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Economic Change in the UK

Economic Change in the UK

When your grandparents left school, they would likely have been able to get a reasonably well-paying job with just their GCSEs or A-Levels. However, for you, or even for your parents, this is entirely different. In today's world, many decent-paying jobs require at least a first degree because of their structure. Why this drastic change, you may ask? The answer is economic change. Continue to read to discover how the UK's economy has shifted over time.

Economic change in the UK history

In the late 1600s, Great Britain became one of the most successful economic regions in the world. In fact, it was the leading global economic power for well over 100 years. Britain was one of the first places to introduce free trade, which saw its output increase by 50% between 1870 and 1900. Additionally, Britain expanded its empire to become the largest in history by the early 20th century. This contributed to its economic change and growth.

In the 20th century, the UK experienced several periods of boom and bust, meaning periods of rapid economic growth followed by periods of recession. These lasted until 1991. Between 1992-2007, the UK experienced a period of economic change dubbed the great moderation. This period was characterised by low inflation and positive economic growth. At this time, the UK actually recorded 63 consecutive periods of growth - the longest in the country's history.

The 2008 global recession negatively impacted economic change in the UK. Consequently, between 2008-2013, the UK had low or negative economic growth, increasing unemployment and austerity measures.

Austerity measures are economic policies used by governments to reduce deficits in the budget - usually cuts in spending and/or increased taxes.

The UK's recovery from the 2008 global recession was fairly slow. There has been some moderate recovery and a fall in unemployment. Now, with Brexit, it will be interesting to see the full impact this move will have on economic change in the UK.

Economic change in the UK structure

In the late 1600s, the majority of jobs in the UK were in the primary sector, mainly in fishing, agriculture, and mining. However, when the Industrial Revolution occurred in 1760 in the UK, there was a massive change from primary sector jobs to secondary sector jobs in manufacturing since more and more factories were being built to produce goods.

The Industrial Revolution occurred between 1760 and 1840. It refers to a period that transformed agriculture-based economies into those based on large-scale manufacturing of goods in factories. It was primarily driven by the use of steam power. The Industrial Revolution began in Great Britain and then spread to the US and Europe.

In the mid-20th century, there was another shift, owing to the decline in manufacturing. This was coupled with an increase in the services sector. Today, most people are employed in the services sector, the most important sector in the UK economy. One sub-sector of the services sector is the quaternary sector, which includes research and development, information technology and financial planning, among others. This sector has been growing rapidly since the 1950s. The image below shows how the structure has changed over time.

Economic change in the UK growth

Let's explore some of the periods during which economic changes in the UK caused the economy to boom.

Industrial Revolution-1770-1820

The period between 1770-1820 was a period of accelerated economic growth in the UK. This was because of the transformation of the UK economy due to the Industrial Revolution. The UK emerged as the world's first industrialised economy.

The Barber Boom- 1970-1973

This period of positive economic change in the UK occurred in the early 1970s due to the economic policies put in place by the then Chancellor of the Exchequer, Anthony Barber. At this time, there were significant tax cuts. Additionally, the mortgage market was deregulated by the Bank of England, which meant that commercial banks could offer mortgages rather than just building societies. There was a rise in house prices accompanied by increased consumer wealth. Moreover, it was the period of the first mass usage of credit cards in the UK. This created a consumer bubble. The growth, however, proved unsustainable. There were significant increases in inflation; by 1975, the inflation rate peaked at 25%.

At this time, the UK also experienced its highest level of unemployment since the 1930s. This resulted in a return to austerity measures.

The Lawson Boom-1985-1988

The Lawson Boom refers to a period of rapid economic growth in the UK in the late 1980s due to the policies implemented by Margaret Thatcher's Chancellor of the Exchequer, Nigel Lawson. The significant positive economic change was caused by income tax being reduced from 29% to 25%, a decrease in interest rates and an increase in house prices. The tax cuts increased disposable income and built consumer confidence. This, in turn, resulted in increased spending and economic growth. During this time, the UK economy grew by 5%. However, the boom was short-lived since the reduction in taxes inevitably led to a current account deficit and an increased inflation rate. Ultimately, the Lawson boom was followed by a UK recession in 1991.

Economic change in the UK events

The UK events industry is tapped to play a significant role as we navigate our post-COVID-19 recovery and exit from the European Union. Hosting events is an integral part of the country's modern Industrial Strategy. As part of the tourism sector deal, the UK government has developed an International Events Action Plan, which details how major events will be used to promote the country. It is expected that the hosting of events will continue to facilitate trade, attract investment and increase exports for the UK.

The UK has always been one of the global leaders in hosting events, including, most famously, the 2012 Olympic Games in London. However, the UK also hosts various other events, including, but not limited to, conferences, trade shows and music festivals. These contribute significantly to the UK economy. In 2019, it was estimated that £70 billion in direct spending was attributed to events, representing 50% of the total visitor spend for that year.

London Fashion Week is a clothing trade show hosted in February and September in the UK. It is one of the big four fashion weeks (the others are Paris, Milan and New York) and features shows and exhibitions, among other events. London Fashion Week not only attracts thousands of visitors from more than 49 countries but also generates over £250 million in income for the UK. This is both in terms of orders made and money spent elsewhere by attendees. London Fashion Week is also a platform for emerging designers to showcase their work and receive international exposure.

Changing UK Economy model on runway London Fashion Week StudySmarterFig. 3 model on the runway during London Fashion Week

Economic change in the UK causes

The following have caused the UK's economic change:

Globalisation

Globalisation refers to the increase in the interconnectivity of countries across the world. This includes increases in the movement of both goods through trade and people through tourism or migration. Globalisation has played a significant role in altering the economy, making us more dependent on other countries, and changing employment patterns. For instance, many of the manufacturing plants have been sent from the UK to other parts of the world, thereby causing the number of people involved in manufacturing to have reduced drastically. Globalisation has also increased Foreign Direct Invest (FDI) into the UK, which has allowed for new knowledge and skills development.

Government policies

The UK government's plan of action has played a significant role in economic change. In the 1970s and 1980s, the UK government embarked on a period of privatisation of its primary and secondary industries. The government also became less involved in how markets were run through a process called deregulation. Privatisation and deregulation led to the closing down of some factories and the loss of jobs in the UK. Many jobs went overseas to countries that had lower manufacturing costs. The decline in manufacturing was coupled with an increase in the service sector. The UK government has also encouraged the growth of small businesses by providing low-cost loans and other similar incentives.

Deindustrialisation

Deindustrialisation has also driven economic change in the UK. Deindustrialisation refers to a decline in the traditional manufacturing industry of a country. It occurs due to exhaustion of raw materials, losing markets or increased competition, and is closely tied to globalisation. In the UK, deindustrialisation occurred for two reasons:

  1. The global shift in manufacturing to new emerging economies (NEEs) where labour costs are much lower than the UK and unions are often discouraged.
  2. Increased mechanisation where machines are used instead of humans to complete tasks because they are ultimately cheaper and more reliable.

You can read our explanation on deindustrialisation for more information.

Economic Change in the UK - Key takeaways

  • Historically, the UK has had one of the most successful economies in the world.
  • The structure of the UK economy has changed from being focused on primary industries in the 17th century, to being focused on tertiary and quaternary industries in the 21st industry.
  • The Industrial Revolution, The Barber Boom and the Lawson Boom were periods when the UK experienced rapid economic growth.
  • The hosting of events, such as the Olympics, makes a significant contribution to the economy of the UK.
  • As the UK recovers from COVID-19 and has exited the EU, the hosting of events will continue to play a major role in the economic change in the UK.

References

  1. Fig. 3 model on a runway at London Fashion Week (https://commons.wikimedia.org/wiki/File:Manisharora4.jpg) by Rebecca Cotton (https://commons.wikimedia.org/wiki/User:Calliopejen) Licensed by CC BY 2.0 (https://creativecommons.org/licenses/by/2.0/deed.en)

Frequently Asked Questions about Economic Change in the UK

The three causes of economic change in the UK are globalization, government policies, and deindustrialization.

Major events contribute positively to the UK economy. They facilitate trade, attract investment and increase exports, thereby increasing economic earnings in the UK.

The UK economy boomed during the Industrial Revolution, in 1970-1973 (Barber Boom) and in 1985-1988 (Lawson Boom).

The UK economy has developed from one that was a primary industry based to one that is service sector based. The quaternary sector is growing within the UK services sector.

The trend of economic growth in the UK is that the country has experienced periods of boom and periods of recession over time.

Final Economic Change in the UK Quiz

Question

Is deindustrialisation more commonly seen in HICs or LICs?

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Answer

HICs

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Question

By how much has the UKs production continued to grow annually?

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Answer

0.7%

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Question

Which statements are TRUE?

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Answer

Deindustrialisation in the UK began in the 1980s when steelworks and coal mines began closing down by Margaret Thatcher's Conservative government's policies. 

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Question

TRUE or FALSE: Companies often relocate their manufacturing to LICs along with their headquarters.

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Answer

False

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Question

Which statements are FALSE?

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Answer

Globalisation is a big reason many LICs have experienced deindustrialisation.

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Question

TRUE or FALSE: deindustrialisation has both positive and negative (social) impacts.

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Answer

True

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Question

Which of the following is not a positive social impact of deindustrialisation?

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Answer

An ageing population remains.

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Question

Explain the spiral of decline.

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Answer

A spiral of decline happens when a negative effect spirals down. For example: when a factory closes, people lose their jobs. These people will then run into financial problems, which, in turn, can have significant social impacts, such as crime and vandalism. 

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Question

Which of the following terms is used to define the service economy, such as healthcare and IT support?

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Answer

Tertiary

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Question

TRUE or FALSE: The quaternary sector is now the biggest employment sector.

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Answer

False

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Question

Which statements are TRUE?

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Answer

Deindustrialisation can happen without industrialisation first.

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Question

Which sector of employment refers to heavy industries?

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Answer

Secondary

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Question

What is a downside to working in the modern-day tertiary sector?

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Answer

Unstable work contracts

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Question

TRUE or FALSE: the two main reasons for manufacturing decline in the UK are a global shift in manufacturing to HICs and a decrease in automation.

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Answer

False

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Question

The global north-south divide describes the _____ differences across the world with a _____ global _____ and the _____ global _____.

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Answer

economic

poorer 

south 

richer 

north.


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Question

What is the UK north-south divide?


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Answer

This splits the UK in half, showing the economically rich south, and the poorer north.

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Question

In the southeast, what was the life expectancy for males between 2018 and 2020? 


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Answer

80.6

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Why are unemployment rates higher in the north?


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Answer

The result of deindustrialisation

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Question

True or false: housing prices are cheaper in the south.


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Answer

False

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Question

What are the causes of the north-south divide?


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Answer

  • Industry decline (deindustrialisation)
  • Service sector and London

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Question

True or false: the south experienced a decline in the same way as the north.


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Answer

False

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What are some strategies to combat the divide?

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Answer

  • Northern powerhouse strategy 
  • Enterprise zones and Local Enterprise Partnerships
  • Transport improvements

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Question

The northern powerhouse strategy involves _____ and _____ in the north and connecting the northern areas to become a _____ economy to increase _____ growth.

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Answer

improving

investing

collaborative economy 

economic


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Question

What is devolution in reference to the north?


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Answer

The idea of giving the north more power to make decisions, rather than London or the south. The government gives northern councils more money and responsibilities.


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What are some examples of already existing devolved powers?


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Answer

Scotland

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Question

What is the multiplier effect?

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Answer

When something positive occurs, it results in further positive things occurring as a consequence. 


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Question

Enterprise zones are areas that have _____, _____ or even_____, to help the growth of businesses. They are basically _____ for business to _____ an area.


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Answer

governmental support

reduced taxes

superfast broadband

incentives  

move/stay to/in


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Question

What is an example of a Local Enterprise Partnership and a project?


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Answer

D2N2 in Derby, Derbyshire, Nottingham, and Nottinghamshire, investing in the Derby cycling and placemaking project.


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Question

Where will the HS2 high-speed rail network connect?


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Answer

London to Birmingham

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Question

True or False: Great Britain was one of the first countries to introduce free trade.

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Answer

True

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Question

Between 1870 and 1900, free trade caused Britain's output to increase by:

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Answer

10%

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Question

The period referred to as "the great moderation" occurred during which years?

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Answer

1992-2007

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Question

What are austerity measures?

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Answer

Austerity measures are economic policies used to reduce budget deficits in the form of spending cuts or increased taxes.

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Question

Which primary sectors were important in the 17th century? Select all that apply.

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Answer

Banking

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Which sector employs the most people today in the UK?

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Answer

Manufacturing sector

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Question

During which years were the Barber Boom?

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Answer

1770-1820

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Question

During the Lawson Boom, the UK economy grew by how much?

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Answer

5%

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Question

The event industry in the UK is set to help with ______ and _____.

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Answer

COVID-19 recovery

Exit from the European Union

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Question

Which two major events were explicitly mentioned in the explanation?

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Answer

London Fashion Week

2012 London Olympics

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Question

True or False: Globalisation has resulted in Foreign Direct Invest (FDI) in the UK.

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Answer

True

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Question

Deindustrialisation was caused by?

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Answer

1. The shift in manufacturing to NEEs

2. Increased mechanisation

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Question

How many countries started the European Economic Community (EEC)?

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Answer

4

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Question

As of 2021, how many countries are members of the European Union?

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Answer

27

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Question

In what year was the name of the European Economic Community (EEC) changed to the European Union (EU)?

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Answer

1958

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Question

TRUE or FALSE: The UK joined the EU in 1993.

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Answer

True

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Question

TRUE or FALSE: The UK left the EU in 2020.

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Answer

True

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Question

Which of the following statement is TRUE?

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Answer

The EU provided support to UK farmers.

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Question

How many countries currently form the Commonwealth?

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Answer

56

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Question

In which year was the Commonwealth was formally constituted?

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Answer

1949

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Question

Which of the following statement is FALSE?

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Answer

UK descendants don't live in Commonwealth countries.

Show question

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