Country Trade Risk Index (ERI): 100.49
Country risk reference rating: level 3 (3/9)
Country Risk Outlook: Stable
Economic and trade risks
In 2012, the UK’s nominal GDP was US$2.4441 billion, the real economic growth rate was 0.3%, the per capita GDP was US$38,710, and the inflation rate reached 2.8%. The UK’s industrial structure is agriculture (0.7%), industry (21.8%), and services (77.5%). The main industrial industries are engineering, chemistry, electronics, aerospace, automobiles, and pharmaceuticals.
The UK economy is shifting towards services, but the pace of recovery is slow and fragile. The risks facing the British economy mainly include: external threats brought about by the deterioration of the European debt crisis, turmoil in the financial industry, the impact of tightening fiscal policies on the economy and the intensity of their implementation, and high public debt endangering fiscal stability.
In 2012, the overall performance of the British economy was weak, and the European debt crisis had a significant impact on the British macro economy. In 2013, the British economy showed significant recovery. The OECD said that the British economic recovery speed exceeded all expectations and was one of the fastest among European partner countries. However, in July 2013, the International Monetary Fund issued a report stating that against the background of domestic debt reduction pressure and sluggish external demand, the UK’s economic recovery will remain slow and fragile. Although economic activity in the UK will become more active, the output gap will still be large.
Investment risk
The UK’s overall investment environment is relatively good and it is the country with the highest ease of doing business in the world. The UK has perfect infrastructure, well-connected transportation, strong industrial foundation, advanced technology, sound financial system and high-quality labor force. In the 2013 World Bank’s investment climate assessment, the UK’s ranking fell. According to the World Bank’s 2013 Doing Business Report, the UK ranked 7th among 185 economies in the world, one place lower than in 2012.
In recent years, the British government has been committed to vigorously attracting foreign investment. The degree of preferential policies for foreign investment has increased, and corporate tax has been reduced significantly. The UK’s tax policy is more competitive than in the EU, and the government also provides certain financial support for specific projects. Although British trade unions have a long history, their power was greatly weakened during Margaret Thatcher’s administration. Strikes have been greatly reduced in the past 20 years. Compared with other European countries, British employment laws are relatively favorable to employers.
Legal risks
The United Kingdom is a typical legal country with a complete legal system and distinct characteristics. British law is mainly based on practice, following the principle of precedent, and is not known for its legislation. The basic characteristics of the British legal system can be summarized as follows: overall unity, specific complexity, central unity, and local complexity. Many laws and regulations in the UK were created by judges. Court trials are fair and transparent and are considered to be the best and most efficient commercial legal system in the world. The laws vary in different areas of England, Scotland, Wales and Northern Ireland. However, as an EU member state, EU law takes precedence over domestic law, and British courts must accept the judgment of the European Court of Justice.
According to the standards of the World Bank’s Doing Business Report 2013, after a British company files for bankruptcy, the bankruptcy case review and execution process takes one year, which is longer than the average of 1.7 years among OECD member countries.
Overall risk
As a major Western country with the longest history of democratic systems, the United Kingdom has a stable domestic political situation and a deep-rooted constitutional tradition. Although there are forces opposing the party leaders within the two parties currently in power, the overall cooperation between the two parties has been maintained. The relationship between the UK and the EU has reached a delicate moment. Cameron’s proposal to hold a referendum on whether the UK should leave the EU has impacted the process of European integration and raised concerns that the UK may be further marginalized in Europe in the future. This will also bring certain uncertainties to investment and economic and trade cooperation in the UK, reducing the value of using the UK as a foothold to develop into the European continent. The UK has a generally good investment environment and is the country with the highest ease of doing business in the world. However, after the outbreak of the financial crisis, British trade protectionism increased, exacerbating Sino-British trade frictions.
Based on the analysis and assessment of the current overall situation, the UK’s country trade risk index (ERI) is 100.49, the country risk reference rating is 3 (3/9), the country risk level is low, and the country risk outlook is stable.
