2017 Index of Economic Freedom

United Kingdom

overall score76.4
world rank12
Rule of Law

Property Rights93.8

Government Integrity78.3

Judicial Effectiveness93.0

Government Size

Government Spending41.9

Tax Burden65.1

Fiscal Health40.4

Regulatory Efficiency

Business Freedom89.9

Labor Freedom72.8

Monetary Freedom85.0

Open Markets

Trade Freedom87.0

Investment Freedom90.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 64.9 million
  • GDP (PPP):
    • $2.7 trillion
    • 2.2% growth
    • 2.1% 5-year compound annual growth
    • $41,159 per capita
  • Unemployment:
    • 5.5%
  • Inflation (CPI):
    • 0.1%
  • FDI Inflow:
    • $39.5 billion
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The United Kingdom has demonstrated good economic resilience with effective rule of law, an open trading environment, and a well-developed financial sector. A labor market that is relatively liberal by European standards has complemented one of the world’s most efficient business and investment environments.

Fiscal consolidation has progressed through spending cuts that have reduced the fiscal deficit to a more manageable though still high level. The U.K. continues to benefit from strong institutional assets such as an independent judiciary and stable currency, and the services sector accounts for 75 percent of the nation’s GDP.

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Background

Following the market reforms instituted by Prime Minister Margaret Thatcher in the 1980s, Britain experienced steady economic growth throughout the 1990s and is now the world’s fifth-largest economy. Government spending grew significantly under successive Labour governments in the early 2000s but has moderated under Conservative governments since 2010. In June 2016, the U.K. voted in a popular referendum to leave the European Union. The exit vote resulted in the resignation of Prime Minister David Cameron, who was replaced by Theresa May. The overall policy direction of the May government, which has argued for an industrial policy, remains to be seen, but negotiating “Brexit” will undoubtedly be a top priority.

Rule of LawView Methodology

Property Rights 93.8 Create a Graph using this measurement

Government Integrity 78.3 Create a Graph using this measurement

Judicial Effectiveness 93.0 Create a Graph using this measurement

Private property rights and contracts are very secure, and the court system is efficient and independent. Protection of intellectual property rights is effective. The rule of law is well established, and the World Economic Forum’s 2015–2016 Global Competitiveness Report ranked the U.K. sixth in the world for efficiency of dispute resolution through its legal framework. Isolated instances of bribery and corruption occur but are prosecuted vigorously.

Government SizeView Methodology

The top personal income tax rate is 45 percent. The top corporate tax rate has been reduced to 20 percent. Other taxes include a value-added tax and an environment tax. The overall tax burden equals 32.6 percent of total domestic income. Government spending has amounted to 44 percent of total output (GDP) over the past three years, and budget deficits have averaged 5.2 percent of GDP. Public debt is equivalent to 89.3 percent of GDP.

Regulatory EfficiencyView Methodology

The regulatory environment is efficient and transparent. Starting a business takes less than a week. Bankruptcy proceedings are straightforward, and the labor market is relatively efficient. The U.K. has few price controls, but it does regulate rates for most utilities and partly controls the price of prescription drugs. In late 2015, the government cut subsidies for renewable wind energy.

Open MarketsView Methodology

Trade is important to the United Kingdom’s economy; the value of exports and imports taken together equals 57 percent of GDP. The average applied tariff rate is 1.5 percent, and the economy is very open to foreign investment. The financial sector continues be one of most competitive in the world, but the state still holds ownership in some banks.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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