major macro economic indicators
|GDP growth (%)||2.3||1.8||1.7||1.2|
|Inflation (yearly average, %)||0.0||0.7||2.7||2.5|
|Budget balance (% GDP)||-4.3||-3.0||-1.9||-1.9|
|Current account balance (% GDP)||-4.9||-5.2||-3.9||-4.4|
|Public debt (% GDP)||88.2||88.2||87.7||87.2|
- Hydrocarbon production covering three quarters of energy needs
- Cutting-edge sectors (aeronautics, pharmaceuticals, automotives)
- Financial services
- Competitive and attractive fiscal regime
- Uncertainty over the implementation and consequences of the decision to leave the EU
- High levels of public and household debt (130% of disposable income)
- Low productivity and lack of training not conducive to innovation
- Regional disparities with London and the Southeast and the rest of the UK, especially regarding transport and energy infrastructure
Decline in activity continues
Growth, still suffering from the uncertainties associated withBrexit, is expected to weaken in 2018. Household consumption, which represents over 60% of GDP, will continue to slow. Indeed, while inflation, following the depreciation of the British currency after the referendum, outstripped nominal wage growth in 2017, the pressure on household disposable income will persist in 2018, leading to an erosion of consumer confidence. However, the drop in consumption's contribution to growth will be gradual, if households continue to reduce their savings (4.3% of disposable income in Q1 2018 compared with 9.2% in 2015). The slowdown in domestic demand has already impacted the automotive sector, which posted a fall in new registrations in 2017 (-6%). The contribution of private investment is expected to fall, with businesses choosing to delay their investment decisions because of the political uncertainty. The fear of a post-Brexitslowdown and the rising cost of credit, following the hike in the benchmark interest rate, will continue to weigh on the construction sector. Despite a more accommodative fiscal policy, the contribution of public consumption would remain weak. Buoyed in 2017 by a devalued pound and by robust demand in the EU partner economies, exports will continue to contribute positively to growth in 2018. The effect of sterling's depreciation on export competitiveness is, however, likely to ease, reducing the contribution of exports to growth.
The increase in consumer prices is expected to moderate slightly, benefitting from the weakening effects of sterling's devaluation on imported goods. After the Bank of England raised its benchmark interest rate, for the first time since 2007, to 0.5% in November 2017, a second intervention to raise rate by 25 basis points in 2018 to bring inflation down towards the 2% target cannot be ruled out.
Slower fiscal consolidation
While the economy is facing a less favourable context and is still struggling to overcome certain structural weaknesses, such as anaemic productivity growth, the pace of fiscal consolidation is expected to ease. In particular, cuts to current expenditures are expected to be smaller than initially foreseen. Rising spending on the National Health Service (NHS) and measures to "repair" the property market imbalances were announced in the budget statement in November 2017. Capital spending is expected to rise only moderately. Despite these measures, the deficit is expected to remain stable in 2018, well below 3%, and debt ratio is expected to decline further.
The current account balance will continue to show a large deficit in 2018. After benefiting from a buoyant global trade environment and the depreciation of sterling in 2017, the balance of goods deficit is expected to increase slightly in 2018. This will not be offset by the services surplus. Even if it could recede, the income balance deficit, which has widened since the start of the decade in connection with the decline in investment income, will continue to impact the current account balance. Transfers, which make a low contribution, are not expected to influence the current account overall balance. Even if the UK has recorded the biggest current account deficit of the G7 and although it is threatened by political uncertainty, the country is expected to be in a position to finance its current account deficit thanks to investment flows.
Thorny Brexit negotiations on the agenda of a weakened government
After triggering Article 50 of the EU treaty governing the EU withdrawal process in March 2017, Theresa May, Prime Minister since July 2016, called early general elections so that she could begin Brexit negotiations from a position of strength. However, during the 8 June 2017 elections, even though Theresa May's Conservative party won, it suffered a significant setback, losing an absolute majority in the House of Commons. Only a fragile alliance with the Democratic Unionist Party, a conservative protestant party from Northern Ireland, enabled Mrs May to remain in position at the head of government. From its weakened negotiating position, on 5 December 2017 the government nonetheless managed to conclude phase one of the talks with the European Commission, reaching agreement on the EU divorce terms. The second phase is also complicated: after several months of divergence as to the official position to endorse, the government published a White Paper in mid-July with its proposals (free trade area for goods with immigration control and different arrangements for services, facilitated customs arrangement), leading to the resignation of Ministers Davis and Johnson (who had called for a hard Brexit). With the effective exit date of 29 March 2019 looming, the outcome of negotiations with the EU is uncertain. In addition, an amendment, adopted thanks to the rebellion of some Conservative MPs, provides for any final deal to be ratified by Westminster. This amendment, exposing Theresa May's weakness and her reduced room for manoeuvre to find an agreement that will satisfy her majority, could lead to a “no deal” Brexit if the final deal is rejected by Parliament.
Last update : July 2018
Cheques are frequently 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.