PwC forecasts show that the UK economy is on course to overtake France as Europe’s second largest economy by 2020, underpinned by political, legal and regulatory advances, as well as impressive performance in communications technology. The new projections also highlight that the UK is closing in on Germany, while India is expected to leapfrog the UK and make third place globally by 2030.
Although PwC’s estimates amount to a major leap forward for the UK economy as a whole, the results were not all positive
“The UK economy has regained its dynamism recently in contrast to France in particular,” said Barret Kupelian, Economist at PwC and co-Author of the report in a statement. “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.”
As of 2013, the UK was the world’s sixth largest economy. However, if PwC’s 2020 predictions prove accurate, it will overtake France in fifth place, only to be bumped back to sixth again come 2030. PwC estimates also put India in third place in terms of GDP as of 2030, representing a significant leap on last year’s tenth place.
Although PwC’s estimates amount to a major leap forward for the UK economy as a whole, the results were not all positive. The firm’s ESCAPE index analysis, which looks beyond GDP and combines indicators based on economic, social, technological environmental and political factors, puts the UK in at fifth of the major G7 economies. The 2013 ranking compares poorly with 2000 and 2007, when the country came in third place, and signals the extent with which the country has been hit by the global financial crisis.
“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,” said John Hawksworth, Chief Economist at PwC in a blog post.
“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.”