Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
The United Kingdom, with a population of 67 million people and a GDP of $3.2 trillion (2021), is a major international trading power, with the fifth-largest economy in the world, according to the World Bank. Though geographically small (the United Kingdom is roughly about the size of Oregon), it has the second-largest economy in Europe and led the G7 in GDP growth in 2021.
Moreover, despite the challenges and uncertainty posed by the UK’s exit from the European Union (“Brexit”), high inflation due to increasing energy prices, and the COVID-19 pandemic, the UK remains a critical market for American exports of goods and services. U.S. exports of goods and services to the UK reached $129.3 billion in 2021, up 7.6 percent from 2020, ranking the UK in seventh place among export destinations for American goods and placing it in the number one spot for trading in services.
Major categories of U.S. exports include financial and professional services, industrial supplies, agricultural products, cyber security and other IT, medical equipment, consumer goods, smart grids, and travel & tourism.
Before the COVID-19 pandemic, the UK ranked third in the overall number of travelers arriving to the United States (behind Canada and Mexico, respectively), making the UK the number one overseas market for travel to the United States, with four to five million UK travelers visiting the United States each year and contributing over $12 billion to the American economy annually. Although 2020 and 2021 saw a dramatic decline in tourism to the United States due to COVID-related travel restrictions, since restrictions were lifted in June 2022, travel in both directions has rebounded.
The U.S.-UK investment relationship is the largest in the world, with cumulative bilateral stock in a direct investment valued at more than $1.5 trillion in 2021. In 2021, the U.S. direct investment position in the United Kingdom (outward) topped $1 trillion, an increase of 9.5% from 2020. The direct investment position from the United Kingdom to the United States (inward) was $512.4 billion, an increase of 21.5% from 2020. More than 2.6 million jobs, 1.46 in the UK and 1.17 million in the United States, are directly supported by these investments.
More than 7,500 U.S. firms have a presence in the United Kingdom, the top location in Europe for U.S. regional headquarters covering Europe, the Middle East, and Africa. According to one recent survey, however, U.S. investment confidence in the UK has declined slightly, in large part to lingering uncertainty and challenges to the UK-EU trade relationship in addition to policy uncertainty, high inflation, and labor shortages.