United Kingdom - Market Overview UK Market Overview
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On June 23, 2016, the UK voted to leave the European Union (EU), ushering in a period of economic and political uncertainty that persists as the UK seeks to define a new, post-Brexit, relationship with the EU and its other key trading partners. As part of the Brexit process, the UK Government triggered the two-year exit process by invoking Article 50 of the Lisbon Treaty in March 2017. The UK was initially scheduled to depart from the EU on March 29, 2019. After subsequent negotiations, the Brexit departure date was delayed and is now set for October 31, 2019. A new UK Prime Minister will be decided in late July, and depending on the outcome, further negotiation of the Withdrawal Agreement may ensue.
Formal Brexit negotiations started in June 2017. In March 2018, both sides agreed to a 21-month transition deal (from March 29, 2019 to December 31, 2020) during which the UK would effectively remain in the EU Customs Union and Single Market. While the UK would be required to continue to follow EU rules without being able to participate in EU decision-making processes, the UK would technically be free to negotiate and sign but not implement new trade deals during this time. UK-EU discussions resulted in a proposed Withdrawal Agreement – the status/rights of citizens (3.2 million EU citizens in the UK;1 million Britons in the EU); the divorce bill (what the UK will pay to cover long-term commitments made to EU programs while the UK was still an EU member); and the status of the border between Northern Ireland and the Republic of Ireland. The proposed Withdrawal Agreement failed to receive Parliamentary support after multiple attempts at passage. The failure to pass resulted in the resignation of Prime Minister May on June 7 as Conservative Party leader. A process to select a new Conservative Party leader who would become the next Prime Minister has been underway since with final decision expected week of July 22, 2019. The next Prime Minister will be responsible for continuing negotiations with the EU on the Withdrawal Agreement or determining whether or not the UK will pursue a “hard” (or “no deal”) Brexit on October 31, 2019 or seek to hold talks in order to re-shape the deal negotiated by Prime Minister May and her team.
Despite the challenges and uncertainty posed by the continuing Brexit process, the UK remains a critical market for American exports of goods and services and a key destination of U.S. foreign direct investment.
The United Kingdom (estimated 2018 GDP of $2.6 trillion) is a major international trading power, with the fifth-largest economy in the world according to the World Bank Group, the second-largest economy in the European Union.
While the United Kingdom is geographically relatively small (about the size of Oregon), it has a population of more than 65 million people.
Highly developed, sophisticated, and diversified, the UK market is the largest in Europe and the fifth-largest in the world for U.S. goods exports. The United Kingdom is the largest market in the world for U.S. service exports.
With relatively few trade barriers, the United Kingdom serves as the entry market into the European Union for more than 43,000 U.S. exporters. U.S. exports to the UK of goods and services combined were estimated to be worth about $140.8 billion in 2018.
Major categories of U.S. exports include Aerospace Products, Agricultural Products, Cyber Security, Medical Equipment, New Build Civil Nuclear, certain consumer goods (such as Pet Products), Smart Grids, Sustainable Construction, and Travel & Tourism.
The UK ranks third in overall number of people arriving to the United States (behind Canada and Mexico, respectively), and thus the UK is the number one overseas market for travel to the United States, with four to five million UK travelers visiting the United States each year. British travelers are estimated to contribute over $12 billion to the American economy annually.
The U.S.-UK investment relationship is the largest in the world, with cumulative bilateral stock in direct investment valued at more than $1.2 trillion in 2016. More than two million jobs, approximately one million in each country, have been created over the years as a result of this investment.
More than 7,500 U.S. firms have a presence in the United Kingdom, which is also the top location in Europe for U.S. regional headquarters covering Europe, the Middle East, and Africa. A major international financial, media, and transportation hub, London is also headquarters to the European Bank for Reconstruction and Development (EBRD).
The UK economy grew by 1.4% in 2018, a modest deceleration from previous years, reflecting uncertainty caused by the Brexit vote and what it will mean for the UK economy. Some observers expect the economy to weaken slightly in 2019 if a no deal Brexit takes place as consumer confidence could be suppressed by factors such as rising inflation and potential currency fluctuations.