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Prospects for the UK Balance of Payments

Author

Listed:
  • Ken Coutts
  • Bob Rowthorn

Abstract

This paper presents disaggregated projections for the UK balance of payments up to 2020. Under conservative assumptions about underlying trends it is projected that the current account deficit will increase from 2% of GDP in 2009 to almost 5% of GDP by the end of the period. Empirical evidence indicates that a deficit of this magnitude is not sustainable and, if unchecked, will lead to a painful adjustment involving lost output and higher unemployment. The paper calls for industrial and other policies to improve UK trade performance, above all in manufacturing, but also in knowledge-intensive services (communications, consultancy, R&D, media etc). It also points out the need to safeguard London’s role as a global financial centre.

Suggested Citation

  • Ken Coutts & Bob Rowthorn, 2009. "Prospects for the UK Balance of Payments," Working Papers wp394, Centre for Business Research, University of Cambridge.
    • Handle: RePEc:cbr:cbrwps:wp394
    Note: PRO-1
    as

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    File URL: https://www.jbs.cam.ac.uk/wp-content/uploads/2023/05/cbrwp394.pdf
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    References listed on IDEAS

    as
    1. Richard H. Clarida, 2007. "G7 Current Account Imbalances: Sustainability and Adjustment," NBER Books, National Bureau of Economic Research, Inc, number clar06-2.
    2. Caroline Freund & Frank Warnock, 2007. "Current Account Deficits in Industrial Countries: The Bigger They Are, The Harder They Fall?," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 133-168, National Bureau of Economic Research, Inc.
    3. Ken Coutts & Andrew Glyn & Bob Rowthorn, 2007. "Structural change under New Labour," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 31(6), pages 845-861, November.
    4. Martin Weale, 2009. "Commentary: Growth Prospects and Financial Services," National Institute Economic Review, National Institute of Economic and Social Research, vol. 207(1), pages 4-9, January.
    5. Richard H. Clarida & Manuela Goretti & Mark P. Taylor, 2007. "Are There Thresholds of Current Account Adjustment in the G7?," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 169-204, National Bureau of Economic Research, Inc.
    6. Bergsten, C. Fred, 2002. "Can the United States afford the tax cuts of 2001?," Journal of Policy Modeling, Elsevier, vol. 24(4), pages 373-380, July.
    7. F. Gerard Adams, 2009. "Will Economic Recovery Drive up World Oil Prices?," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 10(2), pages 1-26, April.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Ken Coutts & Robert Rowthorn, 2013. "De-industrialisation & the Balance of Payments in Advanced Economies," Working Papers wp453, Centre for Business Research, University of Cambridge.
    2. Ken Coutts & Robert Rowthorn, 2013. "Re-industrialisation - A Commentary," Working Papers wp454, Centre for Business Research, University of Cambridge.
    3. Erturk, Ismail & Froud, Julie & Johal, Sukhdev & Leaver, Adam & Williams, Karel, 2012. "Accounting for national success and failure: Rethinking the UK case," Accounting forum, Elsevier, vol. 36(1), pages 5-17.

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    More about this item

    Keywords

    Balance of Payments; forecasts; visible trade; services; investment income; industrial policy.;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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