2013 Index of Economic Freedom

United Kingdom

overall score74.8
world rank14
Rule of Law

Property Rights90.0

Freedom From Corruption78.0

Limited Government

Government Spending27.7

Fiscal Freedom57.0

Regulatory Efficiency

Business Freedom94.1

Labor Freedom71.6

Monetary Freedom72.4

Open Markets

Trade Freedom86.8

Investment Freedom90.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 62.6 million
  • GDP (PPP):
    • $2.3 trillion
    • 0.7% growth
    • 0.1% 5-year compound annual growth
    • $36,090 per capita
  • Unemployment:
    • 8.0%
  • Inflation (CPI):
    • 4.5%
  • FDI Inflow:
    • $53.9 billion
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The United Kingdom’s economic freedom score is 74.8, making its economy the 14th freest in the 2013 Index. Its score is 0.7 point higher than last year, reflecting efforts to improve control of government spending. The U.K. is ranked 5th out of 43 countries in the Europe region.

With a legal system that enforces contracts and property rights effectively, the U.K. has long benefited from openness to global trade and investment. Reforms undertaken in recent years include measures to curb the growth of government spending and a series of corporate tax rate cuts that will continue until 2014. Ending the steady erosion of economic freedom during the past five years, Britain’s overall score took an upturn in the 2013 Index.

However, the British economy continues to struggle to emerge from the economic slowdown, with the prospects for swift growth complicated by the ongoing European sovereign debt crisis, and significant structural reforms are still needed. Restoring the soundness of public finances remains especially critical and will require a sustained commitment to real downsizing of government spending.

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Background

Following the market reforms instituted by Prime Minister Margaret Thatcher in the 1980s, Britain experienced steady economic growth, outpacing other large European Union economies throughout the 1990s. However, the government’s size and spending grew significantly under successive Labour governments. The budget deficit was exacerbated by Labour’s bailout of several British banks in 2008 and by excessive government borrowing. Prime Minister David Cameron’s Conservative–Liberal Democrat coalition government, formed after the 2010 general election, has implemented austerity measures that have cut public services but maintained government spending on the National Health Service and international development. The economy returned to recession in early 2012. Cameron vetoed Britain’s participation in the EU’s Fiscal Compact and has been at the forefront of attempts to cap the EU’s annual and long-term budgets.

Rule of LawView Methodology

Property Rights 90.0 Create a Graph using this measurement

Freedom From Corruption 78.0 Create a Graph using this measurement

The rule of law is well established within an independent legal framework. Private property rights and contracts are very secure, and the court system is efficient. Protection of intellectual property rights is effective. Strong anti-corruption measures discourage bribery of public officials and support integrity within the government. The Bribery Act, which came into force in 2011, provides a modern legal framework to combat bribery.

Limited GovernmentView Methodology

The top income tax rate is 50 percent, and the top corporate tax rate has been reduced to 24 percent. Other taxes include a value-added tax (VAT) and an environment tax. The overall tax burden equals 34.3 percent of total domestic income. As a result of austerity measures imposed in 2010, government spending has fallen to 49.1 percent of GDP, and the deficit has begun to narrow. Public debt has climbed to over 80 percent of total domestic output.

Regulatory EfficiencyView Methodology

The efficient and transparent regulatory framework encourages entrepreneurship. With no minimum capital required, it takes 13 days to establish a business. The labor market is relatively flexible. The non-salary cost of employing a worker is moderate, and severance payments are not overly burdensome. The government controls virtually all prices for health care services. Monetary stability has been well maintained.

Open MarketsView Methodology

The trade-weighted average tariff rate is a low 1.6 percent as in other members of the European Union, with relatively few non-tariff barriers that increase the cost of trade. Under the efficient investment regime, foreign investment is welcomed without heavy bureaucratic interference. The overall stability of the financial system has been restored. The banking sector, although under strain, remains competitive.

Country's Score Over Time

Bar Graph of United Kingdom Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing United Kingdom to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81-0.1
2Denmark76.1-0.1
3Ireland75.7-1.2
4Estonia75.32.1
5United Kingdom74.80.7
6Luxembourg74.2-0.3
7Finland741.7
8The Netherlands73.50.2
9Sweden72.91.2
10Germany72.81.8
11Georgia72.22.8
12Lithuania72.10.6
13Iceland72.11.2
14Austria71.81.5
15Czech Republic70.91.0
16Norway70.51.7
17Armenia69.40.6
18Belgium69.20.2
19Cyprus69-2.8
20Slovakia68.71.7
21Macedonia68.2-0.3
22Spain68-1.1
23Malta67.50.5
24Hungary 67.30.2
25Latvia66.51.3
26Poland661.8
27Albania65.20.1
28Romania65.10.7
29Bulgaria650.3
30France64.10.9
31Portugal63.10.1
32Turkey62.90.4
33Montenegro62.60.1
34Slovenia61.7-1.2
35Croatia61.30.4
36Italy60.61.8
37Serbia 58.60.6
38Bosnia and Herzegovina57.30.0
39Moldova55.51.1
40Greece55.40.0
41Russia51.10.6
42Belarus48-1.0
43Ukraine46.30.2
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