The
United Kingdom's economy is dependent on foreign trade. The government
supports free and unrestricted trade and has championed international trade
organizations such as the World Trade Organization and the EU. Because of
its dependency on trade, the British have few restrictions on foreign trade
and investment. Of the kingdom's 500 largest corporations, 60 are American.
The United Kingdom's main trade partner is the EU. Some 58 percent of the
kingdom's exports go to EU nations. Its main EU partners are Germany, which
accounts for 12 percent of exports; France, with 12 percent; and the
Netherlands with 8 percent. The United Kingdom's largest single market is
the United States, which accounts for 13 percent of its exports. The United
States also provides 14 percent of the kingdom's imports. As a combined
group, the EU provides 53 percent of British imports. Germany provides 13
percent, France 9 percent, the Netherlands 7 percent, and Italy 5 percent.
The United Kingdom has trade treaties with 90 different nations.
The strength of the British pound and the state of the economy has made
the United Kingdom an attractive investment area for foreign investors. The
kingdom is the world's second-largest destination for investment. About 30
percent of all foreign investment going into the EU is directed at the
United Kingdom. The British also invest heavily in other nations. In 1998,
the United Kingdom had US$120 billion invested abroad. The United States is
the largest single investor in the United Kingdom and accounts for 44
percent of all foreign investment in the United Kingdom. In 1997, U.S.
investment in the United Kingdom amounted to US$138.8 billion. The total
U.S. investment in the United Kingdom is more than the total American
investment in Germany, France, Italy, and the Netherlands combined. In
overall terms, foreign investment accounted for 5 percent of GDP.
For several decades, the United Kingdom has had a trade deficit, as it
has imported more goods and services than it has exported. In 1998, the
trade deficit amounted to US$35 billion or 1.5 percent of GDP. However,
because of the attractiveness of the kingdom to foreign investors, new
investment capital continues to allow the British to fund this deficit
because the new investment monies exceed the money the kingdom loses through
its trade deficit.
Foreign companies provide 40 percent of British exports and they have a
significant presence in the manufacturing sector. About 20 percent of
manufacturing companies are foreign-owned and 16 percent of employment in
the sector is tied to foreign firms. In 1998 there were 25,800 foreign
companies in the United Kingdom. Among the major international companies in
the United Kingdom are Dupont, with sales in 1998 of US$2.7 billion, the
Swiss chemical company Ciba, with sales of US$2.3 billion, and Coca-Cola,
with sales of US$2.1 billion.
In order to attract foreign businesses and foreign investment, the
British government has adopted a variety of programs. For instance, the
Parliament allows local and regional governments to establish enterprise
zones. In these zones, companies receive exemptions from property taxes and
reimbursement for costs involved in the construction of new factories or
business locations. These inducements may be extended for up to 10 years.
There are also programs that provide incentives for companies to locate in
economically depressed urban areas that are known as "Assisted Areas." In
1998, the total value of these programs was US$315 million. There are 7
free trade zones in the
United Kingdom (Birmingham, Humberside, Liverpool, Prestwick, Sheerness,
Southampton, and Tilbury). These zones allow goods to be stored for shipment
without tariffs or import duties.
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