Size of UK economy to overtake France by 2020 and narrow the gap with Germany by 2030

 

• The UK to remain sixth largest economy in the world by 2030.
• Political, legal and regulatory institutions and communications technology are key strengths, but the UK scores less well on social indicators such as education and income inequality. 

The UK will become the second largest economy in the EU, overtaking France before 2020 and closing the gap with Germany according to new projections from economists at PwC. By 2030 the UK’s economy is likely to have been leapfrogged by India, but should remain the sixth largest economy in the world based on GDP at market exchange rates (see Table 1 below). 

Table 1: Actual and projected global GDP league table in 2013, 2020 and 2030

2013			2020p			2030p
GDP rank	Country	GDP at MERs (2013 US$ bn)	GDP rank		Projected GDP at MERs (2013 US$ bn)	GDP rank		Projected GDP at MERs (2013 US$ bn)
1	US	17,528	1	US	20,310	1	US	25,585
2	China	10,028	2	China	15,855	2	China	25,009
3	Japan	4,846	3	Japan	5,209	3	India	6,172
4	Germany	3,876	4	Germany	4,205	4	Japan	5,695
5	France	2,886	5	UK	3,258	5	Germany	4,613
6	UK	2,828	6	France	3,182	6	UK	4,027
7	Brazil	2,216	7	India	3,175	7	Brazil	3,858
8	Italy	2,171	8	Brazil	2,748	8	France	3,846
9	Russia	2,092	9	Russia	2,563	9	Russia	3,659
10	India	1,996	10	Italy	2,323	10	Mexico	2,791

Source: IMF estimates for 2013, PwC baseline projections for 2020 and 2030 at market exchange rates (MERs) 

Barret Kupelian, economist at PwC and co-author of the report, said: 

“The UK economy has regained its dynamism recently in contrast to France in particular. The UK should also narrow the GDP gap with Germany over time, although this is projected to be driven mostly by the UK’s more favourable demographics with a less rapidly ageing population and strong labour force participation rates. In the longer run, other emerging markets may overtake the UK, but only India looks set to do so before 2030 according to our latest projections based on GDP at market exchange rates.” 

The PwC analysis also looks beyond GDP, based on an updated 2013 version of its ESCAPE index, which combines 20 indicators of performance across economic, social, technological, environmental and political dimensions. On this basis the UK scores only 5^th of the major G7 economies in 2013, ahead of only France and Italy. This compares to 3^rd place in the G7 in both 2000 and 2007 (see Table 2). The explanation for the markdown is partly the fact that the global financial crisis hit the UK economy relatively hard and partly that its performance is relatively weak on social indicators such as education and income inequality, which is higher in the UK than any other G7 nation except the US. 

Table 2: PwC ESCAPE Index league table for G7 economies 

Rank	2000	2007	2013
1	Germany	Germany	Germany
2	Canada	Canada	Canada
3	UK	UK	Japan
4	US	US	US
5	Japan	Japan	UK
6	France	France	France
7	Italy	Italy	Italy

Source: PwC analysis using ESCAPE Index 

John Hawksworth, chief economist at PwC, said: 

“The UK has noted strengths in areas such as political, legal and regulatory institutions, including ease of doing business, and communications technology. The UK also scores relatively well on some economic variables such as unemployment and its relative growth and inflation performance also improved in 2013, which looks set to continue in 2014. 

“But the UK lags behind its peers in areas related to education, investment, trade deficits and income inequality. So the UK has clear strengths to build on, but also some underlying weaknesses to address even given its recent relatively strong economic recovery.”

 

Ends                                                                                    

Notes to editors 

1.       The analysis referred to in this release will be published as part of PwC’s regular UK Economic Outlook report on 9^th July 2014, but an advance copy of this article is available on request.

 

2.      Further details of PwC’s ESCAPE index are available here: http://www.pwc.co.uk/economic-services/issues/escape-index-mapping-how-markets-emerge.jhtml

 

 

 

 

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