V.

Economy of the United Kingdom

A.

Overview

In the 19th century, Britain had the world’s leading economy: Its overseas trade thrived, its standard of living rose steadily, and its citizens pioneered industrial innovations. With the growth of the economies of other nations in the 20th century, the British economy remained relatively strong. It has continued to grow, and Britain remains a major producer of industrial goods and provider of services, as well as a center of world trade and finance. During the 20th century, Britons saw their per capita disposable income triple, an accomplishment all the more remarkable considering Britain’s size and limited natural resources. The skills and ingenuity of Britain’s highly trained workers, managers, and entrepreneurs have enabled the British economy to function well and provide for its large population.

Although Britain’s economy was strong in the 20th century, it faced a number of persistent problems. The balance of trade was one. Britain has had to import more than a tenth of its food and much of its raw materials, as well as many manufactured goods, and it has to export sufficient products and services to balance the cost of its imports. Another problem has been industrial inefficiency, which was particularly evident in older industries such as coal mining, shipbuilding, and textiles, which produced more products than they could sell. Some industries that had been nationalized (taken over by the state) after 1945, such as British Oil Corporation, British Airways, and British Telecommunications, were unprofitable and operated at a considerable cost to taxpayers. In addition, trade unions sometimes required companies to hire more workers than were needed, and time was lost due to strikes as workers pressed for higher wages. These trade union problems increased the cost of goods, which helped cause inflation. Inflation occurs when the demand for products is higher than the supply, which leads to an increase in the value and price of products. At the same time, unemployment remained high—11 percent of the workforce in the early 1980s—and efforts to lower it were not successful. These problems were particularly evident during the 1970s, when high oil prices triggered a worldwide recession.

Since the mid-1970s, Britain has benefited from a worldwide economic upswing as well as internal improvements. The government has taken a number of steps to encourage economic growth. It curtailed the power of unions and sold some nationalized industries, including British Airways and British Telecommunications, to private companies (called privatization). The government sought to encourage business and private investment by lowering taxes and easing restrictions, such as deregulating the stock exchange and lifting restrictions on certain business agreements. Simultaneously, it sought to curb its spending and services. Newer, more profitable high-tech industries absorbed more workers and managers, while many older, less-efficient firms folded. Britain’s economy received a boost with the discovery and exploitation of abundant oil reserves in the North Sea. Because of this oil, Britain no longer depended on imports of foreign petroleum products and also profited from exports of petroleum products. During the 1990s and early 2000s, Britain’s economy grew at an average annual rate of 2.2 percent.

B.

The Government’s Role in the Economy

Like many modern developed countries, the United Kingdom has a mixed economy. This means that some sectors of the economy are operated by the government and some are operated by private businesses. Since World War II (1939-1945), Britain has worked to balance the mix of private and public enterprises in order to maximize the country’s economy and ensure the economic well-being of its citizens. Historically, Britain’s Conservative Party has sought a stronger private component in the mix while the Labour Party has sought to strengthen the public component. Both parties are committed to a healthy mix of both elements, however.

The public component consists of the welfare system, which includes socialized medicine, known as the National Health Service, plus government controls over business, banking, and the money supply. The welfare system provides support from before birth to the grave. The government is a major employer: Public officials, the judiciary, the military, police departments, fire departments, educators, and health professionals are, for the most part, employed by the state. The government is also a major purchaser of goods, particularly military equipment.

After World War II the government nationalized, or took over, a number of large and troubled industries. These included coal, electricity, transport, gas, oil, steel, certain car and truck manufacturing, shipbuilding, and aircraft building. Since the 1950s, the government has privatized a number of these industries, selling them to private firms. The first sales were the steel and road transportation industries. The Conservative governments between 1979 and 1996 denationalized oil companies, telecommunications, car and truck production, gas, airlines and aircraft building, electricity, water, railways, and nuclear power. By privatizing these industries, the government hoped they would become more efficient, due to pressure by stockholders demanding profits. Nevertheless, the government continues to regulate these newly privatized industries by controlling prices and monitoring performance. The government also seeks to encourage competition in the economy and increase productivity by sponsoring and subsidizing training and educational programs.

As in many modern states, the British government seeks to fine-tune the economy in order to keep economic booms from becoming too inflationary and recessions from becoming too deep. In carrying out fine-tuning, the government uses a combination of monetary policies and fiscal policies. Monetary policies involve the attempt to control the supply and demand for money through the Treasury and the central bank, the Bank of England. Fiscal policy is concerned with the level and distribution of government spending and taxation. The government often opts to manage demand, intervening when demand for goods and services is high enough to threaten inflation. In such cases the government tries to reduce demand by raising interest rates and taxes. In economic emergencies the government can control prices and incomes to a considerable extent, but this is only done in extreme circumstances, such as in times of war or runaway inflation. In the early 2000s Britain’s levels of inflation and unemployment remained among the lowest in the European Union.

C.

Labor

The total British labor force in 2006 was 30,810,893 million people. The structure of employment has undergone significant changes in the past 50 years. There has been a significant increase in self-employment and a corresponding growth in the number of small businesses. More than three-quarters of employees in the early 2000s worked in the services sector, compared with about one-third in 1955. Manufacturing was once the largest employer. It employed 42 percent of workers in 1955, but accounted for only about 13 percent of employees in the early 2000s.

The trade union movement has a long and important history in Britain, but since 1980 the influence of trade unions has declined dramatically. Trade union membership has fallen because of changes in the structure of employment, including privatization, the shift away from manufacturing, the rise in smaller firms, the increase in part-time employment, and the contracting out of work. Membership decreased to slightly over a quarter of the workforce in the early 2000s. The Conservative government, in power from 1979 to 1997, restricted unions’ ability to launch strikes and made unions legally responsible for the actions of strikers; this considerably reduced union power and substantially decreased the number of strikes, called stoppages. In 1986 there were more than a thousand work stoppages; in 1996 there were less than 250. Still, the Trades Union Congress (TUC), an independent association of trade unions, had an affiliated membership of 67 trade unions in the early 2000s, representing nearly 6.5 million trade union members in Britain.

D.

Agriculture

Britain’s land surface is minimal compared to many other nations, but British agriculture is very intensive and highly productive. During the 20th century output rose steadily, although the increase slowed toward the end of the century, and agricultural labor became more productive. The improvement was due to innovations in farm machinery, biological engineering of seeds and plants, and the increased use of fertilizers, pesticides, and herbicides. Consequently, imports of food, feed, and beverages dropped from 36 percent of total imports in 1955 to 11 percent in 1985, and to 10 percent by 1994. Compared to other nations in the European Union, Britain’s agricultural sector is much smaller in terms of employment and contribution to the GDP. In the early 2000s agriculture employed approximately 1.4 percent of the workforce and contributed 1.0 percent of the GDP.

D.1.

Livestock Farming

Many of Britain’s full-time farms are devoted to livestock farming—raising cattle for dairy products or beef, or raising sheep for wool and meat. The treatment of farm animals became a growing concern in Britain in the late 20th century. Factory farming of chickens produced protests, as did the practice of raising calves in confined spaces. Concerns over animal welfare have led some British citizens to become vegetarians.

Grave concern arose in the 1980s over cattle infected with bovine spongiform encephalopathy (BSE), popularly known as mad cow disease. Human beings who eat infected beef may develop Creutzfeldt-Jakob disease (CJD). BSE was first discovered in Britain in 1986, and the British government took steps to eradicate the disease and compensate farmers for lost cattle. Consumer confidence in British beef declined, and in 1996 the European Union banned Britain from exporting any beef or beef by-products. After considerable action by the government to halt the spread of the disease, the EU lifted the ban in 1999.

Livestock farmers in Britain faced another crisis in 2001, when several cases of foot-and-mouth disease were detected in a British slaughterhouse. The highly infectious viral disease, which rarely infects humans, can quickly cripple cattle, sheep, pigs, and other animals with cloven hooves. The dangers of foot-and-mouth disease are largely economic, since infected animals often lose weight or stop producing milk. As the outbreak spread across the British countryside, the British government ordered the slaughter of more than 1 million animals to contain the virus. Cases of the disease were also detected in Belgium, France, and Ireland, leading to the destruction of herds in those countries.

D.2.

Crop Farming

Most crop farming in Britain takes place in eastern and south central England and in eastern Scotland. The leading crops in the early 2000s were wheat, sugar beets, potatoes, barley, and rapeseed. As concern has grown about the use of fertilizers, pesticides, and biologically engineered seeds and their effect on the environment, some farmers have turned to organic farming, with support from the government.

D.3.

Agricultural Policy

The British government began subsidizing the prices paid for agricultural products after World War II as a way to make farming profitable. In 1973 Britain joined the European Economic Community (EEC, now the European Union), and since then agricultural policy has been determined primarily by the EU’s Common Agricultural Policy (CAP). This policy seeks to keep the agricultural market stable, ensure that farmers earn a fair living, and provide consumers with affordable food supplies. As a result of EU policies, products coming into Britain from non-EU countries are taxed, surplus products are bought and stored for later sale, and the cost of exports is subsidized if prices are low.

The British have criticized CAP, primarily because the British farming sector is smaller than the farming sectors of most EU nations. British farmers receive less monetary support from the EU than British taxpayers and consumers pay into CAP, and some British taxpayers and consumers feel they are supporting inefficient European farmers.

Criticism has increased as greater agricultural yields around the world have led to more CAP subsidies for European agriculture. CAP implemented various reforms in 1992 to reduce costs, subsidies, and stockpiles of foodstuffs, such as the surpluses of butter and wine in the 1970s and 1980s. Farmers have been encouraged to take land out of production, to adopt environmentally sound farming methods even though this may decrease production, and to place production quotas on certain products in an effort to reduce the amount of subsidy money they receive. Even so, CAP policies designed to protect small farms, particularly in France and Germany, continue to anger British taxpayers.

E.

Forestry

Britain was once covered with thick forests, but over the centuries the expanding human population steadily deforested nearly the entire country, felling trees for fuel and building materials. Despite the fact that trees grow quickly in the cool, moist climate of the United Kingdom, only remnants of the great oak forests remained at the end of the 20th century.

In 1919 only 5 percent of the United Kingdom was forested; as of 2005 this had increased to 11.7 percent. Most of the forested area consists of commercially planted, fast-growing coniferous trees in Wales and northeastern Scotland. Britain has made efforts to increase the managed forest areas. Imports of wood and wood products are substantial because Britain produces only a small proportion of the wood it needs.

F.

Fishing

At one time the fishing industry not only provided a cheap source of protein for Britons, but it was also the training ground for the Royal Navy. Today fishing is a far less vital economic activity. Fish and fish products are both imported into and exported from Britain.

In recent decades overfishing and conservation restrictions imposed by the European Union have caused a decline in the deep-sea industry. As with agriculture, fisheries policy in Britain is largely determined by the EU through the Common Fisheries Policy (CFP). It aims to protect the remaining fish stocks in European waters so that they can recover from severe overfishing. There are strict quotas on the kinds and amounts of fish that may be caught, and regulations detail the appropriate equipment to use. The CFP has caused some hardship to the British fishing fleet, especially through restrictions on the number of days that ships are permitted to fish.

G.

Mining

Mining has been enormously important in British economic history. Salt mining dates from prehistoric times, and in ancient times traders from the Mediterranean shipped tin from the mines of Cornwall. These tin mines are exhausted today, and the last tin mine in Britain closed in 1998. Britain’s abundant coal resources were critical during the Industrial Revolution, especially because the coal was sometimes conveniently located near iron and could be used in iron and steel manufacture. These mined resources were so important to the Industrial Revolution that entire populations moved to work at coal and iron sites in the north and Midlands of England. Today the iron is exhausted, and the high-quality coal is depleted.

Raw materials for construction form the bulk of mineral production, including limestone, dolomite, sand, gravel, sandstone, common clay, and shale. Some coal is still mined, but petroleum and natural gas are far more important. Mining and quarrying, including oil and gas extraction, accounted for 2.6 percent of the GDP in the early 2000s and employed less than 1 percent of the labor force.

H.

Manufacturing

The history of manufacturing in Britain is unique because of Britain’s role as the birthplace of the Industrial Revolution. During the Middle Ages the production of woolen textiles was a key industry in Britain. In the 16th and 17th centuries, new industries developed. These included silk weaving, garment making, and the manufacturing of hats, pottery, and cutlery. All of these operations were generally conducted in small craft shops and were labor-intensive.

In the 18th century a number of changes in British society prepared the way for the Industrial Revolution. Colonial and commercial expansion created markets in North America, Africa, and parts of Asia. Coal and iron mining developed as Britain’s dwindling forests created the need for another energy source, and new smelting techniques made iron implements cheaper to produce. An agricultural revolution in the 18th century introduced new crops and crop rotation techniques, better breeding methods, and mechanical devices for cultivation. This coincided with a rapid increase in population, in part due to better hygiene and diets, providing both consumers and workers for the new manufacturing operations.

During the Industrial Revolution new methods of manufacturing products were developed. Instead of being made by hand, many products were made by machine. Production moved from small craft shops to factories, and population shifted to urban areas where these factories were located. Cotton textile factories using newly developed steam-powered machines produced more goods at a lower cost per item. Textiles, shipbuilding, iron, and steel emerged as important industries, and coal remained the most important industrial fuel. The Industrial Revolution dramatically raised the overall standard of living.

The structure of British industry changed substantially in the last half of the 20th century. The coal mining and cotton textile industries declined sharply. As coal production declined, oil production replaced it as a major industry. Motor vehicle production became a significant part of the industrial base but was subject to severe foreign competition. As incomes increased, consumer demand rose for durable goods such as cars and kitchen appliances. British industrial production also expanded into communications equipment, including fiber optics, computers, computer-controlled machine tools, and robots. Growing industries in recent decades include paper products and publishing; chemicals, such as pharmaceuticals; rubber and plastics; and electronic and optical equipment.

Scotland is also a major producer of computers. The so-called Silicon Glen between Glasgow and Edinburgh employs thousands of people in the electronics industry and is the site of many overseas computer firms. Scotland and Northern Ireland are still noted for their production of whiskey and textiles, especially linen from Northern Ireland and tweed from Scotland.

Britain remains an important manufacturing country, although it imports large quantities of manufactured goods from overseas, particularly vehicles and electronic equipment. The automobile manufacturing industry had declined during the 20th century until Japanese manufacturers opened plants in Britain in the 1990s. About 12 percent of the workforce was engaged in manufacturing in the early 2000s, and manufacturing accounted for about 16 percent of the gross domestic product (GDP).

I.

The Service Sector

One sign of a highly developed nation is a large and sophisticated service sector. When a nation’s economy matures, its service sector grows rapidly while its manufacturing sector stabilizes or diminishes. This was the case with Britain. In the early 2000s Britain’s service sector accounted for nearly three-fourths of the GDP and employed almost fourth-fifths of the workforce. The service industries include finance, retailing, wholesaling, tourism, business services, transport, insurance, investment, advertising, public relations, market research, education, administration, and government and professional services.

Britain developed sophisticated banking, financial, insurance, and shipping operations as early as the 17th century to support its expanding international ocean trade. Lloyd’s of London, an early insurance house, began when a number of people willing to underwrite, or insure, the success of voyages gathered regularly at Lloyd’s Coffee House in London to share shipping news. Lloyd’s now insures approximately half of the world’s shipping and cargoes as well as much of the aircraft industry.

Banking and financial services have always played an important part in London’s economy, and levels of specialization and expertise have been high. This has attracted ever-larger amounts of business from an increasingly global economy. Today, London has the largest concentration of international banks in the world and is the world’s leading center for currency trading. Leeds, Manchester, Cardiff, Liverpool, Edinburgh, and Glasgow have developed as financial centers in recent decades. London is also the world’s leading center for insurance and handles 20 percent of the world’s insurance business. The financial services sector expanded especially rapidly after the deregulation of the stock exchange in 1986. By the early 2000s financial and other business services, including real estate, accounted for more than one-quarter of Britain’s GDP and employed nearly one-fifth of the workforce.

Several significant developments in the service sector took place toward the end of the 20th century. Telecommunications became a dynamic growth industry, and independent retailing declined sharply.

The leisure industry grew dynamically, commanding an increasing proportion of consumer spending. Organizations catering to international conferences and exhibitions also have been a growth area. These organizations have been particularly successful because Britain is one of the world’s top locations for business meetings and trade shows.

Tourism has become an increasingly important economic sector in Britain, employing at least 7 percent of the workforce. Britain is one of the world’s top tourist destinations, annually attracting about 25 million overseas visitors in the early 2000s—more than a 50 percent increase over the early 1980s. Under the Development of Tourism Act of 1969, a government organization, the British Tourist Authority, was set up to attract overseas visitors and to improve tourist accommodation and travel conditions.

J.

Energy

Britain has more energy resources than any other country in the European Union, chiefly in the form of oil and natural gas. Other energy sources include coal and nuclear power. Scotland has some hydroelectric power stations. Alternative energy sources, notably wind farms, are being developed in various parts of Britain.

J.1.

Oil and Natural Gas

Oil was discovered in the North Sea in 1969. By the 1980s it was adding significantly to the British economy as oil exports increased during a period of high oil prices. British taxpayers also benefited from the taxes and royalties paid by the oil and gas companies, which are licensed by the crown to search for and produce oil and gas. However, oil production peaked during the 1990s and has since declined.

Gas has been used since the 19th century in London and other places, but it was manufactured from coal. Since the 1960s, when offshore gas fields were discovered, natural gas has been used. In the early 2000s natural gas accounted for more than two-fifths of the fuel consumption in Britain.

J.2.

Coal

Coal was Britain’s traditional source of energy for about 300 years. It was the main source of fuel during the Industrial Revolution, when it was mined, used, and exported in large quantities. Peak production occurred in 1913, when more than 300 million tons were mined. Coal has become far less important to the British economy. In the past 20 years cutbacks in coal production have been severe, particularly since the end of a bitter miners’ strike in 1984. Production in 2003 was 28 million tons. Coal supplies an ever-smaller proportion of Britain’s total energy needs.

J.3.

Nuclear Power

Britain was a pioneer in the development of nuclear power plants (see Nuclear Energy), opening the world’s first commercial-scale power station in northwestern England in 1956. By 2003 nuclear power provided 23 percent of the electricity produced in Britain. Modern nuclear power stations built after 1975 were privatized in 1996, while the government maintained ownership of six older power plants built between the 1950s and the 1970s because they were nearing the end of their useful life. Decommissioning nuclear power stations when they cease being productive has proven costly, and radioactive waste has been the most serious contributor to pollution since the 1940s.

K.

Transportation

Britain has historically been an innovator and world leader in many forms of transportation, from shipping to rail systems to aviation.

K.1.

Shipping

Because Britain is an island, shipping has been important for centuries. The irregular coastlines of the British Isles provide many natural harbors, and Britain’s gentle, navigable rivers have always been conducive to shipping. Seafaring skills were directly connected to Britain’s growth as a naval power. As early as the 16th century Britain defeated Spain, its greatest rival at sea. In the 17th and 18th centuries France was defeated, then Germany in the early 20th century. Prior to World War II, Britain had the largest merchant fleet in the world, a fleet that sailed throughout the vast British Empire and was protected by the Royal Navy. Britain continued to be the world leader in shipping until World War II, when submarine attacks by Germany sank many British vessels and the tremendous output of the American shipbuilding industry made the United States the world leader.

Today many British shipping firms operate under foreign flags to avoid the more stringent British shipping regulations, including higher wages for crews. Most British passenger shipping involves ferry trips to the continent of Europe or to Ireland. Tankers carrying oil and dry bulk cargo make up the majority of oceanic shipping. British ports were nationalized in the late 1940s, and in recent years most have moved into the private sector or are governed by independent trusts. The most important port in the United Kingdom is London; other important commercial ports are at Forth in Scotland, Grimsby and Immingham in eastern England, Liverpool in western England, and Southampton and Dover in southern England.

K.2.

Canals

Canals were built in Britain to link rivers, and most of Britain’s canals were built as part of the transportation revolution that took place between 1750 and 1840. Canals were built by gangs of laborers known as navigators, a name that came from their task of creating channels of inland navigation. This term was soon shortened to “navvies.” The canals were important during the Industrial Revolution for transporting goods, but by the 1830s they had to compete with the new railways, which quickly surpassed them. Thereafter, canals were used to carry extremely bulky materials.

Today Britain has about 3,200 km (about 2,000 mi) of canals and navigable rivers, of which about 620 km (about 390 mi) are commercial waterways. The most important of these are the Manchester Ship Canal, which is the largest canal in Britain; the Thames; and the Caledonian Canal across northern Scotland, which provides a navigable waterway linking the North Sea and the Atlantic Ocean. The rest of the rivers and canals are used for recreation and form part of Britain’s historical heritage.

K.3.

Railways

The Victorian era was also known as the Railway Age. The railroad can be considered the child of the British coal mines because carts on tracks were used to haul coal. These precursors of the railroad were then combined with steam engines, which led to further technological innovations. An added advantage in the development of railroads in Britain was that the most populated parts of the country, where this mode of transportation was needed, were relatively flat.

The world’s first public railway was the Stockton and Darlington, which opened in 1825. A period of hectic railway building followed for the next quarter century as different companies competed to lay track. It was a massive undertaking that employed vast armies of laborers and altered the British landscape by digging through hills and constructing bridges and tunnels. In a short time the basic grid of Britain’s railways was in place.

Over the ensuing century smaller railway companies were absorbed or merged into a few large companies. In 1948 the government nationalized the four remaining companies, and in the 1960s they became the British Railways Board. In 1955 a modernization program began to replace steam trains with diesel and electric ones. The last steam locomotive was withdrawn in 1968. Around this time intense competition from road transport made it necessary to cut costs, and many unprofitable branch railway lines closed.

Railroads were part of the wave of privatization that took place in the early 1990s. The complicated procedure was based on the Railway Act of 1993. The infrastructure, including tracks and train operations, was put into the hands of Railtrack, a government-owned company that was privatized by selling stock to private investors. Passenger operations were split into 25 operating units, each franchised to a private firm given the right to provide passenger service to a particular region of Britain. In 1995 freight operations in Britain were divided among private companies based in different parts of the country. The government appoints a rail regulator and a franchising director to ensure that rail arrangements are fair to companies and passengers. The moves to fully privatize BR were highly contentious and generated considerable criticism within Britain.

The fractured nature of rail organization was forcefully brought home in the late 1990s and early 2000s with a series of high-profile rail accidents. The accidents were blamed in part on the separation of ownership of rail and rolling stock and on the needs of privatized companies to provide shareholder income at the perceived expense of passenger safety. After a crash in 2000 in Hertfordshire caused by faulty rails, the entire railway network was examined and track replaced, leading to severe delays to rail journeys for months. Railtrack was replaced in 2003 by Network Rail, a not-for-profit company.

A railway tunnel beneath the English Channel was completed in 1993, connecting England and the European continent. The main Channel Tunnel, which is 50.4 km (32 mi) long, runs from Folkestone, England, to Calais, France. Trains carry both passengers and freight through the tunnel. Motorists can drive their cars on and off the train. The trip through the tunnel takes about 35 minutes.

K.4.

The London Underground

The London Underground operated 408 km (254 mi) of railway in the early 2000s, of which about 42 percent is under the ground. Known as the tube, the system serves 275 stations, with more than 500 trains running during peak periods. Expansion of the system has continued; the Jubilee Line, connecting the southeast and east to central London, was completed in 1999. Much of the system is old, however, and breakdowns are a recurring problem. Despite its problems, the Underground provides reliable public transportation for an impressive number of commuters across a large metropolitan area. There are also urban rail systems in Glasgow, Liverpool, Tyne and Wear, Manchester, and Sheffield.

K.5.

Air Travel

Along with other industries, Britain’s airlines were nationalized after World War II and then were privatized in the late 1980s. British Airways is one of the world’s leading airlines and has one of the largest fleets in Europe. It was formed in 1974 by combining the two state-run airlines, British Overseas Airways Company (BOAC) and British European Airways (BEA). Together with Air France, British Airways in 1976 introduced the first supersonic passenger service, using the Concorde aircraft. Concorde service was discontinued in 2003. Britain has numerous independent airlines, as well.

London’s main airports, Heathrow and Gatwick, are among the world’s busiest centers for international travel. Heathrow handles more than 67 million passengers a year, and is the world’s busiest airport for international travel. There are nearly 150 other licensed civil airfields in Britain.

In 1970 Britain joined Airbus Industrie, a European consortium of aircraft manufacturers. In 2001 Airbus became a single integrated company, owned 80 percent by the European Aeronautic Defense and Space Company (formed from the merger of the French, German, and Spanish partners in the Airbus consortium) and 20 percent by BAE Systems PLC, formerly known as British Aerospace.

K.6.

Roads

About 90 percent of all passenger travel in Britain is by road, and primarily by private car rather than public transportation. The unstoppable growth in passenger cars during the 20th century was paralleled by rising public concern about the environmental effects of increased traffic and especially concern about air pollution. In 1994 the government slowed its road-building program. The move was in part a response to research findings that tended to confirm environmentalists’ claims that the main effect of building new roads and motorways had been to encourage extra traffic and not, as intended, to improve the flow of existing traffic. Road building began to pick up again in the early 2000s. The Transport Act of 2000 gave local authorities the power to charge drivers for use of the roads in an effort to reduce congestion. In 2003 London motorists began to pay for the privilege of driving into the center of the city.

L.

Communications

L.1.

The Post Office

The Post Office was founded in 1635 and is noted in history for issuing the famous Penny Black, the world’s first adhesive stamp, in 1840. In 1969 the Post Office was reorganized as a public corporation. Today, its operations are divided into three major brands: the Royal Mail, Parcelforce Worldwide, and the Post Office. The Royal Mail handles the collection and delivery of mail, Parcelforce handles parcel delivery, and the Post Office handles retail services to the public. The Post Office also handles the payment of government pensions and welfare benefits, issues licenses, collects utility company bills, and offers banking services for certain banks. It also issues foreign currency and traveler’s checks, sells travel insurance, and acts as the agent for Western Union’s money transfer service. The Post Office directly operates only about 500 sites; the other post offices in the United Kingdom are franchises.

The Royal Mail monopoly ended in 2006. Other licensed operators are now able to collect mail from businesses and from their own collection boxes, and to transport and deliver mail to business and residential customers. The Royal Mail is still required to provide a universal collection and delivery service, delivering mail at a uniform price to all UK addresses.

L.2.

Telecommunications

Britain has one of the world’s largest and most technologically advanced telecommunications systems. Telecommunications were officially the responsibility of the Post Office until 1981, when British Telecom was founded to take over telecommunications management. British Telecom was privatized in 1984 and in 1991 changed its name to BT. BT agreed to a merger with the U.S. telecommunications company MCI in 1997 to form Concert, one of the biggest companies of its kind in the world. A number of other companies offer telecommunications services such as mobile communications, overseas wireless and cable, and cable television. The National Grid, the privatized electricity transmission company, has used its pylon network to set up a fiber-optic telecommunications system, and cable television companies also offer telephone services.

L.3.

The Media: Radio, Television, and the BBC

Historically, broadcasting in Britain has been treated as a public service responsible to the people through Parliament. In recent decades broadcasting has been opened up to market competition. The British Broadcasting Corporation (BBC), set up in 1922, is a large public television and radio service that is primarily supported by license fees paid annually by each household. In 1955 Independent Television (ITV) stations were permitted and began to present some competition to the BBC. The government licenses and regulates broadcasting through the Independent Television Commission (ITC) and the Radio Authority. Today Britain has 5 terrestrial television channels and almost 200 radio stations. There are numerous satellite companies based in Britain, and an increasing number of cable companies.

BBC 1 and BBC 2 are complementary national television networks—one provides a range of programs meant to have a wide-ranging appeal, while the other broadcasts more innovative shows geared toward specific groups. The BBC carries no advertising and regularly transmits educational broadcasts. The proceedings of Parliament are freely broadcast on both radio and television. Britain also has three ITV channels that are licensed out to private television companies in 14 designated television regions. These private companies support themselves with advertising and sponsors, but are regulated by the ITC. Wales presents public broadcasts on a Welsh-speaking channel. These broadcasters face competition from digital satellite and cable television stations.

The BBC has five radio networks that broadcast throughout Britain. There are also three independent national radio services (classical music, rock music, and talk radio), and about 250 independent local radio services. These independent radio services are awarded licenses by the Radio Authority. BBC World Service Radio broadcasts around the world in English and 45 other languages, carrying extensive programs and high-quality news broadcasts.

In 1990 the Broadcasting Act was passed in an attempt to guarantee standards of decency, accuracy in news coverage, and balanced presentations of controversial topics, while encouraging more competition in television and radio. The Broadcasting Act passed in 1996 addressed the new digital technologies in broadcasting that would allow for more radio and television services to be made available to the public. To handle this increased broadcasting capability, the government allowed the licensing of at least 18 more national television channels and at least 12 more radio services. The Broadcasting Standards Commission was set up in 1997 to set standards for radio and television broadcasts, to monitor violent and sexual content, and to respond to complaints about broadcasts.

L.4.

The Press

Britain has one of the largest publishing industries in the world. There are ten morning daily newspapers and nine Sunday papers published nationally. In addition, hundreds of regional and local newspapers and some 7,000 periodicals, mainly weeklies and monthlies, are published in the United Kingdom. Noted weeklies include the Economist, the New Scientist, the New Statesman, the Spectator, and the Times Literary Supplement.

Britain is home to some of the oldest newspapers in the world. The Observer and the Times have both been published since the late 18th century. In the past newspaper publishing was concentrated in Fleet Street in London, but the national papers have moved their editorial and printing facilities away from Fleet Street or out of London. British newspapers range from “quality” papers that focus on the news to “popular” papers that emphasize entertainment. Quality newspapers, such as the Financial Times and the Guardian, include the most respected newspapers. The popular papers—the Sun, the Daily Mirror, and the Daily Star—are referred to as tabloids and are characterized by sensationalist stories, gossip, and lavishly illustrated stories. Other papers, such as the Daily Mail and Express, offer a middle ground between news and entertainment stories.

M.

Foreign Trade

Foreign trade has been vital to Britain for hundreds of years. Britain’s prominent position in world trade during the 18th and 19th centuries resulted largely from its geographical isolation from the wars and political troubles that afflicted the centers of trade on the European Continent. The development of trading companies, such as the East India Company and Hudson’s Bay Company; colonial expansion; and naval control of the seas also contributed to Britain’s preeminence.

Britain remained one of the world’s leading trading nations in the 21st century. It generally ran a large trade deficit, with imports exceeding exports. Visible exports, or trade in merchandise, account for only about half of Britain’s overall trade. Trade in services—including sea transport, civil aviation, travel, government services, investment income, transfers, and financial services—accounts for the other half. Much of Britain’s trade is with the European Union, especially Germany, France, and Netherlands. The United States is another major trading partner.

N.

Banking and Financial Services

Britain is one of the world’s leading financial centers. Banking, finance, insurance, and other business services accounted for about more than a quarter percent of Britain’s output in the early 2000s and more than 5 million people were employed in this sector.

The Bank of England, chartered in 1694, was nationalized in 1946 and is the only bank that issues banknotes in England and Wales. Several banks in Scotland and Northern Ireland issue currencies in limited amounts. After the Labour government was elected in 1997 the Bank of England was given operational independence in monetary policy. This means it can set interest rates independent of the government in power, much as the Federal Reserve does in the United States. There are more than a dozen major commercial banks in Britain, including Lloyds TSB, Barclays, National Westminster, and HSBC. The postal system, savings banks, and cooperative and building societies also provide some banking services.

Historically, the financial services industry has been based in the City of London in an area called the Square Mile. The City is a small part of the Greater London metropolitan area that surrounds it. Financial services are still concentrated in the City, although several provincial cities have developed their own financial centers. The City has the greatest concentration of foreign banks in the world and one of the world’s largest insurance markets. It is also the world’s main center for trading in stock of overseas companies. One of the world’s largest financial derivatives markets is in the City, as well. Financial derivatives are contracts to buy or sell, at a future date, financial documents such as stocks and bonds.

The London Stock Exchange, one of the largest exchanges in the world, has always been a focus of international trade. In 1986 it was substantially deregulated, an event known as the Big Bang in financial circles. This led to the rapid expansion of products, markets, and numbers of employees, a movement that slowed in the early 1990s but has since rebounded.

O.

Currency

The pound sterling (£1), consisting of 100 pence, is the basic unit of currency in Britain (£0.50 equal U.S.$1; 1996 average). Before Britain converted its currency to the decimal system between 1968 and 1971, the pound equaled 20 shillings and each shilling was made up of 12 pence. Bookkeeping had to be done using three columns and the decimal system could not be applied.

The European Union established the euro as its unit of currency, and other EU members made the transition to the euro between 1999 and 2002. However, the British government elected not to do so and instead retained the pound as its currency.

P.

Tourism

Britain is one of the world’s foremost travel destinations, and tourism is an essential part of Britain’s income. It employed about 1.4 million people and contributed about 3.5 percent to the GDP in the early 2000s. The British Tourist Authority, which is supported by the government, promotes tourism in Britain and maintains hundreds of Tourist Information Centres to assist visitors. England, Scotland, Wales, and Northern Ireland have their own government-supported tourist boards as well.

Visitors to Britain come from all over the world, attracted by Britain’s heritage and arts, historic buildings, monuments, museums, and galleries. In 2006, 30.7 million overseas visitors traveled to Britain. The largest number came from the United States, followed by France, Germany Ireland, and Netherlands.

London, the most popular tourist destination, is crowded with tourists throughout the year. Among the sites regularly visited by millions are the Tower of London, the Houses of Parliament, Buckingham Palace, and Westminster Abbey. At night visitors enjoy the hundreds of theaters and pubs in London.

Northwest Wales has many excellent castles, among them Conwy, Caernarfon, and Harlech. In Scotland, historic Edinburgh Castle looms over the capital. Great cathedrals from the Middle Ages still dominate the skylines of many English cities, including Salisbury, Durham, and Canterbury. In Wales the remains of Tintern Abbey and the small but beautiful Saint David’s Cathedral are outstanding.

Stately homes are abundant throughout Britain. Among the more famous is Blenheim Palace, the home of the Churchill family. Hampton Court Palace, just outside of London, was one of the homes of Henry VIII. The Palace of the Holyrood House in Scotland was once the home of Mary, Queen of Scots. Among other worthwhile places to visit are Oxford and Cambridge, both university towns with many ancient buildings, and the Tudor home in which William Shakespeare was born in the town of Stratford-upon-Avon.