Abstract
The UK economy has performed well in recent years, but it faces important challenges and risks. Economic growth has consistently been near the top among major advanced economies, the employment rate has risen to a record high, the fiscal deficit has been reduced, and major financial sector reforms have been adopted. Nonetheless, the economy still faces vulnerabilities, including those related to possible shocks to global growth and asset prices; property markets that have been buoyant in recent years; a wide current account deficit and low household saving rate; and uncertainty about the degree to which productivity growth will recover. In the near term, the largest risks and uncertainties relate to the upcoming EU referendum. Given the importance of the referendum, this report and the accompanying Selected Issues paper include analysis of the referendum's potential macroeconomic implications for the UK and the global economy, while recognizing that this choice is for UK voters to make and that their decisions will reflect both economic and noneconomic factors. This analysis finds that the economic effects of an exit would likely be negative and substantial for the UK. In this event of a vote to leave the EU, policies should be geared toward supporting stability and reducing uncertainty.
Fund Relations
(Data as of April 30, 2016)
Membership Status: Joined December 27, 1945; accepted Article VIII.
General Resources Account
| SDR Million |
Percent Quota |
|
|---|---|---|
| Quota | 20,155.00 | 100.00 |
| Fund holdings of currency | 16,614.27 | 82.43 |
| Reserve position in Fund | 3,541.01 | 17.57 |
| New arrangement to borrow | 1,672.44 |
| SDR Million |
Percent Quota |
|
|---|---|---|
| Quota | 20,155.00 | 100.00 |
| Fund holdings of currency | 16,614.27 | 82.43 |
| Reserve position in Fund | 3,541.01 | 17.57 |
| New arrangement to borrow | 1,672.44 |
SDR Department
| SDR Millions |
Percent Allocation |
|
|---|---|---|
| Net cumulative allocations | 10,134.20 | 100.00 |
| Holdings | 7,115.59 | 70.21 |
| SDR Millions |
Percent Allocation |
|
|---|---|---|
| Net cumulative allocations | 10,134.20 | 100.00 |
| Holdings | 7,115.59 | 70.21 |
Outstanding Purchases and Loans: None
Financial Arrangements: None
Projected Payments to Fund (SDR million; based on present holdings of SDRs):
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2016 | 2017 | 2018 | 2019 | 2020 | |
| Principal | |||||
| Charges/Interest | 1.07 | 1.86 | 1.86 | 1.86 | 1.86 |
| Total | 1.07 | 1.86 | 1.86 | 1.86 | 1.86 |
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2016 | 2017 | 2018 | 2019 | 2020 | |
| Principal | |||||
| Charges/Interest | 1.07 | 1.86 | 1.86 | 1.86 | 1.86 |
| Total | 1.07 | 1.86 | 1.86 | 1.86 | 1.86 |
Exchange Rate Arrangement:
The UK authorities maintain a free floating regime.
The UK accepted the obligations of Article VIII, Sections 2, 3, and 4 on February 15, 1961. It maintains an exchange system free of multiple currency practices and restrictions on payments and transfer for current international transactions, except for exchange restrictions imposed solely for the preservation of national or international security. The UK notifies the Fund of the maintenance of measures imposed solely for the preservation of national and international security under Executive Board Decision No. 144–(52/51). The last of these notifications was made on January 9, 2012 (EBD/12/2).
Article IV Consultation:
The last Article IV consultation was concluded on February 24, 2016. The UK is on the standard 12-month consultation cycle.
FSAP
The FSAP update was completed at the time of the 2011 Article IV Consultation. A mandatory FSAP has also been conducted in time for the 2016 Article IV consultation, in line with the five-year cycle for members or members’ territories with financial sectors that are determined to be systemically important pursuant to Decision No. 15495-(13/111), adopted December 6, 2013.
Technical Assistance: None
Resident Representatives: None
Statistical Issues
Economic and financial data provided to the Fund are considered adequate for surveillance purposes. The UK subscribes to the Special Data Dissemination Standard (SDDS) and meets the SDDS specifications for the coverage, periodicity, and timeliness of data. SDDS metadata are posted on the Dissemination Standard Bulletin Board (DSBB). The UK has adopted the European System of National and Regional Accounts 2010 (ESA 2010) and the Balance of Payment and International Investment Position Manual, sixth edition (BPM6).
The UK government has commissioned a review of the UK’s current and future statistical needs and the capacity to meet those needs, prompted by increasing difficulty in measuring output and productivity and a perception that official data could be improved.
An interim report, published in December 2015, found that conventional statistical measures and methods are increasingly challenged as the UK economy becomes more service oriented, as businesses operate more across national borders, as digitization of economic activities increases, and as the boundaries between market and home production become more blurred. These issues are relevant to a number of advanced and transition economies. The interim report recommends a number of specific steps, such as greater integration of data sources and use of administrative data, addressing shortcomings to national accounts and flow of funds measures, and improvements to UK trade, construction, and CPI statistics. Staff welcomes these recommendations.
The final report was published on March 11, 2016. The report made six strategic recommendations regarding measuring the economy, ONS capability and performance, and governance of statistics. The recommendations are as follows:
Address established statistical limitations.
Become more agile in the provision of statistics that properly reflect the changing structure and characteristics of the economy.
Refocus the culture of ONS towards better meeting user needs.
Make the most of existing and new data sources and the technologies for dealing with them.
Become better at understanding and interrogating data.
Strengthen the governance framework so as to help support the production of high-quality economic statistics.
Table of Common Indicators Required for Surveillance (As of May 19, 2016)
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).
Table of Common Indicators Required for Surveillance (As of May 19, 2016)
| Date of latest observation | Date received | Frequency of Data7 | Frequency of Reporting7 | Frequency of Publication7 | |
|---|---|---|---|---|---|
| Exchange Rates | Same day | Same day | D | D | D |
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | March 2016 | 04/29/2016 | M | M | M |
| Reserve/Base Money | May 18, 2016 | 05/19/2016 | W | M | M |
| Broad Money | March 2016 | 04/29/2016 | M | M | M |
| Central Bank Balance Sheet | May 18, 2016 | 05/19/2016 | W | W | W |
| Consolidated Balance Sheet of the Banking System | March 2016 | 04/29/2016 | M | M | M |
| Interest Rates2 | Same day | Same day | D | D | D |
| Consumer Price Index | April 2016 | 04/12/2016 | M | M | M |
| Revenue, Expenditure, Balance and Composition of Financing3 – General Government4 | Q4 2015 | 03/16/2016 | Q | Q | Q |
| Revenue, Expenditure, Balance and Composition of Financing3 – Central Government | March 2016 | 04/21/2016 | M | M | M |
| Stocks of Central Government and Central Government-Guaranteed Debt5 | March 2016 | 04/21/2016 | M | M | M |
| External Current Account Balance | Q4 2015 | 03/31/2016 | Q | Q | Q |
| International Investment Position6 | Q4 2015 | 03/31/2016 | Q | Q | Q |
| Exports and Imports of Goods and Services | March 2016 | 05/10/2016 | M | M | M |
| GDP/GNP | Q4 2015 | 03/31/2016 | Q | Q | Q |
| Gross External Debt | Q4 2015 | 03/31/2016 | Q | Q | Q |
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).
Table of Common Indicators Required for Surveillance (As of May 19, 2016)
| Date of latest observation | Date received | Frequency of Data7 | Frequency of Reporting7 | Frequency of Publication7 | |
|---|---|---|---|---|---|
| Exchange Rates | Same day | Same day | D | D | D |
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | March 2016 | 04/29/2016 | M | M | M |
| Reserve/Base Money | May 18, 2016 | 05/19/2016 | W | M | M |
| Broad Money | March 2016 | 04/29/2016 | M | M | M |
| Central Bank Balance Sheet | May 18, 2016 | 05/19/2016 | W | W | W |
| Consolidated Balance Sheet of the Banking System | March 2016 | 04/29/2016 | M | M | M |
| Interest Rates2 | Same day | Same day | D | D | D |
| Consumer Price Index | April 2016 | 04/12/2016 | M | M | M |
| Revenue, Expenditure, Balance and Composition of Financing3 – General Government4 | Q4 2015 | 03/16/2016 | Q | Q | Q |
| Revenue, Expenditure, Balance and Composition of Financing3 – Central Government | March 2016 | 04/21/2016 | M | M | M |
| Stocks of Central Government and Central Government-Guaranteed Debt5 | March 2016 | 04/21/2016 | M | M | M |
| External Current Account Balance | Q4 2015 | 03/31/2016 | Q | Q | Q |
| International Investment Position6 | Q4 2015 | 03/31/2016 | Q | Q | Q |
| Exports and Imports of Goods and Services | March 2016 | 05/10/2016 | M | M | M |
| GDP/GNP | Q4 2015 | 03/31/2016 | Q | Q | Q |
| Gross External Debt | Q4 2015 | 03/31/2016 | Q | Q | Q |
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).