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Faculty of Economics

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Coutts, K. and Rowthorn, R.

The UK balance of payments: structure and prospects

Oxford Review of Economic Policy

Vol. 29 no. 2 pp. 307-325 (2013)

Abstract: This paper describes the history of the UK balance of payments since 1950, and contains an informal discussion of future prospects. It documents the huge shifts that have occurred in the composition of trade, in particular the rise of the City of London and knowledge-intensive services (communications, consultancy, R&D, media, other business services, etc.), the rise and fall of North Sea oil, and the transformation of the UK from a leading net exporter of manufactured goods to a major net importer. Domestic oil production is now in decline, net income from overseas investment has fallen, and the City of London is under threat. The UK also has a current account deficit equal to 4 per cent of GDP. These recent developments have led to widespread calls for rebalancing the economy so as to improve the trade performance of the manufacturing sector. This paper supports this objective. It calls for industrial and other policies to improve UK trade performance, above all in manufacturing, but also in knowledge-intensive services. It also points out the need to safeguard London’s role as a global financial centre.

Keywords: economic history, balance of payments, visible trade, services, investment income

JEL Codes: F14, F17, L60, L80

Author links: Ken Coutts  

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