major macro economic indicators
|2020||2021||2022 (e)||2023 (p)|
|GDP growth (%)||- 9.8||7.5||4.4||5.2|
|Inflation (yearly average, %)||0.9||2.6||9.1||5.2|
|Budget balance (% GDP)||-15.0||-5.7||-7.0||5.2|
|Current account balance (% GDP)||-2.5||-2.0||-5.9||5.2|
|Public debt (% GDP)||102.6||105.6||102.0||5.2|
(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
- High public and household debt (115% of gross disposable income)
- Low productivity and training deficit not conducive to innovation
- Regional disparities between the Southeast (especially London) and the rest of the country, particularly in terms of transport and energy infrastructure
Inflation, exacerbated by the war in Ukraine, is hampering recovery
Among the countries most affected by the health and economic crisis, the United Kingdom was also one of the first economies in the region to rebound, thanks to one of the earliest vaccination campaigns globally. Therefore, by the end of 2021, GDP had returned to pre-crisis levels. However, the recovery in 2022 will be hampered by the economic consequences of the war in Ukraine. Soaring commodity prices, including the decision by the UK Energy Authority (Ofgem) to raise the annual energy price cap by 54% in April 2022, will add to the inflationary pressures that emerged in the second half of 2021. These pressures had already prompted the Bank of England (BoE) to raise its policy rate - the first among advanced economies - from 0.1% to 0.25% in December 2021. The monetary authority then proceeded to a third consecutive increase in March (bringing its rate to 0.75%) in anticipation of a strengthening of these pressures, and will most likely be forced to continue in this direction throughout the year. In this context, household purchasing power, which was relatively unaffected during the crisis thanks to the substantial short-time working scheme (GBP 69 billion, or 3.1% of GDP, twice that of the region's major economies), will fall sharply, despite the measures taken by the government to limit the magnitude of the drop. As the savings rate had fallen back to its pre-crisis level by the end of 2021, after exceeding 20% at the peak of the pandemic, household consumption will be particularly affected, despite the 6.6% increase in the National Living Wage in April 2022 and generally higher wages due to record job vacancies (1.3 million in January 2022, compared to 800,000 before the crisis). Furthermore, despite the extension until March 2023 of the "super deduction" for capital investment, business investment, which started to recover slowly in 2021, will be held back by both economic uncertainty and falling profits - resulting from soaring production costs and supply problems. Furthermore, despite limited trade with Russia - which accounted for 0.8% of exports and 1.5% of imports (excluding gold) in 2021 - the UK economy will be affected by the sharp slowdown of its neighbours, as over 40% of its exports are to the European Union (EU). This is in an already unfavourable environment, following the country's exit from the EU, for British exports which, unlike other advanced economies, had still not returned to their pre-crisis level by the end of 2021 (-12% compared to 2019). After remaining very low throughout the crisis, the number of insolvencies started to rise again in August 2021, due to the end of the support measures. In 2022, in the face of accumulating headwinds, insolvencies should continue on this trend.
Prudent fiscal policy in response to rising debt financing costs
After having increased considerably during the pandemic, due to the successive emergency measures between 2020 and 2021 for a total of 19% of GDP, the public deficit should continue to shrink gradually in 2022, despite the implementation of measures to limit the impact of the rise in energy prices on households (reduction in fuel prices, GBP 150 discount on the council tax and GBP 200 discount on energy bills). The slight improvement in the public accounts will be made possible by the increase in revenues, driven in particular by the 1.25 point increase in social security contributions (+ GBP 15 billion, 0.7% of GDP), despite the announcement in March 2022 of the increase in the exemption threshold - which will reduce revenue by GBP 6 billion - and the four-year freeze in the top income tax bracket (+ GBP 3 billion in 2022). However, public debt will remain very high, and its financing costs will rise sharply due to the change in the BoE's policy stance, which, after having bought massive amounts of government bonds on the financial markets during the pandemic (for a total of GBP 895 billion), began to reduce the amount of its assets in February 2022.
The structural current account deficit will widen further in 2022 due to a higher energy import bill. Although the country has a large structural surplus in the balance of services (5.5% of GDP in 2021), thanks to financial and insurance services (two thirds of the surplus), it does not fully compensate for the deficit in the balance of goods (6.7% of GDP). As a central place in the international financial system, the country comfortably finances its current account deficit through foreign portfolio investments.
Boris Johnson weakened by scandals
Prime Minister, Boris Johnson, in power since his election as head of the Conservative party in July 2019, had succeeded in dissolving Parliament and strengthening his majority in the December 2019 elections, with 365 seats out of 650 (+50 compared to 2017). After seeing his popularity fluctuate according to his management of the health crisis - the success of the vaccination campaign had propelled his popularity rating to 48% in May 2021 - Boris Johnson was clearly behind Labour leader Keir Starmer in polls conducted in January 2022 (28% vs. 38%), after he admitted attending a party during the first lockdown in May 2020. In this context, although his popularity rating recovered slightly in March due to the geopolitical context, a vote of no confidence from the Conservative party to replace him as leader in 2022 cannot be ruled out.
Last updated: March 2022
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.