Causes of economic change

The UK economy is undergoing many changes. As the UK approaches a post-industrial era, the country is looking to be economically and environmentally sustainable, with greater links to the wider world.


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 population worked in secondary jobs. The 2011 census showed that this figure had dropped to just 9%. Globalisation has allowed the UK 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 were lower. This is when UK jobs first began to go overseas.
  • The service sector grew. Wages in the service sector are generally better than in the primary and manufacturing sectors.

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 consumer goods.

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 move there, such as reduced taxes and relaxed planning rules.