encouraging. Since 2009, the Bank of England (BoE) has kept its base rate at 0.5%. Because of the very low rate of inflation, it is predicted to remain this way at least until the end of 2015. In the last few years, inflation has consistently remained considerably above the BoE’s official target of 2%. But it has been mitigated since then, partly due to the decrease in the price of oil, reaching a low point of 0.3% in February 2015.
Austro-British trade relations have developed exceptionally well, experiencing an outstanding increase of 8.3% from January to November 2014. In comparison, the worldwide and the European gains in this time frame were just 1.4% and 0.8%, respectively. Imports from the UK also increased by 13.7%.
Trade of goods
From January to November 2014 the Austrian export of goods to Great Britain increased by an above-average 8.3%, reaching a sum of EUR 3.6 billion, succeeding a prior increase of 5% to EUR 3.58 billion in 2013. The majority of exports is comprised of machines, technical equipment and vehicles, followed by manufactured goods and finished goods. British goods imported into Austria are mainly made up of chemical supplies, like pharmaceuticals. Having reached EUR 1.5 billion in the first three months, Austria reached its third-largest third surplus with Great Britain, coming just after its trade with France and the US.
Trade of services
In 2013, the exchange of services also developed very positively. With a plus of 7.8%, Austrian service exports strongly grew to EUR 1.854 billion. In the same time period, British service exports rose by 25.2%, reaching EUR 1.639 billion.
Direct investments further emphasize the strong economic bond between the two countries. At the end of 2013, Austrian enterprises had invested a total of EUR 5.8 billion in the UK (compared to EUR 4.0 billion in 2012) and employed around 23,000 people (2012). At the same point in time, British investments into Austria were at EUR 3.66 billion with around 11,000 employees (2012).
Information about the economic situation of the United Kingdom, its bilateral trade relations, and business opportunities on the British market can be found at Advantage Austria London:
45 Princes Gate
London SW7 2QA
Trade Commissioner & Commercial Counsellor: Georg Karabaczek
T +44 (0)20 7584 4411
F +44 (0) 7584 7946
Source: AWO Economy Report www.wko.at/awo/uk