Causes of economic change in the UK

The UK is experiencing a period of economic change. This is happening as a result of several factors, including globalisation, government policies and deindustrialisation.


Globalisation describes the way in which the world has become more interconnected. Globalisation has led to an increase in world trade, foreign investment, communication between different countries and the sharing of ideas.

Globalisation has led to an increase in world trade, foreign investment, communication between different countries and the sharing of ideas.

In the past, the UK economy was based on activities that took place within the country and within Commonwealth countries. The growth of globalisation has meant that the UK economy is now more dependent on other countries. An example of this is the manufacturing industry. In the 1900s, 55% of the UK population worked in secondary jobs. The 2011 census showed that this figure had dropped to just 9%. Globalisation has allowed people to connect with other countries - it is possible to send orders abroad, locate factories abroad and get products shipped in to UK ports.

Government policies

The government manages the UK economy through the Treasury. Each year a budget is produced, which sets out things such as the minimum wage, spending on public services and levels of tax.

During the 1980s the UK was performing better than most other European countries. Several things helped this growth:

  • Many state-owned businesses in the UK were privatised, eg British Telecom and British Gas. They had been owned by the government, but they were sold to individuals or other companies. This made a lot of money for the government.
  • Markets were deregulated. This means that the government became less involved in running things and some companies had to find better ways to make a profit.
  • Lots of factories and coal pits were closed. The government said that they could no longer compete with foreign countries where wages are lower. This is when UK jobs first began to go overseas.
  • The service sector grew. Wages in the service sector are generally very good.

The UK economy continued to grow into the 1990s. The government had decided to keep taxes low so people had more money and could afford to buy more things.

In 2008, there was a global financial crisis and the UK entered a period of recession. Many of the UK's banks, eg RBS and Lloyds Banking Group, were helped out using government money. This was very expensive for the country and the level of national debt grew.

Since 2010, a programme of austerity has been in place. The government has made spending cuts to save money and has carried out quantitative easing, which involves creating more money. There are attempts to improve productivity so that the UK can earn more money. There are 24 Enterprise Zones across the UK, eg Birmingham and Manchester. These locations have incentives for businesses to locate themselves there, such as reduced taxes and relaxed planning rules.


The UK has experienced deindustrialisation. There has been a decrease in the amount of manufacturing taking place in the country and a growth in the tertiary and quaternary sectors. Traditional industries, such as ship building and textiles, have declined. This has happened for two main reasons:

  1. A global shift in manufacturing to new emerging economies (NEEs), where wages are lower, working hours are longer and trade unions are sometimes banned.
  2. An increase in the number of machines used to carry out work. This is called mechanisation.
Primary industries have declined since pre-industrial times. Secondary industries peaked in industrial times. Tertiary industries have increased. Quaternary industries have only appeared recently.