United Kingdom: Improve skills

GDP growth is expected to continue at its recent pace of 2.5 to 2.75%, supported by buoyant domestic demand. Exceptionally strong labour force growth–driven by high immigration and rising participation–is outstripping employment growth, pushing the unemployment rate up. The resulting labour market slack should help to ensure that the anticipated fourth quarter spike in headline inflation does not push up inflationary pressures, and that headline inflation moves back to the 2% target in 2007.

Spending restraint and achieving value for money in public spending will be the challenge for fiscal policy over the next few years and will be crucial if a decisive reduction of the government deficit is to be achieved. Following recent monetary policy tightening, the case for further increases in interest rates is not compelling. To raise potential growth policy should focus on improving workforce skills and continuing the national roll-out of the reformed disability scheme.

Population (000s), 200559 989
Area (000 sq km)245
CurrencyPound
GDP (Billion USD), 20051 928.7
Life expectancy at birth (Women, Men), 2003 80.7, 76.2
Total labour force (000s), 200529 517
Government typeConstitutional Monarchy

Indicators% change unless otherwise indicated
200620072008
GDP growth2.62.62.8
Household savings ratio5.35.65.7
Consumer price index2.22.01.9
Short-term interest rate (%)4.85.04.8
Unemployment rate (%)5.55.75.8
General government financial balance
(% GDP)
-3.0-2.7-2.6
Current account balance (% GDP)-2.4-2.0-2.1

Source: OECD

©OECD Observer No. 258/259, December 2006




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