Growth Projections for the UK and Possible Sectors for Export Diversification
We mentioned in our previous article that the UK ranks as the 14th most complex country in the world based on the Economic Complexity Index (ECI) ranking of the Atlas of Economic Complexity. Here, we will focus on the growth projections for the UK economy in the next decade.
The United Kingdom had an average of 1.5% GDP per capita growth over the past five years. This is in line with the regional averages. Although the UK ranks as the 14th most complex country in the ECI ranking, the economy has become less complex, worsening 7 positions.
This worsening in complexity also affects the growth projections. Harvard’s Growth Lab foresees the UK economy to annually grow by 3.0% in the period ending in 2027. This performance places the UK in the bottom half of countries analysed in the Atlas of Economic Complexity. This worsening in complexity mainly results from a lack of export diversification.
The above figures show the growth path of GDP per capita in the UK and the change in the ECI ranking as well as main components of UK exports. United Kingdom has already completed the structural transformation process and entered all major high-productivity sectors. But the UK’s export performance has been driven by services in the last five years, where the exports in services have fallen. Exports in total have also declined annually by 0.2% (on average) over the past five years, and thus resulted in a slow down in the UK’s economic growth.
The largest contribution to UK’s export growth comes from ICT (Information and Communication Technology), and Travel and tourism products, which are moderate complexity products. Growth Lab’s research suggests that countries grow by diversifying into new products of higher complexity and also more complex products tend to support higher wages. In light of the current complexity of the UK economy and structural development, Harvard’s Growth Lab claims that a higher level of growth can be reached in the UK by leveraging its current successes into more complex production. And by looking at the current exports, the Growth Lab lists Industrial Machinery and Inorganic Chemicals as sectors with high potential for new diversification.
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