1.2 Economic context
Gross domestic product (GDP) in current prices increased from $565 billion in
1980 to $2.9 trillion in 2014, or equivalently, $45 603 per person (in current US$)
(Table 1.2). GDP in current prices decreased during the global financial crisis
of 2007–8, falling 4.3% in 2009 and returning to only weak positive growth
from 2010 through to 2013 (European Commission, 2015). According to data
from Eurostat, the United Kingdom experienced the highest fall in GDP per
head of any EU country between 2007 and 2009 (24.3%, compared with the EU
average of 5.8%). The unemployment rate fell between the mid-1990s and the
mid-2000s, reaching a low of 4.7% in 2004. Unemployment increased during
the financial crisis and reached a peak of 8.0% in 2012, before decreasing and
reaching 6.1% in 2014 according to data from Eurostat (well below the EU
average of 10.2%).
The financial crisis has had important implications for public finances.
While government revenues as a share of GDP have remained relatively stable,
government spending during the financial crisis has generally not kept up with
GDP growth. As a result, the public deficit decreased from 9.5% of GDP in
2010 to 5.5% in 2012. According to Eurostat, the United Kingdom still had
the 4th largest deficit relative to GDP in the EU in 2013, at 5.8% (European
Commission, 2015).
Income inequality as measured by the Gini coefficient has remained steady
since at least the mid-1990s, at a value in the low 30s (see Table 1.2). In global
terms, this level indicates relatively low income inequality, although it is
relatively high for a western European country. The at-risk of poverty rate has
also remained largely unchanged in recent years, at around one quarter of the
population in 2013.