major macro economic indicators
|2018||2019||2020 (e)||2021 (f)|
|GDP growth (%)||1.4||1.3||-11.4||5.9|
|Inflation (yearly average, %)||2.5||1.8||0.7||1.3|
|Budget balance (% GDP)*||-2.2||-2.3||-19.2||-8.5|
|Current account balance (% GDP)||-3.7||-4.3||-3.0||-2.7|
|Public debt (% GDP)||84.7||84.1||105.8||108.1|
(e): Estimate (f): Forecast *Fiscal year from April to March
- Production of hydrocarbons covers three-quarters of energy needs
- Cutting-edge sectors (aeronautics, pharmaceuticals, automotive)
- Financial services
- Competitive and attractive tax regime
- Uncertainties about future trade relationship with the EU
- High public and household debt (120% of disposable income)
- Low productivity and training deficit not conducive to innovation
- Regional disparities between the South-East (especially London) and the rest of the country, particularly in terms of transport and energy infrastructure
Heading towards a partial rebound, mainly driven by consumption
The British economy will only partially rebound in 2021, after having been among the most affected in terms of health and economy in 2020. As the government was forced to introduce a lockdown in the spring and again in November to curb the spread of the pandemic, the country experienced, in 2020, a peacetime recession on a scale never before seen. The rebound in activity, which will gradually accelerate in line with the health situation, is expected to be driven by household consumption, after it was hampered by travel restrictions and the closing of shops. The recovery in consumption should provide all the more driving force for growth as household purchasing power has been relatively unaffected during the crisis, thanks to support measures such as short-time work and the allowance for the self-employed. Concomitantly, business investment, which has also benefited from unprecedented support from the government - via state-guaranteed loans, the deferral of tax deadlines (income tax for the self-employed, VAT) or the abolition of corporate tax for the most affected sectors (retail trade, hotels, leisure) -, is also expected to pick up, but in a less dynamic way. Affected by the health uncertainty at the beginning of the year, businesses will also have to face the repayment of maturities and loans, after a 12-month grace period. Moreover, despite the signing of a trade agreement with the European Union (EU) in December 2020, conditions will become less favourable in 2021. In addition, the government will support the recovery with additional public spending, notably on infrastructure (transport, environment, fibre), amounting to an estimated GBP 27 billion (1.2% of GDP). After falling in 2020 (-30%), due to support measures and the impossibility for creditors to open proceedings, making the procedure de facto voluntary, the number of insolvencies is expected to rise sharply in 2021, and exceed the level recorded in 2019 by a third.
Large public deficit, largely financed by the Bank of England
The public deficit will remain very large, after having soared in 2020 due to successive emergency measures taken by the government totalling GBP 280 billion (13.6% of GDP, a third of which is due to the short-time work scheme alone). While the support measures are expected to be phased out in 2021, in line with the health situation, most of them will be extended to (at least) the beginning of the year, meaning that their cost will decrease, but is expected to reach at least GBP 50 billion (2.3% of GDP). In addition to these measures, there will be continuing high health and capital expenditure, which cannot be offset by freezing the salaries of half the best paid workers in the civil service (excluding health workers). Simultaneously, the reduction in the deficit will be made possible in particular by the rebound in tax revenues, linked to activity. Public debt is expected to continue increasing, after having exceeded 100% of GDP. In this context, the Bank of England should continue to finance public spending by engaging in the mass buying of government bonds. In November 2020, the monetary authority increased the amount of its asset purchases from GBP 745 billion to 895 billion, of which 98% were bonds issued by the UK government.
Although external accounts improved in 2020, due to the fall in imports of goods and services (tourism) - linked to domestic demand - exceeding that of exports, the current account will remain in deficit in 2021. On the one hand, the balance of goods is constantly in deficit (4.3% of GDP over the first three quarters of 2020). On the other hand, the balance of services is still in surplus (5.8% of GDP), thanks to financial and insurance services (two thirds of the surplus). At the same time, the income balance is structurally in deficit (2.5% of GDP), due to the repatriation of income from substantial foreign investments in the country. As the country will settle part of the financial commitments stipulated in the EU exit agreement in 2021, the balance of transfers will remain largely in deficit (1.5% of GDP). As a key player in the global financial system, the United Kingdom easily finances its current account deficit through foreign investment, mainly portfolio investment.
Tension in the majority and declining popularity of the Prime Minister
Prime Minister Boris Johnson, who has been in power since his election as leader of the Conservative party in July 2019, succeeded in his gamble to dissolve Parliament, strengthening his majority in the December 2019 election, winning 365 seats out of 650 (50 more than in the 2017 election). Although this large majority allowed him to finally effect the exit of the United Kingdom from the EU in January 2020, he then faced the rebellion of several dozen MPs during the deployment of 5G (from which Huawei was ultimately excluded) and the implementation of health restrictions at the end of 2020. Moreover, after reaching a peak in April, his popularity rating halved in the following months, reaching 34% at the end of November 2020, with an overall negative opinion among Conservative voters, due to a management of the health crisis that has been deemed a failure.
Last updated: February 2021
Cheques are still used for domestic and international commercial payments, although bills of exchange and letters of credit are preferred for international transactions. Bank transfers – particularly SWIFT transfers − are also often used and are viewed as a fast and reliable method of payment. Direct Debits and Standing orders are also recognised as practical solutions for making regular or anticipated payments and are particularly widely used in domestic transactions. It is acceptable to issue invoices both before and after the supply of goods or services.
The debt collection process usually begins with the debtor being sent a demand for payment, followed by a series of further written correspondence, telephone calls and (if the value of the debt permits), personal visits and debtor meetings. The collection process has been designed as a progression of stages, beginning with an amicable (pre-legal) collection phase and escalating up to litigation, should the debtor fail to meet his obligations.
The County Court only has civil jurisdiction. Judges handle claims for debt collection, personal injury, breach of contract concerning goods or property, land recovery and family issues (such as divorce and adoption). Cases valued at less than GBP 25,000 (or under GBP 50,000 for personal injury cases) must have their first hearing in the county court.
The High Court is based in London, but also has provincial districts known as “District Registries” all over England and Wales. It has three divisions: the Queen’s Bench Division, the Chancery Division, and the Family Division.
The Court of Appeal has two divisions – the Civil Division and the Criminal Division.
The Supreme Court is composed of a president, a deputy president, and twelve professional justices.
Fast-track proceedings (Summary Judgments)
In order to apply for a summary judgment, the claimant must obtain an Application Notice Form from the court. This should be supported by a Statement in which the claimant sets out why he believes that summary judgment should be given − either because the defendant has no real prospect of successfully defending the claim, or because there is no reason why the case should be decided by a full trial.
A copy of this statement is served on the opponent seven days before the summary judgment hearing. The opponent also has the opportunity of presenting a statement, but this must be sent no later than three days before the hearing. The claimant cannot apply for summary judgment until the debtor has either returned an acknowledgment of service form, or has filed a defence. If the court agrees with the claimant, it will return a favourable judgment. The application will be dismissed if the court does not agree with the claimant.
There are now identical procedures and jurisdictions for the County Court and the High Court. A number of litigation “tracks” have been created, each with their own procedural timetables. Claims are allocated to a track by a procedural judge, according to their monetary value. There are transaction processes that need to be followed before initiating a court action. These processes have been designed to encourage the parties concerned to settle disputes without the need for court proceedings, thus minimising costs and court time.
Proceedings formally commence when the claimant (formerly “the plaintiff”) files a Claim Form with the County Court or the High Court. Full details of the complaint are set out in the Particulars of Claim, which is usually a separate document which supports the Claim Form. The Claim Form must be served on the defendant by the court, or by the claimant. The defendant can then respond to the claim form within 14 days of service. A time extension of 28 days is agreed for the debtor to file a defence and/or a counter-claim. Once these formal documents have been exchanged, the court orders both parties to complete an “Allocation Questionnaire”.
Freezing order (formerly Mareva Injunction)
A freezing order (or freezing injunction) is a special interim order which prevents the defendant from disposing of assets or removing them from the country. One of the conditions attached to the granting of such an order is often that the applicant will pay full costs to the person against whom it was made, if it turns out to be inappropriate. A typical commercial dispute can take 18-24 months to reach a judgment, starting from the time legal action is first initiated.
Enforcement of a Legal Decision
A number of enforcement mechanisms are available. These include the Warrant of Execution (which allows a County Court Bailiff to request payment from the debtor) and the Writ of Fieri Facias for debts exceeding GBP 600, under which a High Court Enforcement Officer can make a levy on goods to the equivalent value of the judgment debt (for subsequent sale at auction and offsetting against the amount due).
As a member of the European Union, the UK has adopted several enforcement mechanisms for decisions rendered in other EU countries. These include EU payment orders which are directly enforceable in domestic courts and the European Enforcement Order, for undisputed claims. Judgments issued in non-EU countries are recognised and enforced if the issuing country has an agreement with the UK. If no such agreement is in place, an exequatur procedure is provided by English Private International Law.
Administration is intended as a rescue mechanism which enables companies (wherever possible) to continue with their business operations. The procedure is initiated either by applying to the court for an administration order, or by filing papers with the court documenting the out-of-court appointment of an administrator.
Company Voluntary Arrangement (CVA)
The CVA is an informal but binding agreement, between a company and its unsecured creditors, in which the company’s debts are renegotiated. It can be used to avoid or support other insolvency procedures, such as administration or liquidation. It provides for a restructuring plan which imposes the support of dissenting creditors.
Creditor’s Scheme of Arrangement
The Creditor’s Scheme of Arrangement is a court-approved compromise or arrangement, between a corporate debtor and all classes of its creditors, for the reorganisation or rescheduling of its debts. It is not an insolvency procedure and does not include a moratorium on creditor action. It can, however, be implemented in conjunction with formal insolvency proceedings, (administration or liquidation). It can also be implemented on a standalone basis by the debtor company itself.
There are three types of receivers. The first of these is a receiver appointed with statutory powers. The second type of receiver is one who is appointed under the terms of a fixed charge or a security trust deed. The third category is an administrator (who is appointed under the terms of a floating charge over all, or a substantial share, of the debtor company’s property.
A company can enter voluntary or compulsory liquidation. Voluntary liquidations can be either a “members’ voluntary liquidation” or a “creditors’ voluntary liquidation”. Both of these proceedings are initiated by the company itself, by passing a resolution during a meeting of members. The company then ceases trading and a liquidator collects the company’s assets and distributes the benefits to the creditors so as to satisfy, as far as possible, the company’s liabilities.