Prospects for the UK Balance of Payments
This paper presents disaggregated projections for the UK balance of payments up to 2020. Under conservative assumptions about underlying trends it is projected that the current account deficit will increase from 2% of GDP in 2009 to almost 5% of GDP by the end of the period. Empirical evidence indicates that a deficit of this magnitude is not sustainable and, if unchecked, will lead to a painful adjustment involving lost output and higher unemployment. The paper calls for industrial and other policies to improve UK trade performance, above all in manufacturing, but also in knowledge-intensive services (communications, consultancy, R&D, media etc). It also points out the need to safeguard London’s role as a global financial centre.
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