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Key Data on the UK Economy

Friday, April 18, 2014
by Geoff Riley

At this time of the year many students are wanting to get up to speed with some of the important data for the UK economy so that they can consider including it in some of their exam answers. Here is a one page revision handout on the UK drawing on a large number of indicators and (as far as possible) providing the data for 2013. Sources used include the IMF, OECD and UK Treasury.

Key Data on the UK Economy from tutor2u
Take a Zondle quiz on the UK economy!

Policies to reduce collusion

by Tom White

Investigating and understanding price fixing and collusion are an important part of analysing behaviour in oligopolistic markets. Not all of these corrupt practices are headline grabbers: most are in such unglamorous areas as ball-bearings and cargo rates, which go on unnoticed for years, quietly bumping up the end cost to consumers of all manner of goods and services.

What steps can be taken to undermine the incentives for business to engage in these illegal activities?

According to The Economist, collusion among producers to rig prices and carve up markets is thriving, with the cartels growing ever more intricate and global in scope (more detail here). Competition authorities have uncovered several huge conspiracies in recent years, including one in which more than 20 airlines worldwide had fixed prices on perhaps $20 billion of freight shipments. They were fined a total of $3 billion; and so far the compensation claims from ripped-off customers comfortably exceed $1 billion. One academic study found that the typical cartel raised the price of the goods or services in question by 20%. Another suggested that cartels were robbing poor countries’ consumers of tens of billions of dollars a year: if so, negating all the aid that rich countries’ governments send them.

Investigators are still unravelling a huge global network of cartels among suppliers of a wide range of car parts. Makers of seat belts, radiators and foam seat-stuffing have had hefty fines slapped on them. Price-fixing has infected high finance, too. Some of banking’s biggest names stand accused of fiddling interest-rate and foreign-exchange benchmarks. It makes quite a depressing list. According to the authors, the good news is that enforcement has got tougher, smarter and more co-ordinated. 

What policies are recommended?

Gone are the days when price-fixers got a slap on the wrist. Firms can expect big fines, and bosses can go to prison. Since many cartels now operate across borders, so do investigators: American and Japanese trustbusters joined forces to flush out the car-parts cartels. And incentives for whistleblowers have also increased: around 50 countries now offer immunity or reduced penalties for snitches.

One study of the issue so far concluded that, given the still-low risk of detection, collusion pays. Yet beyond a certain point—which the fines now imposed by American and European regulators have probably reached—fines inflict so much damage on guilty companies that they undermine competition instead of enhancing it. The answer might be stiffer prison sentences, particularly for senior executives.

More can be done to aid detection, too. Statistical tests to “screen” markets for unusual pricing patterns helped uncover the interest-rate and foreign-exchange scandals. Potential conspirators may think twice if they suspect their market is being screened. Deploying such technology is costly; and increased funding is a big ask at a time of public-sector cut backs. But cartel authorities in Europe and America generally bring in far more than they cost to run, so extra money pushed in their direction is likely to be well spent.

Another way to discourage the formation of cartels is to factor the increased risk of collusion into scrutiny of proposed mergers. Price-fixing is likelier, and easier to sustain, with fewer players. Blocking a few more mergers—whose benefits anyway tend to be exaggerated—might both save companies from themselves and spare their customers the costs of collusion.

Nigeria becomes the biggest economy in Africa after GDP revisions

by Tom White

Measuring the size of an economy is difficult on so many levels. Of course, there’s always the GDP debate, which asks about the best way to measure economic and social progress. But even measuring GDP is a huge challenge. Nigeria has just experienced a vast 89% increase in GDP having ‘rebased’ its figures.

The Economist explains rebasing: GDP is typically measured by reference to the shape of the economy in a “base” year. Statisticians sample businesses in different industries to see how fast they are growing. The weight they give to each sector depends on its importance to the economy in the base year. As time passes the figures become less and less accurate. Nigeria’s old GDP data relied on a hopelessly dated snapshot of its economy in 1990. The new figures (which have 2010 as the base year) give due weight to fast-growing industries such as mobile telecoms and film-making that have sprung up since then.

Indeed the telecoms industry accounts for more than a quarter of the upgrade in GDP. In 1990 the state telephone company had just a few hundred thousand fixed-line customers. There are now around 115m mobile-phone lines in use in Nigeria. Manufacturing also looms larger than it did. Factories that have opened since 1990 are being counted. As a result the sector’s share of the economy has grown from less than 2% of GDP to nearly 7%. Film-making had not shown up at all in the old figures; now the industry’s size is estimated at around 1.4% of GDP.

Nigeria’s number-crunchers have improved the gathering of statistics in other ways too. For instance, the old GDP figures were based solely on estimates of output. The new ones are reconciled with separate surveys of spending and income. Perhaps the greatest advance is the inclusion of the activity of small businesses. The sample of firms from which the GDP data are calculated has increased tenfold to around 850,000 establishments, including many small ones. The informal shops that account for the bulk of retail and wholesale trade are now part of the GDP picture. Indeed after telecoms, trading makes up the biggest share of the revision.

In another article, we are reminded of the challenges Nigeria still faces.

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