A History of the UK Balance of Payments

Although the primary purpose of this chapter is to describe the balance-of-payments experience of the United Kingdom since 1950, it will be helpful as an introduction to place the experience in historical perspective, relying heavily on the statistical tables compiled by Mitchell and Deane (1962). Starting from 1854, data will be given on imports, exports, the balance of trade, the over-all balance on current account, indices of the volume of imports and exports, and the terms of trade. Throughout the chapter emphasis will be given to discussion of the statistics rather than to events and policies, and the focus will be on the real sector of the balance-of-payments accounts rather than on international monetary developments. The chapter contains an appendix written by one of us just after the collapse of the Bretton Woods system, expressing scepticism that Britain’s balance-of-payments problems (and slow growth) would be permanently solved by allowing the exchange rate to float. It makes interesting reading now that Britain has locked itself into the Exchange Rate Mechanism of the European Monetary System.