Country - Britain

Country Profile: United Kingdom
EXECUTIVE SUMMARY
Britains country profile
Office Nae The United Kingdom of Great Britain and Northern reland
Capital London
Area 244,103 sq. km
E!port " Iport Stu#y
Britain is the fifth largest trading Nation in the world. Britain's overseas trade is
mainly with other developed countries. Germany overtook the United States in
1990 to become Britain's biggest overseas market for goods. t is also
Britain's tenth largest export market, rose by 13 per cent by value in 1996,
while Japan is Britain's fifth largest supplier.
Britains Econoy $ %e&elopent
Britain's economy is based primarily on private enterprise, with the private
sector accounting for about four-fifth of both output and employment. This
chapter talks of: Economic Performance, Economic Strategy, Public
Finance, Government and ndustry etc.
In#o " Britis' Relations'ips
Moves in ndia to liberalise the economy and free the constraints on both
ndian business and foreign investors have transformed the commercial
relationship. British consultants are in demand throughout ndia. They have
been active in advising ndian clients on major engineering and infrastructure
projects. British financial institutions and international law firms are advising
ndian clients on rising capital and the issue of global depository receipts. a
trust exists to sponsor young industrialists from Britain and ndia to spend 18
months in each other's country to research and gain practical experience in
industry.
Fortune Institute of International Business, New Delhi
1
OB(ECTIVES
To assess UK as a market and to study it's Geographic Location as a
strategic trading Partner with ndia.
To Analyse UK's major trading partners and to study its Export and
mports with ndia and rest of the world.
To Analyse UK's economic development.
To study UK's Relations with ndia and to provide a strategic outline for
ndo- British Partnership.
2
MET)O%O*O+Y
%ata Sources
The entire data was collected through Primary & Secondary sources. The
Research Approach was informal nterviews.
,riary Sources
Data was collected through personal interviews by visiting officials at the
British high commission and British Library.
Secon#ary Sources
Data was collected by visiting the British Council Library as well as the Library
of the British High Commission and also through internet.
3
*IMITATIONS
Some of the data was old as the new data had not been updated at the
British High Commission's statistics.
Data for a long period of time pertaining to UK alone would not be
assessed due to unavailability of data.
After Sept 11 problem it was difficult to get permission to enter British High
Commission.
4
COUNTRY ,RO-I*E
Bac./roun#0
Great Britain, the dominant industrial and maritime power of the 19th century,
played a leading role in developing parliamentary democracy and in advancing
literature and science. At its zenith, the British Empire stretched over one-
fourth of the earth's surface. The first half of the 20th century saw the UK's
strength seriously depleted in two World Wars. The second half witnessed the
dismantling of the Empire and the UK rebuilding itself into a modern and
prosperous European nation. As one of five permanent members of the UN
Security Council, a founding member of NATO, and of the Commonwealth, the
UK pursues a global approach to foreign policy; it currently is weighing the
degree of its integration with continental Europe. A member of the EU, it chose
to remain outside the European Monetary Union for the time being.
Constitutional reform is also a significant issue in the UK. The Scottish
Parliament, the National Assembly for Wales, and the Northern reland
Assembly were established in 1999.
5
+eo/rap'y
*ocation0
Western Europe, islands including the northern one-sixth of the island of
reland between the North Atlantic Ocean and the North Sea, northwest of
France
+eo/rap'ic coor#inates0
54 00 N, 2 00 W
Area0
total: 244,820 sq km
water: 3,230 sq km
note: includes Rockall and Shetland slands
land: 241,590 sq km
Area 1 coparati&e0
slightly smaller than Oregon
*an# 2oun#aries0
total: 360 km
border countries: reland 360 km
Coastline0
12,429 km
Maritie clais0
continental shelf: as defined in continental shelf orders or in accordance with
agreed upon boundaries
exclusive fishing zone: 200 NM
territorial sea: 12 NM
Cliate0
temperate; moderated by prevailing southwest winds over the North Atlantic
Current; more than one-half of the days are overcast
6
Terrain0
mostly rugged hills and low mountains; level to rolling plains in east and
southeast
Ele&ation e!trees0
lowest point: Fenland -4 m
highest point: Ben Nevis 1,343 m
Natural resources0
coal, petroleum, natural gas, tin, limestone, iron ore, salt, clay, chalk, gypsum,
lead, silica, arable land
*an# use0
arable land: 26%
permanent crops: 0%
other: 74% (1998 est.)
Irri/ate# lan#0
1,080 sq km (1998 est.)
Natural 'a3ar#s0
winter windstorms; floods
En&ironent 1 current issues0
Continues to reduce greenhouse gas emissions (has met Kyoto Protocol target
of a 12.5% reduction from 1990 levels and intends to meet the legally binding
target and move towards a domestic goal of a 20% cut in emissions by 2010);
by 2005 the Government aims to reduce the amount of industrial and
commercial waste disposed of in landfill sites to 85% of 1998 levels and to
recycle or compost at least 25% of household waste, increasing to 33% by
2015; between 1998-99 and 1999-2000, household recycling increased from
8.8% to 10.3%
7
En&ironent 1 international a/reeents0
Party to: Air Pollution, Air Pollution-Nitrogen Oxides, Air Pollution-Sulphur 94,
Air Pollution-Volatile Organic Compounds, Antarctic-Environmental Protocol,
Antarctic-Marine Living Resources, Antarctic Seals, Antarctic Treaty,
Biodiversity, Climate Change, Desertification, Endangered Species,
Environmental Modification, Hazardous Wastes, Law of the Sea, Marine
Dumping, Marine Life Conservation, Nuclear Test Ban, Ozone Layer
Protection, Ship Pollution, Tropical Timber 83, Tropical Timber 94, Wetlands,
Whaling
signed, but not ratified: Air Pollution-Persistent Organic Pollutants, Climate
Change-Kyoto Protocol
+eo/rap'y 1 note0
lies near vital North Atlantic sea lanes; only 35 km from France and now linked
by tunnel under the English Channel; because of heavily indented coastline, no
location is more than 125 km from tidal waters
,opulation0
59,778,002 (July 2002 est.)
Nationality0
Et'nic /roups0
English 81.5%, Scottish 9.6%, rish 2.4%, Welsh 1.9%, Ulster 1.8%, West
ndian, ndian, Pakistani, and other 2.8%
Reli/ions0
Anglican and Roman Catholic 40 million, Muslim 1.5 million, Presbyterian
800,000, Methodist 760,000, Sikh 500,000, Hindu 500,000, Jewish 350,000
*an/ua/es0
English, Welsh (about 26% of the population of Wales), Scottish form of Gaelic
(about 60,000 in Scotland)
8
*iteracy0
definition: age 15 and over has completed five or more years of schooling
total population: 99% (2000 est.)
male: NA%
female: NA%
Country nae0
Conventional long form: United Kingdom of Great Britain and Northern reland
conventional short form: United Kingdom
abbreviation: UK
+o&ernent type0
constitutional monarchy
Capital0
London
A#inistrati&e #i&isions0
England - 47 boroughs, 36 counties*, 29 London boroughs**, 12 cities and
boroughs***, 10 districts****, 12 cities*****, 3 royal boroughs******;
%epen#ent areas0
Anguilla, Bermuda, British ndian Ocean Territory, British Virgin slands,
Cayman slands, Falkland slands, Gibraltar, Guernsey, Jersey, sle of Man,
Montserrat, Pitcairn slands, Saint Helena, South Georgia and the South
Sandwich slands, Turks and Caicos slands
In#epen#ence0
England has existed as a unified entity since the 10th century; the union
between England and Wales was enacted under the Statute of Rhuddlan in
1284; in the Act of Union of 1707, England and Scotland agreed to permanent
union as Great Britain; the legislative union of Great Britain and reland was
implemented in 1801, with the adoption of the name the United Kingdom of
9
Great Britain and reland; the Anglo-rish treaty of 1921 formalized a partition of
reland; six northern rish counties remained part of the United Kingdom as
Northern reland and the current name of the country, the United Kingdom of
Great Britain and Northern reland, was adopted in 1927
Constitution0
unwritten; partly statutes, partly common law and practice
*e/al syste0
common law tradition with early Roman and modern continental influences; no
judicial review of Acts of Parliament; accepts compulsory CJ jurisdiction, with
reservations; British courts and legislation are increasingly subject to review by
European Union courts
Suffra/e0
18 years of age; universal
E!ecuti&e 2ranc'0
chief of state: Queen ELZABETH (since 6 February 1952); Heir Apparent
Prince CHARLES (son of the queen, born 14 November 1948)
head of government: Prime Minister Anthony (Tony) BLAR (since 2 May 1997)
cabinet: Cabinet of Ministers appointed by the prime minister
elections: none; the monarchy is hereditary; the prime minister is the leader of
the majority party in the House of Commons (assuming there is no majority
party, a prime minister would have a majority coalition or at least a coalition
that was not rejected by the majority)
*e/islati&e 2ranc'0
Bicameral Parliament comprised of House of Lords (consists of approximately
500 life peers, 92 hereditary peers and 26 clergy) and House of Commons
(659 seats; members are elected by popular vote to serve five-year terms
unless the House is dissolved earlier) elections: House of Lords - no elections
10
(some proposals for further reform include elections); House of Commons -
last held 7 June 2001 (next to be held by NA May 2006) election results:
House of Commons - percent of vote by party - Labor 42.1%, Conservative
and Unionist 32.7%, Liberal Democrats 18.8%, other 6.4%; seats by party -
Labor 412, Conservative and Unionist 166, Liberal Democrat 52, other 29; note
- seating as of 15 February 2002: Labor 410, Conservative 164, Liberal
Democrats 53, other 32 note: in 1998 elections were held for a Northern
reland Parliament (because of unresolved disputes among existing parties,
the transfer of power from London to Northern reland came only at the end of
1999 and was twice rescinded before reinstatement in November 2001); in
1999 there were elections for a new Scottish Parliament and a new Welsh
Assembly
(u#icial 2ranc'0
House of Lords (highest court of appeal; several Lords of Appeal in Ordinary
are appointed by the monarch for life); Supreme Courts of England, Wales,
and Northern reland (comprising the Courts of Appeal, the High Courts of
Justice, and the Crown Courts); Scotland's Court of Session and Court of the
Justiciary
,olitical parties an# lea#ers0
Conservative and Unionist Party [ain Duncan SMTH]; Democratic Unionist
Party (Northern reland) [Rev. an PASLEY]; Labor Party [Anthony (Tony)
BLAR]; Liberal Democrats [Charles KENNEDY]; Party of Wales (Plaid Cymru)
[euan Wyn JONES]; Scottish National Party or SNP [John SWNNEY]; Sinn
Fein (Northern reland) [Gerry ADAMS]; Social Democratic and Labor Party or
SDLP (Northern reland) [Mark DURKAN]; Ulster Unionist Party (Northern
reland) [David TRMBLE]
,olitical pressure /roups an# lea#ers0
Campaign for Nuclear Disarmament; Confederation of British ndustry;
National Farmers' Union; Trades Union Congress
11
International or/ani3ation participation0
AfDB, AsDB, Australia Group, BS, C, CCC, CDB, CE, CERN, EAPC, EBRD,
ECA (associate), ECE, ECLAC, EB, ESA, ESCAP, EU, FAO, G- 5, G- 7, G- 8,
G-10, ADB, AEA, BRD, CAO, CC, CFTU, CRM, DA, EA, FAD, FC,
FRCS, HO, LO, MF, MO, nterpol, OC, OM, SO, TU, MONUC, NAM
(guest), NATO, NEA, NSG, OAS (observer), OECD, OPCW, OSCE, PCA,
SPC, UN, UN Security Council, UNAMSL, UNCTAD, UNESCO, UNFCYP,
UNHCR, UNDO, UNKOM, UNMBH, UNMK, UNMOVC, UNOMG, UNRWA,
UNTAET, UNU, UPU, WCL, WEU, WHO, WPO, WMO, WTrO, ZC
-la/ #escription0
Blue with the red cross of Saint George (patron saint of England) edged in
white superimposed on the diagonal red cross of Saint Patrick (patron saint of
reland) and which is superimposed on the diagonal white cross of Saint
Andrew (patron saint of Scotland); known as the Union Flag or Union Jack; the
design and colors (especially the Blue Ensign) have been the basis for a
number of other flags including other Commonwealth countries and their
constituent states or provinces, as well as British overseas territories
Econoy 1 o&er&ie40
The UK, a leading trading power and financial center, is one of the quartet of
trillion dollar economies of Western Europe. Over the past two decades the
government has greatly reduced public ownership and contained the growth of
social welfare programs. Agriculture is intensive, highly mechanized, and
efficient by European standards, producing about 60% of food needs with only
1% of the labor force. The UK has large coal, natural gas, and oil reserves;
primary energy production accounts for 10% of GDP, one of the highest shares
of any industrial nation. Services, particularly banking, insurance, and business
services, account by far for the largest proportion of GDP while industry
continues to decline in importance. GDP growth slipped in 2001 as the global
downturn, the high value of the pound, and the bursting of the "new economy"
12
bubble hurt manufacturing and exports. Still, the economy is one of the
strongest in Europe; inflation, interest rates, and unemployment remain low,
and the government expects growth of 2% to 2.5% in 2002. The relatively good
economic performance has complicated the BLAR government's efforts to
make a case for Britain to join the European Economic and Monetary Union
(EMU). The Prime Minister has pledged to hold a public referendum if
membership meets Chancellor of the Exchequer BROWN's five economic
"tests." Scheduled for assessment by mid-2003, the tests will determine
whether joining EMU would have a positive effect on British investment,
employment, and growth. Critics point out, however, that the economy is
thriving outside of EMU, and they point to public opinion polls that continue to
show a majority of Britons opposed to the single currency.
+%,0
purchasing power parity - $1.47 trillion (2001 est.)
+%, 1 real /ro4t' rate0
2.4% (2001 est.)
,opulation 2elo4 po&erty line0
17%
)ouse'ol# incoe or consuption 2y percenta/e s'are0
lowest 10%: 2.6%
highest 10%: 27.3% (1991)
*a2or force0
29.7 million (2001)
*a2or force 1 2y occupation0
agriculture 1%, industry 25%, services 74% (1999)
Uneployent rate0
5.1% (2001 est.)
13
Bu#/et0
revenues: $565 billion
expenditures: $540 billion, including capital expenditures of $NA (FY01)
In#ustries0
machine tools, electric power equipment, automation equipment, railroad
equipment, shipbuilding, aircraft, motor vehicles and parts, electronics and
communications equipment, metals, chemicals, coal, petroleum, paper and
paper products, food processing, textiles, clothing, and other consumer goods
In#ustrial pro#uction /ro4t' rate0
-1.6% (2001 est.)
Electricity 1 pro#uction0
355.761 billion kWh (2000)
Electricity 1 consuption0
345.032 billion kWh (2000)
Electricity 1 e!ports0
134 million kWh (2000)
Electricity 1 iports0
14.308 billion kWh (2000)
A/riculture 1 pro#ucts0
cereals, oilseed, potatoes, vegetables; cattle, sheep, poultry; fish
E!ports0
$287 billion (f.o.b., 2001)
E!ports 1 coo#ities0
manufactured goods, fuels, chemicals; food, beverages, tobacco
E!ports 1 partners0
EU 54% (Germany 11%, France 9%, Netherlands 7%, reland 7%), US 15%
(2000)
14
Iports0
$337 billion (c.i.f., 2001)
Iports 1 coo#ities0
manufactured goods, machinery, fuels; foodstuffs
Iports 1 partners0
EU 48% (Germany 11%, France 7%, Netherlands 6%), US 13%, Japan 5%
(2000)
%e2t 1 e!ternal0
$NA
Econoic ai# 1 #onor0
ODA, $4.5 billion (2000)
Currency0
British pound (GBP)
Currency co#e0
GBP
E!c'an/e rates0
British pounds per US dollar - 0.6981 (January 2002), 0.6944 (2001), 0.6596
(2000), 0.6180 (1999), 0.6037 (1998), 0.6106 (1997)
-iscal year0
1 April - 31 March
Telep'ones 1 ain lines in use0
34.878 million (1997)
Telep'ones 1 o2ile cellular0
13 million (yearend 1998)
Telep'one syste0
general assessment: technologically advanced domestic and international
system
15
domestic: equal mix of buried cables, microwave radio relay, and fiber-optic
systems international: 40 coaxial submarine cables; satellite earth stations - 10
ntelsat (7 Atlantic Ocean and 3 ndian Ocean), 1 nmarsat (Atlantic Ocean
region), and 1 Eutelsat; at least 8 large international switching centers
Ra#io 2roa#cast stations0
AM 219, FM 431, shortwave 3 (1998)
Ra#ios0
84.5 million (1997)
Tele&ision 2roa#cast stations0
228 (plus 3,523 repeaters) (1995)
Tele&isions0
30.5 million (1997)
Internet country co#e0
.uk
Internet Ser&ice ,ro&i#ers 5IS,s60
245 (2000)
Internet users0
33 million (2001)
Rail4ays0
total: 16,878 km
standard gauge: 16,536 km 1.435-m gauge (4,928 km electrified; 12,591 km
double- or multiple-tracked) broad gauge: 342 km 1.600-m gauge (190 km
double-tracked) note: all 1.600-m gauge track is in common carrier service in
Northern reland (1996)
)i/'4ays0
total: 371,603 km
paved: 371,603 km (including 3,303 km of expressways)
unpaved: 0 km (1998 est.)
16
7ater4ays0
3,200 km
,ipelines0
crude oil (almost all insignificant) 933 km; petroleum products 2,993 km;
natural gas 12,800 km
,orts an# 'ar2ors0
Aberdeen, Belfast, Bristol, Cardiff, Dover, Falmouth, Felixstowe, Glasgow,
Grangemouth, Hull, Leith, Liverpool, London, Manchester, Peterhead,
Plymouth, Portsmouth, Scapa Flow, Southampton, Sullom Voe, Tees, Tyne
Merc'ant arine0
total: 212 ships (1,000 GRT or over) totaling 4,308,232 GRT/4,171,757 DWT
ships by type: bulk 7, cargo 32, chemical tanker 13, combination ore/oil 1,
container 53, liquefied gas 3, passenger 13, passenger/cargo 1, petroleum
tanker 48, refrigerated cargo 4, roll on/roll off 26, short-sea passenger 10,
specialized tanker 1
Airports0
470 (2001)
Military 2ranc'es0
Army, Royal Navy (including Royal Marines), Royal Air Force
Military anpo4er 1 a&aila2ility0
males age 1!"#: 14,632,418 (2002 est.)
Military anpo4er 1 fit for ilitary ser&ice0
males age 1!"#: 12,151,734 (2002 est.)
Military e!pen#itures 1 #ollar fi/ure0
$31.7 billion (2002)
Military e!pen#itures 1 percent of +%,0
2.32% (2002)
17
%isputes 1 international0
Spain and UK are discussing "total shared sovereignty" over Gibraltar, subject
to a constitutional referendum by Gibraltarians, who have largely expressed
opposition to any form of cession to Spain; Mauritius and Seychelles claim the
Chagos Archipelago (British ndian Ocean Territory) and its former inhabitants,
who reside chiefly in Mauritius, but in 2001 were granted UK citizenship and
the right to repatriation since eviction in 1965; Argentina claims the Falkland
slands (slas Malvinas) and South Georgia and the South Sandwich slands;
Rockall continental shelf dispute involving Denmark and celand; territorial
claim in Antarctica (British Antarctic Territory) overlaps Argentine claim and
partially overlaps Chilean claim; disputes with celand, Denmark, and reland
over the Faroe slands continental shelf boundary outside 200 NM
Illicit #ru/s0
gateway country for Latin American cocaine entering the European market;
major consumer of synthetic drugs, producer of limited amounts of synthetic
drugs and synthetic precursor chemicals; major consumer of Southwest Asian
heroin; money-laundering center
18
EX,ORT IM,ORT STU%Y
Britain is the fifth largest trading Nation in the world. As a member of the
European Union (EU), it is part of the world's largest established trading,
group, responsible for 40 per cent of world exports. Overseas sales of goods
and services from Britain are equivalent to over a quarter of GDP.
Visi2le Tra#e
Britain traditionally used to be an exporter of manufactured goods and an
importer of food and basic materials. n 1996, however, manufactures
accounted for 84 per cent of exports and 82 per cent of imports. Meanwhile,
the percentage of foods, beverages, and tobacco in total imports has been
dropping since the 1950s, and was down to 9 per cent in 1996; while the
share of basic materials fell from 15 to under 4 per cent between 1970 and
1996.
Since the mid 1970, North Sea oil has made a significant contribution to
Britain's overseas trade. n 1996, the surplus on trade in oil amounted to
nearly 4,300 million.
+eo/rap'ical %istri2ution
Britain's overseas trade is mainly with other developed countries. More than
half of it is with other EU member states and Western Europe as a whole took
62 per cent of Britain's exports in 1996. EU countries account for eight of
Britain's top ten export markets and seven of the leading suppliers of goods to
Britain. Germany overtook the United States in 1990 to become Britain's
biggest overseas market for goods. t is also Britain's tenth largest export
market, rose by 13 per cent by value in 1996, while Japan is Britain's fifth
largest supplier. n the same year, exports to Hong Kong increased by 10 per
cent; to South Korea, by 13 per cent; to Thailand, by 17 per cent; and to Saudi
Arabia, by 51 per cent.
19
Ot'er Transactions
Other transactions fall into three main groups: internationally tradable
services; investment income on external assets; and non-commercial
transfers (chiefly between governments). Earnings from trade in services
amounted to 50,807 million in 1996, a rise of 9 per cent, with an overall
surplus of 7, 142 million. Financial services make a major contribution to
overseas receipts in 1996 were 6,396 million. Earnings on investment
income rose by 5 per cent to 96,071 million, with a surplus of 9,652 million.
Coercial ,olicy
Government policy seeks to promote an open multilateral trading system and
the further liberalisation of world trade. To this end, Britain has taken a leading
part in the activities of such organisations as the World Fund and the
Organization for Economic Co-operation and Development as well as the EU.
The Government welcomes both outward and inward investment. nward
investment is promoted by the nvest in Britain Bureau (BB), as a means of
introducing new technology, products and management styles; creating or
safeguarding employment styles; creating or safeguarding employment; and
increasing exports or substituting imports. The BB recorded 483 new inward
investment project from 26 countries in 1996-97, which are expected to create
or safeguard 94,000 jobs. Outward investment helps to develop markets for
British exports while providing earnings in the form of investment income.
The Government provides a wide range of advice and practical support to
meet the needs of exporters, especially small and medium-sized enterprises.
Support includes dedicated export promotion services and export insurance.
20
Coo#ity Coposition of Visi2le Tra#e 8999
$ million
E!ports Iports
Food and live animals 7,002 14,613
Beverages and tobacco 4,387 2,927
Crude materials 2,621 6,306
Fuels 11,030 7,060
Animal and vegetable oils and fats 208 724
Chemicals 22,360 18,540
Manufactures classified chiefly by material 23,287 29,222
Of which:
Wood and cork manufactures 224 1,111
Paper and paperboard manufactures 2,340 5,056
Textile manufactures 3,472 5,180
ron and steel 4,124 3,610
Non-ferrous metals 2,708 3,837
Metal manufactures 3,373 3,557
Machinery and transport equipment 74,141 77,778
Of which:
Mechanical machinery 20,789 16,868
Electrical machinery 33,369 36,461
Road vehicles 14,528 20,745
Other transport equipment 5,461 3,709
Miscellaneous manufactures 21,077 25,540
Of which:
Clothing and footwear 3,929 8,024
Scientific and photographic 6,671 6,183
Other commodities and transactions 1,940 1,612
Total 168, 041 184,305
%ource: &onthly 'igest of %tatistics
21
+EO+RA,)ICA* %ISTRIBUTION O- TRA%E IN +OO%S 8999
E!ports
Iports
%ource: (& )reasury
22
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Rest of 4orl# Ot'er OEC% countries
Oil1e!portin/ countries Nort' Aerica
Ot'er 7estern Europe European Union
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8:;
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Rest of t'e 4orl# Ot'er OEC% countries
Oil1e!portin/ countries Nort' Aerica
Ot'er 7estern Europe European Union
BRITAINS ECONOMY $ %EVE*O,MENT
Britain's economy is based primarily on private enterprise, with the private
sector accounting for about four-fifth of both output and employment.
Econoic ,erforance
The past few decades have seen the fastest growth in the services sector,
which now accounts for around two-thirds of GDP, compared with about half
in 1950. nvestment in the economy has been generally rising since 1996.
nflation has declined substantially since the start of the 1990s. The Retail
Prices ndex (RP); which records the price of goods and services purchased
by households in Britain, measures the rate of inflation. The annual rate was
3.6 per cent in September 1997. n the same month the RP excluding
mortgage interest payments (a measure of 'underlying inflation) was 2.7 per
cent. By 1997, underlying inflation had been below 4 per cent for five years.
Employment has been growing again following a decline during the last
recession, but remains below the pre-recession peak in spring 1990. n spring
1997, the number in employment rate was 7.5 per cent, a fall of over 2 per
cent since 1992.
Econoic Strate/y
The Government's economic strategy aims to improve the underlying rate of
growth and employment, by creating economic stability based on low inflation
and prudent government borrowing, and a better environment for long-term
investment in industry, infrastructure, science and technology, and education
and training. The Welfare State is being modernised in order to help people
back into employment, and the tax system is under review to make sure that it
is demonstrably fair to all. The Government is working with business to
improve the competitiveness of companies, but also believes that economic
23
development must take full account of the high standard demanded by
protection of the environment.
,u2lic -inance
The Government's view is that sound public finances are essential for
economic stability. t has therefore introduced a five-year plan to reduce the
structural budget deficit. This is being supported by a comprehensive
spending review, under which government departments are examining all
aspects of their expenditure.
The Department of Social Security has the largest spending program, but
health and education are being targeted as priority areas for expenditure.
+o&ernent an# In#ustry
The Government seeks to work in partnership with business, so that they can
become as competitive as possible, thereby expanding the country's wealth
and providing employment. n order to help industry, the Government sees its
role as:
Promoting open and competitive markets at home and abroad;
Encouraging the development of a skilled and flexible labour market.
24
Econoic In#icators
89?A 8998 899A
Gross domestic product 488,122 540,308 601,720
Exports 114,047 132,252 179,805
mports 113,255 140,598 184,671
Consumers expenditure 295,622 340,037 376,648
Gross domestic fixed capital formation 83,685 97,403 104,090
Percentage increase in Retail Prices
ndex
3.3 5.9 2.4
Workforce in employment (000s) 24,719 26,313 25,819
Percentage of workforce unemployed 11.1 8.30 7.5
%ource: *nited +ingdom ,ational -ccounts 1##. /dition, /conomic )rends0
1abour &ar2et )rends $ million at 1##0 mar2et prices
+OVERNMENT RECEI,T AN% EX,EN%ITURE 899<19?
25
Source of Re&enue
E!pen#iture
26
E!cise #uties
88;
Business rate
=;
VAT
8A;
Council ta!
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Council ta!
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Ot'er ta!es an#
royalties
:;
Ot'er financin/
A;
Incoe ta!
@@;
Borro4in/
B;
Social security
contri2ution
8A;
Corporation ta!
9;
Social security
>@;
)ealt' C
personal
social ser&ices
8<;
)ousin/
'erita/e Ct'e
En&ironent
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E#ucation
8@;
%efence
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*a4 Cor#er
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eployent
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IN%O1BRITIS) RE*ATIONS)I,
ndia is a rapidly developing market that provides opportunities for UK
companies' goods and services. ndia is the UK's 17th largest export market.
n 2000, UK/ndia bilateral trade was worth over $8 billion. Trade Partners
UK's 2002/03 business plan for ndia has identified 9 priority sectors where
we believe there are real opportunities for UK companies to increase their
profitability and international competitiveness. These sectors are automotive,
agri-business, financial services, healthcare, education and training,
environment technology, CT, creative industries and leisure and tourism.
Opportunities also exist in a number of other up and coming sectors.
A ,ARTNERS)I, -OR 7OR*% TRA%E AN% INVESTMENT ,ROMOTION
n 1993, in response to opportunities created by the bold and imaginative
liberalisation programme introduced in ndia, the then British and ndian Prime
Ministers publicly endorsed the creation of the ndo-British Partnership
nitiative (BP). t's mandate was to increase bilateral trade and investment
with particular emphasis on small and medium enterprises and to promote
technology and science links between the two countries.
Backed by the two Governments and led by industry, the initiative has
become an ongoing Partnership and is now called the ndo-British Partnership
(BP). n ndia the BP secretariat is managed by the Confederation of ndia
ndustry (C) in collaboration with the Commercial Department of the British
High Commission, and in the UK by the Department of Trade and ndustry
(DT). t is led by co-chairmen N.R. Narayana Murthy, Chairman & CEO of
nfosys Technologies Ltd and David Jefferies, Ex-Chairman of National Grid.
27
ENTER,RISE INITIATIVE0 IN%IA 1 T)E IN%O1BRITIS) ,ARTNERS)I,
UD TRA%E STATISTICS 1 IN%IA TOTA*S 5E Million6
(an1%ec
@BB8
(an1Oct
@BB8
(an1Oct
@BB@
(an1Oct
5@BB@$B86
; C'an/e
E!ports 1782.1 1550.5 1543.2 -0.5
Iports 1884.1 1562.4 1579.5 1.1
UD EX,ORTS TO IN%IA 5E illion6
Non Metallic Minerals 776.4 679.7 719.8 5.9
Non Ferrous Metals 140.0 135.0 63.9 -52.7
Power Generating
Equipment
98.4 85.3 69.5 -18.5
Transport Equipment 87.9 78.0 117.3 50.5
Scientific Equipment 56.3 47.4 56.2 18.7
General ndustrial
Machinery
53.8 43.0 52.9 23.0
Special ndustrial
Machinery
48.4 39.9 42.0 5.3
Metal Ores and
Scraps
92.5 80.4 57.7 -28.3
Electrical Machinery 54.2 47.4 51.8 9.3
Telecommunications 44.9 38.1 30.4 -20.1
OT)ER 5Top A Ites6
Miscellaneous
manufactured article
nes
35.4 28.7 32.2 12.3
Office machines and
ADP equipment
23.1 19.6 25.6 30.2
Textile yarn, fabrics,
made-up articles, nes
9.0 13.6 14.6 7.5
Organic chemicals 30.0 26.6 28.5 7.0
Manufactures of metal
nes
15.7 12.9 16.7 29.3
norganic Chemicals 19.0 17.4 8.5 -51.2
TOTA* 5OT)ER6 >@9F> @<AF= @?8F? 8F9
28
UD IM,ORTS -ROM IN%IA 5E illion6
Apparel and Clothing 349.4 298.6 317.4 6.3
Textile Yarn and
Fabric
284.8 245.3 215.2 -12.3
Miscellaneous
Manufactured Articles
144.5 119.5 133.9 12.1
Footwear 133.7 113.4 114.4 0.9
Metal Manufactures 127.1 105.9 118.1 11.5
Power Generating
Equipment
77.2 63.6 32.9 -48.3
Non Metallic Minerals 59.8 51.5 54.8 6.4
Vegetables and Fruit 51.7 44.1 43.4 -1.6
Organic Chemicals 53.4 41.9 47.1 12.4
Road Vehicles 38.7 28.1 26.7 -4.9
OT)ER 5Top A Ites6
Cereals and cereal
preparations
48.3 39.8 35.7 -10.4
Travel goods,
handbags and similar
containers
39.1 32.2 38.7 20.1
Electrical machinery,
apparatus and
appliances, nes and
electrical parts thereof
36.9 31.0 36.0 16.1
General industrial
machinery and
equipment, nes and
machine parts nes
33.7 28.1 33.3 18.5
Coffee, tea, cocoa,
spices and
manufactures thereof
45.0 33.3 32.8 -1.6
Fish, (not marine
mammals),
crustaceans,
molluscs, & aquatic
invertebrates and
preparations thereof
43.9 37.6 39.5 5.2
TOTA* 5OT)ER6 =A>F< :=BF= :<=FA =FA
29
DEY -ACTS AN% -I+URES 1 IN%O1BRITIS) TRA%E AN% INVESTMENT
Tra#e
UK-ndia bilateral trade of goods and services at close to 5 billion
(US$6.8 billion) in 2001 has grown by 67% since the ndo-British
Partnership was formed in 1993. Sharp decline in UK's exports to ndia
slowed down the growth in UK-ndia bilateral trade in 2001, even as ndia's
exports to UK increased in that year
UK is ndia's second largest trading partner after the USA and accounted
for 5.0% of ndia's total foreign trade in goods in 2001/02.
Major items of trade in goods included - UK exports to ndia: non-metallic
minerals, gold, power generating and telecom equipment, transport
equipment and industrial machinery. UK's imports from ndia: textiles and
readymade garments, gems and jewellery, footwear, metal manufactures,
power generating equipment, organic chemicals and vegetables and fruit.
Ne4 In&estent
UK has the third largest share of 7.8% of new investment approved
since 1991, well ahead of Germany, Japan and France.
UK has the sixth largest share of 3.9% of new investments
implemented since 1991, behind Mauritius, USA, Japan, Germany and
Netherlands. n addition, reinvestments by UK companies already
existing in ndia are also significantly high.
Since 1993, when the BP was formed, over 1800** new ndo-British
joint ventures have been approved.
30
UK Investment (Rs million)
Appro&als
GGG
Actual
GGG
UD UD s'are of
total
UD UD s'are of
total
1992 1176.7 3.0 760.0 11.3
1993 6227.3 7.0 2325.0 13.0
1994 12991.5 9.2 4276.0 14.4
1995 17258.6 5.4 1746.0 2.7
1996 15245.9 4.2 1809.0 2.1
1997 44907.2 8.2 4341.0 3.6
1998 32008.4 10.4 2737.1 3.1
1999 29630.5 10.4 2797.0 4.0
2000 4112.3 1.1 2985.0 3.7
2001 49942.5 18.6 2705.0 2.1
2002 9112.1(Jan-
Aug'02)
10.3 9262.9 (Jan-
Aug'02)
11.1
3 %ource: ')4 /conomics 5 %tatistics 'irectorate, *+
Countertra#e
The Government of ndia (GO) has no written policy on counter trade.
However, global tenders usually include a clause stating that all other things
being equal preference will be given to companies willing to agree to counter
trade. The Ministry of Commerce formulates and periodically reviews the
broad guidelines governing counter trade. The importance of counter trade as
a means for managing forex outflows (and trade imbalances) has declined
with the growing strength of ndia's external sector since the beginning of the
process of liberalisation in 1991. Counter trade is confined to defence and civil
aviation procurements, and importation in bulk of certain essential
commodities such as edible oil, newsprint, and fertiliser. Of late counter trade
has also been preferred for the bulk importation of capital equipment by public
sector undertakings in infrastructure sectors e.g. power and railways. Major
counter trade deals done by GO include purchase of Bofors Guns; purchase
of aircraft from Boeing and Airbus ndustrie; purchase of Aircraft Engines from
GE Aircraft and UT-Pratt & Whitney; and rehabilitation of 327km of railway
31
track from Malaysian Railways. Big UK PLCs with counter trade deals in ndia
include British Aerospace, Rolls Royce, and C T Taylor.
Counter trade can only be arranged through designated state-owned trading
enterprises such as the State Trading Corporation (STC) for military and
essential commodities procurements, and the Mineral and Metals Trading
Corporation (MMTC) for civil procurements. All counter trade deals are
scrutinised by the Reserve Bank of ndia.
Bulk imports (over 100 million rupees) of items such as edible oil and
fertilisers, project imports by state owned enterprises, purchase of aircraft or
spare parts, and capital imports of over one billion rupees require a counter
purchase ratio of 10% to 50%, while non-essential items require a higher
counter purchase ratio of up to 100%. The Ministry of Commerce has drawn
up a list of goods which state-owned corporations may export under counter
trade arrangements. This list includes agricultural produce, engineering
goods, chemical and pharmaceutical products, leather and leather goods,
textiles, marine products, and computer software.
So far, there has been little emphasis on offset trading and most counter trade
deals have involved counter purchases by way of imports of goods and
services. However, increasing modernisation of ndian industry has increased
ndia's confidence in manufacturing world-class components in the civil
aviation and defence sectors, and counter trade deals are expected to shift
towards offset trading in the coming years. For example, Boeing is procuring
some components from Hindustan Aeronautics Limited (HAL) under some
counter trade deals with the GO to supply aircraft.
The STC is also planning to undertake counter trade obligations third country
against sale of high value items and technology by ndian companies in
collaboration with counter trade experts overseas.
Where cash-based trading is difficult, countertrade offers the best chance for
securing a deal. Fifty years on, Britain's relation with ndia has changed
32
significantly, qualitatively and for the better. The British Raj is not forgotten,
nor should it be. The imperial past has helped shape the friendships and
understanding of the present. But today Britain and ndia stand side by side,
modern and equal partners, sharing democratic values and working together
on a progressive and forward-looking agenda.
The links between Britain and ndia cover every field. Many reflect the strong
institutional legacy that ndian inherited. Parliamentary links are particularly
close. Senior judges of both countries meet regularly.
,eople to ,eople
Few countries hold as much excitement for British travelers as ndia. Many
have grown up dreaming of visiting Agra, Varanasi, or the fortresses of
Rajasthan. They head for the beaches at Goa. For the Himalayan foothills, or
to the wildlife sanctuaries of Madhya Pradesh. With the emergence of ndia as
an economic power, and a key partner, their numbers are swelled by British
businessmen, less exotically dressed, but equally susceptible to the promise
of ndia.
ndian visitors to Britain are not just students and businessmen. More and
more ndian s are now also visiting Britain on holiday, to shop, to tour the
country or to visit friends. Many last year will have come just to see the
cricket. t will have felt a long journey home!.
There are now almost one million people of ndian origin living in Britain. Their
impact on modern British life has been remarkable. So too their contribution to
ndo-British relations, not only through the close links which they maintain with
family and friends in ndia, but by inspiring others in Britain with a curiosity to
discover ndian for themselves.
Veertaswamy's , the first ndian restaurant in Britain, opened in London in
1927. Seventy years later there are over 8,000. Two million adjusts visit an
ndian restaurant every week. Thirty-three pence in every pound spent on
33
eating out is spent in an ndian restaurant. The menus may not look familiar to
visiting ndians.
British Asians are making their mark in all walks of life. ndian students are
among the highest achievers at school and university. They are prominent in
the professions. ndian entrepreneurial flair has brought prosperity and jobs.
Many of the most dynamic and successful business in Britain are owned by
British Asians.
TRA%E AN% INVESTMENT
In#ian In&estent
United Breweries, Ranbaxy laboratories, Tata Consultancy services. Just
three of the 60 plus ndian companies investing in Britain. Britain has always
offered a warm welcome to foreign investment, recognising the advantages it
can bring in terms of jobs, new technology, and export potential. ndian
companies are increasingly following hard on the heels of Japanese, Korean,
Taiwanese and South-East Asian investors in establishing operations in
Britain, and using Britain as a platform for expanding into Europe.
ndian T companies, which enjoy a worldwide reputation, are prominent
among them. HCL Corporation, ndia's largest T group, has set up in High
Wycombe, creating over 100 jobs. n its first four years turnover increased
thirty-six-fold to 18 million. ts ndian competitors, Mastek and Square D
among the, are also established in Britain.
In#o1Britis' ,artners'ip
Two way investment is just one of the aims of the ndo-British Partnership
launched in 1993 to boost bilateral trade. Moves in ndia to liberalise the
economy and free the constraints on both ndian business and foreign
investors have transformed the commercial relationship. Bilateral trade has
doubled in four years and is now worth 3.4 billion. A target of 5 billion is set
for 2000. Two huge exhibitions are bringing that target closer: the
34
Confederation of ndian ndustry held a massive trade fair at Manchester's
ultra-modern velodrome in July, and the BP hosts its biggest exhibition to
date at Pragati Maidan in Delhi during the State.
UD1Tra#e an# In&estent
The story of Britain's presence in ndia is one of partnership, both old and
new. When Tate & Lyle, the world's biggest sugar manufacturer, set up a joint
venture with Simhaoli Sugar Mills company a few years ago, it became the
first foreign company to gain entry into the ndian sugar industry. Cadbury
Schweppes on the other hand is long established in ndia. There's a thirsty
market for its new Crush and Canada Dry brands.
Privatisation has opened up a world of opportunity to Britain's former public
utilities. Many have found a ready niche as ndia modernise and expands its
own utilities. Mahanagar Gas supplies more than 3,000 domestic customers
in Mumbai and 10 per cent of the city's taxi fleet. t will connect to industrial
customers. n July, British Gas announced it was taking control of Gujarat
Gas, ndia's largest gas distribution company.
Britain invests in many sectors. The security firm Group 4 Securities is the
fourth largest private sector employer in ndia with a workforce of 18,000. And
did you know that LRC, a joint venture between London nternational Group
(makers of Durex) and Chennai-based TKK, have been manufacturing
condoms in ndia for over 30 years?
Consultancy an# -inancial Ser&ices
British consultants are in demand throughout ndia. They have been active in
advising ndian clients on major engineering and infrastructure projects. They
are the first choice of ndian companies in advising on standards issues, such
as the introduction of the environmental standard SO 90000. British
architects are also much sought after.
35
The City of London's great strengths as one of the world's leading financial
centres are recogjnised by ndian businesses and international investors alike.
British financial institutions and international law firms are advising ndian
clients on rising capital and the issue of global depository receipts. The recent
issue of shares in VSNL ndia's largest equity issue to date was listed in
London and co-managed by two British banks, Flemings and Kleinwort
Benson.
British insurance companies are developing ever-closer links with potential
ndian partners.
Science an# Tec'nolo/y
Bilateral collaboration in science and technology is a cornerstone of the ndo-
British Partnership. Among other things, a trust exists to sponsor young
industrialists from Britain and ndia to spend 18 months in each other's
country to research and gain practical experience in industry.
T'e -uture
The potential for further collaboration between British and ndian companies in
all these sectors is considerable. Whether it is achieved or not depends on
continued growth, stability and liberalisation in ndia and on British companies
remaining globally competitive in the skills, products and services that they
offer.
,o4er
ndia needs to increase its power generating capacity and to improve
transmission and distribution. Elsewhere we explain the support Britain is
giving under its development assistance programme to the power sector in
Orissa. Commercially, Britain's National Power and GEC are separately
involved in two of the prestigious 'fast-track' projects: National Power with the
Hinduja Group at Vishakapatnam (Vizag) in Andhra Pradesh and GEC
Alsthom with spat Steel in Bhadrawati in Maharashtra.
36
7ater
Although the water sector has only recently opened to private sector
participation, many British companies have already established a presence in
ndia. They are working throughout the country but particularly in Tamil Nadu,
Maharashtra, Orissa and Andhra Pradesh. Projects concern water supply,
sewerage, drainage and irrigation.
,orts
British companies have extensive experience in port development. Their skills
and advice have been sought for projects to expand port facilities in Mumbai,
Goa, Chennai and Calcutta and on other projects throughout the country P&O
have recently been awarded the contract for two new berths at the JNPT Port
near Mumbai, Clark and Standfield will build a ship repair facility in Orissa.
Roa# an# Rail
New roads are being planned throughout ndia to ease traffic congestion and
shorten traveling times. Private finance has been secured for toll roads build
on a BOT (build-operate-transfer) basis. British companies are being used as
design consultants for these and other projects.
Ur2an Transportation Systes
British companies can help ndia's major cities develop urban transportation
systems. They are already involved in a program to ensure Mumbai's
continued prosperity as a gateway to ndia. A British consortium is promoting
an infrastructure initiative for Mumbai under the auspices of the ndo-British
Partnership.
37
,ARTNERS IN %EVE*O,MENT
A C'an/in/ -ocus
The overall aim of Britain's development program, administered by the
Department for nternational Development (DFD), is to help ndia reduce
poverty, mainly by providing finance for development projects, and by
transferring British expertise and know how.
E#ucation
For more than a decade, Britain has supported primary education in Andhra
Pradesh by training teachers Providing educational materials and constructing
classrooms.
)ealt'
Since 1990, Britain has contributed over 100 million for health projects in
ndia, including to control major diseases like TB and malaria and to eradicate
polio; and to finance improvements in organissation and management of
health services, particularly in Orissa.
)elpin/ 7oen
Another key aim is to enhance the economy social, political and legal status of
women in ndia. One indicator of the scale of the task is the disparity in
literacy rates 64 per cent for men and 39 per cent for women. British
education and health projects pay particular attention to the need of girls and
women. One of the main features of our urban and rural projects alike is to
enable women to play a full part in decision making at local level.
Encoura/in/ ,ri&ate In&estent
The Commonwealth Development Corporation (CDC) promotes development
by investing in commercial enterprises in developing countries. Active in ndia
since 1987 the CDC has built up an investment portfolio of over 150 million
38
in 35 companies. These produce everything from truck tyres and textiles to
software and plastics. A further 400 million of potential investment is under
appraisal.
S,ORTS
Cricket is a bridge builder. ndian and British people know each other better
because of it. Sachin Tendulkar and Saurav Ganguly are as much the heroes
of British youngsters as Darren Gough or Nasser Hussain. And when English
cricket is going through a bad patch, British visitors to ndia are into allowed to
forget it! Those same visitors will be left in no doubt that the game in ndia is
as popular as ever.
n the meantime, both countries can celebrate their Olympic success at
tennis. Leander Paes hard earned bronze will have come as a surprise to
those Britons who do not associate ndia with tennis, although older players
and movie- goers will remember Vijay Amritraj's exploits on the court (as well
as into be on film Octopussy!). Similarly, Tim Henman and Nick Broad's silver
in the doubles and Henman's subsequent charge up the work ranking will
have impressed ndian fans.
ndian sports are becoming increasingly popular in Britain: kabbadi and carom
in particular. And British fans of that most intellectual of sports, have a new
hero in Viswanath Anand.
%E-ENCE RE*ATIONS
Today, the Defence Consultative Group (DCG), set up in March 1995, has
given new energy and direction to the ndo-British defence relationship.
Headed by the most senior civil servant in each country's defence ministry,
the DCG aims to promote mutual understanding on strategic and security
issues; to facilitate greater familiarity and increased opportunities for
interaction between the respective armed forces; and to develop the potential
for cooperation in defence equipment production and research.
39
STRATE+IC OVERVIE7
UK mining equipment companies are striking ground- breaking deals in ndia
that could be used as blueprints in other industries. Joy Mining Machinery and
Long Airdox have recently signed contracts with South Eastern Coalfields
(SECL) a subsidiary of the state-owned Coal ndia- to supply fully
mechanised equipment for room and pillar mining. The deals are worth in the
region of 15m and 11m respectively.
Both companies are currently pursuing similar projects with other Coal ndia
subsidiaries. Joy Mining, for example, is discussing as many as eight tenders
with Western Coalfields, Eastern Coalfields and Bharat Coking Coal Ltd. n
terms of tendering activity ndia has the highest current and future potential in
the world even though the process of actually securing contracts is a low one.
As these are the first sales of continuous miner technology to ndia they
represent a significant market breakthrough for the UK and a technological
one for ndia. By slotting into this niche UK companies have eliminated their
main foreign competitors in longwall technology China and Germany- who
simply do not produce continuous miner equipment.
Open cast mining Britain is also enjoying success in ndia. Bucyrus Limited
has a 25m order to supply walking draglines to government owned Northern
Coalfields Ltd, as well as the prospect of refurbishment of equipment and
machines.
David Lee, Managing Director of Bucyrus, said the UK had gained an
advantage over foreign competition through competitive pricing and personal
contacts.
UK based Brintons Carpoets has set up an export oriented manufacturing
facility near Pune, investing Rs. 50 crores to establish its fourth overseas
production site.
40
A number of factors combined to make ndia an attractive location for
Brintons. Lower costs combined with the widespread availability of high
quality technical labour were significant points in ndia's favour as were its
historical and cultural links with the UK.
n addition, ndia's proximity to Brintons other important markets, including the
Middle and Far East, and the potential market for high quality carpet within
ndia itself made it a natural choice.
nfrastructure consultants Halcrow have been appointed to lead a consortium
of ndian and British firms including Cameron McKenna, Cranfield University,
Pricewaterhouse Coopers and Consulting Engineering Services to conduct
a feasibility study to develop the transport corridor which provides crucial
trade access to ndia's north eastern states.
Th objective of the Halcrow assignment is to assist the Central Government
and the West Bengal Government in developing a program of public and
private investment in transport infrastructure to improve access in this crucial
transport corridor, which potentially serves 200 million people.
The current plan is to road bridge the 180 km missing rail link between ndia
and Myanmar, which consists of very difficult hilly terrain.
Agreement between participating countries on a common protocol in respect
of customs, border crossing and train operation procedures, remain the most
important requirements. The route would open up business opportunities for
shippers, exporters and importers by making a cost effective transport
alternative available.
n fact the Hefce's project with the University grants Commission of ndia is to
work collaboratively and to seek to learn from the experience of both
countries.
More than 17000 visitors attended the seventh British Book Fair in Hyderabd
recently, spending Rs 4.3 m (63,000). The fair, part of the British Council's
41
ongoing work to link the publishing industries of Britain and ndia, attracted
hundreds of inquiries for programmes relating to general education, business
English and distance learning. The fair brought people in the book world
together to form partnerships and fostered related trade between the two
countries.
Lukhand mage of the UK along with Singularity of reland have joined forces
with Bombay based Melstar nformation Technologies to develop a new
document management system. The first phase of the project is nearly
complete. The alliance is to create products for the financial and insurance
sectors, which ease the communication and capture of electronic documents.
Yeses Global Trading Pvt. Ltd., Chennai, a partner company of the popular
Yeses supermarket store chain in ndia, is the sole importing agent for
McVitle's biscuits in South ndia, where the roll- out will begin.
A new strategy for the ndo-British Partnership is emerging as the result of a
pathfinding mission to ndia, designed to prepare the BP for the new
millennium. The mission comprised SMEs with leading edge technology
appropriate to ndia's needs and focused primarily on the two ndian states
showing most appetite for growth Andhra Pradesh and Gujarat.
After seven years in which bilateral trade of goods has soared to 4 billion,
the next step will be to recognise the extent to which Britain and ndia can
work in partnership to win a greater share of global business.
n the business world today it is not always the big corporation that are
creating wealth. Smaller companies can be faster on their feet and we want to
bring the benefits of collaborations in ndia to their attention. The ndian
market was not as price sensitive. hope we will be able to offer a better
product at a lower price than the competition. Dr. Leighton James, Managing
Director of DS Systems, Swansea, was looking to make progress with
several projects after a stop start affair with ndia over the past two years. n
February he signed an agreement with an ndian company to undertake the
42
installation and maintenance of the company's water filtration and storage
units. DS's unit enables vast quantities of potable water to be produced
without the need for electricity and with just one metre head of water. t is
ideal for use in villages and urban situation where power supply is unreliable.
Speaking at an BP-C seminar on cold chain technology in Hyderabad,
Bhide listed critical areas in which the state needed British help. They
included crates for packing fruit immediately after harvest, nylon nets,
elevators to reach higher crops, grading packaging and refrigeration
equipment.
Sourcing large amounts of long term, fixed rate funds and managing the
inherent forex risk revenues in ndian rupees from the sale of power while
importing equipment expenses are in US $ - has always been a daunting
prospect for ndian promoters. Now, that is all set to change thanks to a touch
of British ingenuity. The UK's Export Credit Guarantee Department (ECGD),
which is keen to assist ndian importers, has proposed new schemes that
could revitalise ndia's power needs. At the same time, it could provide a
wealth of new opportunities for the UK power sector not just in the major
utilities but in hundreds of smaller suppliers of parts, equipment, and
consultancy services. The plan involves loans to ndian parties in Rupees,
funded by ndian institutions, but backed by ECGD guarantee. The guarantee
is expected to attract and encourage investment from life insurance and
provident funds.
Based in Hamel Hempstead, a company manufactures standby power
systems equipment for the telecommunications industry, providing insurance
against mains failure that could cause havoc to critical communications.
ndia's erratic power supply system made it an obvious target and, just 4
years after making a first trip to the market, Eltek is about to open its own
manufacturing operation in ndia.
A knowledge of the specific market for Eltek's products was not considered as
important since Eltek knew its own products and through interaction with
43
American and European equipment suppliers to ndia had developed a fair
understanding of the potential.
Ters of payent
The RB sets ndia's exchange-control policy in consultation with the Go and
administers the foreign exchange regulations. The broad framework of ndia's
exchange-control measures are laid down in the Foreign Exchange
Management Act 2000 (FEMA), which relaxed and simplified the measures
contained in its draconian predecessor, the Foreign Exchange Regulations
Act 1976 (FERA). All foreign exchange transactions are subject to regulations
laid down in the RB Exchange Control Manual (ECM) that specifies the
procedure to be followed in foreign exchange transactions. The ECM is
reviewed from time to time.
ndian importers do not require permission from RB to make lead payments
(i.e. payment in advance of the delivery of the imports) of up to 15 per cent of
the import value or US$ 15,000 in the case of import capital goods and
equipment. Payments exceeding US$ 15,000 need to backed by an
international bank guarantee covering the advance payment against the
exporter's failure to deliver the goods.
The RB allows short-term trade credits up to 180 days. Longer periods are
allowed for deferred payments credit, especially for imports of capital goods
and equipment, subject to a licence from the Director General of Foreign
Trade (DGFT).
mporters are allowed to cover their payments against potential fluctuations in
the exchange rate for a period exceeding six months. Documentation
requirements for such forward cover have also been drastically reduced
%e2t collection
Debt collection is not a problem, when letters of credit are used. Normal
precautions should be taken. n the case of bad debts local lawyers are
44
available but the legal system is slow and on smaller debts the outlay could
be more than the debt.
EX,ORT -INANCIN+ AN% INSURANCE
The Trade Partners UK Export Finance team encourages the availability of
competitive export finance to all UK companies seeking to export goods or
services or invest overseas.
Export Credits Guarantee Department (ECGD)
Can provide insurance or arrange medium/long-term finance packages in a
wide range of markets worldwide for UK exporters of capital goods and
projects. They can also provide contacts for private sector insurance for UK
exporters of consumables.
Insurance for s'ort1ter cre#it
A number of companies provide insurance for short-term credit to guard
against non-payment, such as:
Gerling NCM
45
+ettin/ your /oo#s to t'e ar.et
,ort an# 4are'ouse facilities
ndia has an extensive coastline of about 6,000 km. There are eleven major
ports which handle 90% of the sea-borne traffic. nadequate capacity at some
of the major ports often delays the quick unloading of cargo. Warehouse
facilities are available. Setting up of private bonded warehouses is permitted
for exports and imports.
-or4ar#in/ an# clearin/ a/ents
All goods entering ndia have to pass through customs and follow the laid
down formalities. The procedure for clearance of goods is usually complex
and exporters will find it convenient to appoint a customs clearing agent. The
customs authorities license such agents
The British nternational Freight Association's New mporter / Exporter
nitiative aims to provide specialist help and assistance to companies who are
new to exporting. This service, available through selected BFA registered
members, offers up to one day's free consultancy to advise companies on
such matters as modes of transport, distribution methods, costing,
documentation and payment terms.
EX,ORT -INANCE AN% INSURANCE
The Export Finance team encourages the availability of competitive export
finance to all UK companies seeking to export goods or services or invest
overseas. We can advise companies seeking guidance on export finance and
investment insurance matters. As well as having close links with ECGD we
are also in contact with the wide range of commercial and merchant banks
that specialise in funding for export.
46
E!port ,ayent Ris.s
The thorniest issue, when cracking international markets is getting paid. Non
payment can arise due to a number of reasons. Some of the common ones
are: buyer becoming insolvent, buyer defaulting on the payment due, war/civil
war breaking in the buyer's country, the country running out of foreign
exchange, etc. The risks of non-payment may be grouped under two
headings- Buyer risks and Country risks. Exporters can insure against these
risks by taking out export credit insurance policy. The insurance enables
exporters to pursue a bolder marketing policy, take on new exporters and
break into new markets.
E!port Cre#it Insurance
This can be broken into two categories - short term and Medium term
Cas' or S'ort Ter Cre#it1
Contracts involving the sale of consumer goods, raw materials and other
similar goods are normally sold on cash or short payment terms. Speak to our
team regarding securing payment on shipment of goods. The private
insurance market provides credit insurance for export of these goods.
Me#iu$ *on/ Ter Cre#it1
For payment terms exceeding two years. Credit insurance for medium/ long
term is primarily provided by Export Credits Guarantee Department (ECGD).
ECGD has a range of products and services that might meet your financing
and insurance needs.
E!port -inance S'ort ter0
Exporters can use the payment arrangements, financial instruments issued by
overseas buyers and convert them to cash on shipment. The market is vast,
as substantial export transactions are done on short-term credit. Your bank
will be able to advise you on this. Banks, credit insurers and trading houses
47
compete to get a substantial market share. There are several mechanisms in
the market to raise export finance. The common ones are:
%ocuentary cre#it 5%C6 " These are one of the most popular methods for
settling international trade transactions because they offer security to both
seller and buyer and because they are honoured through the banking system.
DC may be defined as an irrevocable undertaking provided by the issuing
bank in the buyer's country, on behalf of the buyer that payment will be made
for goods or services provided by the exporter, provided the exporter complies
with all the terms and conditions established by the credit. The DC terms may
provide for payment immediately upon presentation of conforming documents
or at some future date reflecting any extended payment terms granted by the
exporter. Also, exporters' bank may be prepared to provide a short-term loan,
for a percentage of the DC value, prior to shipment and recoup from the
proceeds of the subsequent presentation of the DC.
-actorin/1 is the purchase by a factor of a company's book debt on a
continuous basis, for cash. The factor may assume the credit risk in an export
transaction within an agreed limit (i.e. non- recourse to the exporter) or in
some cases the exporter may wish to retain this risk. Therefore the
mechanism helps exporters to receive cash, within a few days of invoicing.
Your bank will be able to advise you on this facility. Factors and Discounts
association represents British factoring and invoicing firms.
-orfaitin/1 involves a bank's specialised unit purchasing 100% of the invoice
value of an export transaction at a discount, without recourse to the exporter.
t is essential that the debt is evidenced by an unconditional instrument and
the buyer's obligation is supported by a local bank guarantee or accepted by
the obligor.
Cre#it Insurance facilities - Exporters can assign their credit insured policies
to banks and obtain up to 100% finance for credit insured debts. t is
necessary that there is a valid claim on the insurer in the event of default by
the buyer.
48
EBR%s 5European Ban. for Reconstruction an# %e&elopent6 Tra#e
facilitation ,ro/rae 5T-,6 to support s'ort1ter E!port for RussiaH
CIS an# Eastern Europe
Under the TFP programme, EBRD guarantee payment of trade finance
instruments issued or guaranteed by approved local banks in EBRD's country
of operation (ssuing banks) to international confirming banks, thereby
guaranteeing the trade finance obligation of participating local banks. The
finance instruments include letter of credit (L/Cs), standby L/Cs, advance
payment bonds, payment guarantees, bills of exchange, promissory notes etc.
The guarantees cover commercial and political risk of non-payment by the
issuing bank, but do not assume any risk of the exporter or the importer.
All international banks are eligible to join the Programme as confirming banks.
Selected banks from the region that have experience of processing
confirmations of trade finance instruments may also act as confirming banks.
The participation of issuing banks and confirming banks is subject to EBRD's
approval and signing of appropriate legal documentation.
An EBRD guarantee may be requested either by the issuing bank or by the
confirming bank. f you want to become an active beneficiary of the
programme, ask you buyer if the issuing bank under your transaction would
be able to secure the EBRD's guarantee. This would improve your chances of
doing business with the region.
Me#iu Ter -inance Support
ECGD is the key player in the provision of medium term export finance
support. Our export finance team can advise you on the range of facilities
available.
,roIect -inance
Major projects such as oil exploration, infrastructure etc. will require complex
finance arrangements, involving private investors, finance institutions, export
49
credit agencies,bilateral and multilateral institutions such as World Bank, the
nternational Finance Corporation and those in the European Community.
Generally, the funding of a project will take into account the revenues (hard
currency) expected to be generated from the project and the assets and
contracts as security. t is therefore advisable to seek experts' advice in the
early negotiation stage.
O&erseas In&estent Insurance
ECGD can also insure British companies who invest abroad against the
political risks of a non-return on their investments.
E!port %ocuentation
The nternational Trade Team in your local Business Link can provide
specialist help with export documentation such as certificates conformity. To
contact your local nternational Trade Team go back to our home page and
look under Local Office Database.
OEC% +UI%E*INES -OR MU*TINATIONA* ENTER,RISES
The UK Government is an adherent to the Organisation for Economic Co-
operation and Development (OECD) Guidelines for Multinational Enterprises
(MNEs). We expect all UK outward investors to operate in accordance with
the Guidelines. The following briefly explains what the Guidelines are, how
they relate to your business, and where to obtain further information.
7'at are t'eyJ
They are a framework of "principles of good conduct for international
companies in their business activities, designed to help MNEs act in
harmony with the policies of countries in which they operate and with
societal expectations They aim to help MNEs in developing/reviewing
their own corporate codes of conduct or socially responsible policies;
50
Although not legally binding on companies, they represent the firm
expectations of business behaviour by all 33 OECD governments and
observers, including the UK. They are the only comprehensive code of
conduct for MNEs that has been collectively endorsed by
Governments;
7'y are t'ey rele&ant to UD copanies in&estin/ o&erseasJ
They set out Governmental expectations of MNE behaviour worldwide
covering a wide number of areas including the environment, labour
standards, human rights, competition, corruption, disclosure, consumer
relations, technology transfer, and taxation;
Obeying domestic law is the first obligation of business. The Guidelines
are not a substitute for, nor do they override, local law. They reflect
what are increasingly seen as universal standards of behaviour and
values which should be observed over and above minimum standards
which may be enshrined in national law. Conforming with national laws,
therefore, may not be sufficient to ensure conformity with the
Guidelines;
The Guidelines set out procedures for concerns to be raised with
Governments (through National Contact Points) relating to individual
MNE behaviour that is not in accordance with the Guidelines. The
National Contact Point is charged with considering whether such
issues are substantiated and initiating dialogue with the MNE
concerned, and others as appropriate, to resolve any which are.
EC+% T'e UDKs Official E!port Cre#it A/ency
ECGD, the Export Credits Guarantee Department, is the UK's official export
credit agency. We are a separate Government Department reporting to the
Secretary of State for Trade and ndustry. We derive our powers from the
1991 Export and nvestment Guarantees Act.
51
We have over 80 years experience of working closely with exporters, project
sponsors, banks and buyers to help UK exporters compete effectively in
overseas markets where the private sector may be unable to help. We do this
by arranging Finance Facilities and Credit nsurance for contracts ranging
from around 20,000 up to hundreds of millions of pounds. There is special
help for smaller exporters. We also provide Overseas nvestment nsurance
for UK-based companies investing overseas.
On average we underwrite business worth over 4 billion a year.
Despite its small size, the United Kingdom is the fifth-largest trading nation in
the world. Due to its reliance on trade, the UK supports a new round of
multilateral negotiations to further the project of liberalization begun decades
ago with the birth of the GATT. The United Kingdom's Department of Trade
and ndustry has created a web site that elaborates the UK's position on WTO
negotiations despite its affiliation with the European Union, which has created
its own common position.
The United Kingdom favors reduced tariff levels across a broad range of
sectors, including most goods and services. t seeks the elimination of
nuisance tariffs and tariff peaks; it also favors binding tariffs at applied rates.
The UK understands that developing countries feel they did not benefit
significantly from the Uruguay Round Agreements, and it proposes duty-free
market access for LDCs and improved access commitments for all other
developing nations. The UK also wants broader market access for services; it
seeks broad commitments in terms of sectoral coverage and non-
discrimination.
Unlike its peers at the EU, the UK is satisfied with the performance of the SPS
Agreement and does not support amendment of this policy. The UK does,
however, wish to see the Agreement on Technical Barriers to Trade (TBT)
revised to simplify and clarify international standards because it feels that
technical barriers remain a major impediment to trade.
52
The UK seeks greater incorporation of environmental concerns into the WTO
and wants the relationship between MEAs and WTO rules clarified. t is
committed to pursuing labor standards through the LO, not the WTO.
The United Kingdom urges more transparent and objective administration of
anti-dumping rules to prevent their abuse as a protectionist measure. t also
supports stronger rules on subsidies to minimize the trade-distorting effects of
these measures.
The Agreement on Government Procurement includes only a few WTO
members; the United Kingdom wishes to see procurement liberalized further
in the next round of negotiations. n investment policy, the UK wants to strike
a balance between guaranteeing investor rights and the legitimate right of
governments to regulate businesses within their borders. And the UK supports
competition policy because it believes the WTO would effectively prevent
trade-distorting behavior by multinational corporations.
The UK supports trade facilitation measures, estimating that trade friction
results in a de facto tariff of 7-10% on international trade, except for the
unfortunate fact that nobody seems to benefit from its collection. t seeks
greater harmonization between nations to ease the movement of goods
across borders. The United Kingdom also supports a continuation of duty-free
status for electronic commerce and hopes to develop appropriate disciplines
in the future to bring electronic commerce fully into the multilateral trading
system.
Finally, the United Kingdom seeks a review of regional and preferential trade
agreements to ensure that they do not obstruct multilateral liberalization. t
seeks clarification of WTO rules relating to these agreements to determine
their legitimacy within the multilateral trading system.
UNITE% DIN+%OM 1ECONOMY
53
The United Kingdom is the world's fourth largest economy. nternational trade
plays a key role in the UK economy. The UK is the fifth largest exporter of
goods and services, and exports account for about 25% of GDP. Other EU
countries took nearly 59% of UK exports of goods in 1999 and supplied
almost 54% of imported goods. The UK has around 3.7 million businesses.
They include many big companies. According to a Financial Times survey of
the top 500 European companies by market capitalization in January 2000,
146 were UK-based as against 68 French and 60 German. Of the world's top
500 companies 40 are British as against 28 French and 21 German. A small
number of large companies and their subsidiaries are responsible for a
substantial proportion of total production in some sectors. This is particularly
true for chemicals, pharmaceuticals, motor vehicle assembly and aerospace.
Of the top 20 UK companies, four are in the retail banking sector, five in
telecommunications and three in pharmaceuticals. Britain is the largest
European investor in China with over US$ 18 billion in contractual investment.
TO, UD COM,ANIES BY MARDET CA,ITA*ILATION
Million
Vodafone AirTouch 184, 780
BP Amoco 120 939
Glaxo SmithKline 120 794
British Telecom 72 289
HSBC Holdings 60 689
AstraZeneca 50 232
Shell Transport and Trading 47 917
Lloyds TSB 36 219
BsskyB 29 221
RoyalBankScotland 24 842
The UK is also a major recipient of foreign investment, ranking second in the
world according to the United Nations World nvestment Report. Britain is the
premier inward investment location in Europe and inward investment is a
significant contributor to the economy. The UK attracts over 30% of all
54
overseas foreign direct investment into Europe. Overseas businesses
investing in Britain generate and estimated 40 per cent of UK exports. The UK
is particularly successful in attracting investment in industries linked to the
knowledge-driven economy - computer software, nternet,telecommunications
and e-business sectors. Other main sectors for UK inward investment are the
automotive sector, specialty chemicals and financial services.
Tra#e Statistics
Trade has been of vital importance to the British economy for hundreds of
years. Although it has less than 1 per cent of the world's population, the UK is
the fifth largest trading nation, accounting for around 5.6% of world trade in
goods and services.
External Trade in Goods and Services million - 1999
Exports of Goods: 165 667
Exports of Services: 63 982
Total: 229 649
mports of Goods: 192 434
mports of Services: 52 444
Total: 244 878
55
Coo#ity Coposition of Tra#e in +oo#sH 8999 1 MN illion
Coo#ity E!ports Iports Balance
Food, beverage and tobacco 9929 16527 -6598
Basic materials 2280 5516 -3236
Oil 9050 4842 4208
Other fuels 803 783 20
Semi-manufactured goods 43234 45437 2203
Finished-manufactured goods 98876 117540 18664
Unspecified goods 1495 1789 294
Total 165 667 192 434 26 767
Tra#e in +oo#s 1 Main Mar.ets 8999
Main Mar.ets Value 5E
illion6
S'are of UD tra#e
in /oo#s 5;6
United States 24297 14.7
Germany 20350 12.3
France 16809 10.1
Netherlands 13544 8.2
rish Republic 10716 6.5
Belgium and Luxembourg 9188 5.5
taly 7781 4.7
Spain 7484 4.5
Sweden 4012 2.4
Japan 3303 2.0

56
Tra#e in +oo#s 1 Main Suppliers 8999
Main Suppliers Value 5E illion6 S'are of UD tra#e in
/oo#s 5;6
Germany 26468 13.8
United States 24431 12.7
France 17851 9.3
Netherlands 13401 7.0
Belgium and
Luxembourg
9471 4.9
taly 9311 4.8
Japan 9251 4.8
rish Republic 8478 4.4
Spain 5894 3.1
Switzerland 5329 2.8
Tra#e in Ser&ices 8999 1 million
Sector E!ports Iports Balance
Transportation 11538 13930 -2392
Travel 14298 22634 -8341
Communications 1484 1694 -210
Construction 267 85 182
nsurance 4111 569 3542
Financial Services 6992 205 6787
Computer and nformation
Services
1928 500 1428
Royalties and License Fees 4387 3840 547
Other Business Services 17083 6130 10953
Personal, Cultural and
Recreational Services
782 490 292
Government 1117 2367 -1250
Total 63982 52444 11538
Source: (U.K.) National Statistics
57
Custos syste
OVERVIE7
The Customs system within the UK is based on a mixture of frontier controls
and release to local clearance under simplified procedures. The criteria for
this are a risk assessment of the individual trader.
Within the UK almost all (99%) entries are submitted by ED submission from
the port or individual trader. Most cargo is inventory controlled against the
AWB or bill of lading.
,ROCESS
,ort Clearance
8F Creation by carrier of inventory record.
@F Documents to agent/broker.
>F Preparation of Customs entry.
:F Submission via ED.
=F Customs calculate duty and tax. Collection against bank guaranteed
account with Customs. [National Deferment Guarantee]
AF Release of goods.
*ocal Clearance un#er Siplifie# Sc'ee
8F As stages 1-4 and 5 but with reduced data element in the Customs entry.
@F Goods to importers premises.
>F Full Customs entry at end of months trading.
TIMIN+
Release times differ from port to port but typically:
58
Sea Freight: 4-12 hours of submission of entry.
Surface Freight: 1-2 hours from submission of entry.
At many ports Customs operate a 24 hour working day.
AUT)ORITY REOUIRE% BY BRODER0
Verbal instruction to enter considered acceptable. However if importer has
own deferment a faxed or written letter of instruction required ONCE. This
then lodged with Customs and UK Customs computer updated.
TARI--
Classification is based on the Harmonised Tariff. (Currently using 1988
Version).
Customs is arbiter of the correct classification of goods, but appeal
mechanisms exist up to and including the European Union
Commission.
Customs can, upon request of a UK domiciled trader, issue formal
instructions as to tariff liability. This is accomplished by issue of a
Binding Tariff nstruction. This is binding on the trader and Customs. A
BT has full EU status and can be used in any country of the European
Union. There is a similar mechanism for origin status.
f there is a dispute as to classification the higher amount can be paid
and rights reserved to seek refund when the dispute is settled.
59
VA*UATION
s based on the open market value of the goods.
For the purposes of valuation the open market value is the CF price to
unrelated traders. Any "assists" must be declared to Customs.
Customs will accept a value based on a previous sale. However the
sale must be directly related to the import.
Royalties or license fees if not included in the CF price are to be
declared. Financial charges and buying commission - is specifically
declared - are except from duty but liable to tax.
%UTY
Levied on landed vale, generally as a % of that value.
OT)ER TAXES
Excise due on alcohol and tobacco products.
Value Added Tax (VAT) applicable on CF + duty + post landing
charges to destination.
All goods fall into general Tax groups.
Zero Rated Goods [children's clothing, books, newspapers and food] =
0%
Lower Rate Goods [Antiques and artwork] = 5%
Standard Rate Goods [Every thing else] = 17.5%
60
,RO)IBITE% $ RESTRICTE% IM,ORTS
mport License / Quota and Visa.
n general normal commercial goods are subject to import license,
most are covered by an "Open General License". Only if specifically
removed from the OGL are import licenses required.
With a few exceptions EU import licenses are controlled from the point
of origin.
The EU issues at the start of each year an allowance for import from
each country by tariff or CAT No. The exporting country then issues
amounts to traders. This means that the rd country trader can be
assured that goods being manufactured will be admitted to the
European Union.
AT export from the 3rd country an Export License is endorsed by the
exporting country. Possession of a valid export license guarantees
issue of an import license.
EXEPTON: A few goods are controlled by quota [leather shoes and
hats]. Under the European Quota system licenses are issued to
importers against expected orders. These are apportioned to the trade
in the year proceeding import. The method of allocation is by proportion
of requested amounts against the total permitted import. Existing
traders are favored.
OT)ER RESTRICTIONS
Narcotics, obscene articles. Total prohibition.
Guns and weapons - strictly controlled license.
Medicines - Controlled by product type approval. This can be UK or EU
wide registration of the drug.
61
Wildlife - Controlled by CTES and health restrictions.
Foods - Meat and animal products controlled by issue of authorized
exporter status to specified premises. Additional health and veterinary
restrictions in force.
Controlled admission of many plant products including import license
(CAP) requirement for specified goods.
MARDIN+
Many standards in-force, most involving point of sale marking that
MUST be present. Specific Enquirer recommended for each product
type.
%UTY CONCESSIONS
Duty free movement among EU member states.
Duty free admission of European Union Originating industrial goods to
EFTA countries. [Norway and Switzerland]. Reciprocal agreement
allowing free admission for industrial goods from these countries to the
EU.
Duty free admission of many goods from North Africa (Magreb), Middle
East (Mashrak), African and Caribbean and Pacific states (ACP and
OCT agreements). Agreements with most Eastern European states for
duty free or reduced duty admission. GSP free or reduced duty rates.
RE-UN%S$%EMAN%S
Customs Entries may re-evaluate up to three years after original
submission.
62
OT)ER IM,ORT SC)EMES
This lists principle schemes only.
Customs warehouse: Allows storage of goods in a Customs bonded
warehouse. Very minor processing allowed under this system. This
includes pick and pack type operations.
Customs Free Zone: Effectively creates the zone as a duty and tax-free
area within the country. Little used within the UK, as most benefits of a
free zone are available under other schemes.
nward Processing Relief: Goods imported for further manufacture and
re export can be relieved of all import duty.
EX,ORT CONCESSIONS
Apply to agricultural sector only.
EX,ORT CONTRO*S
Control of arms and technology line with European and UN
recommendations. Where applicable an individual export license will be
required.
The EU also monitors goods in transit and applies the same criteria.
High tech "Duel Use" goods can be a problem, if transiting the EU
please check for Transshipment License.
S,ECIA* NOTE
The UK is a participant in the SEA trials. TMS - Trade Management
Services United Kingdom.
The United Kingdom Good Laboratory Practice Monitoring Authority
(UK GLP MA)
63
Background
Health and environmental safety data are required for the registration of a
wide range of product types and product registration is usually sought in more
than one country.
n 1981 the Organisation for Economic Co-operation and Development
(OECD) principles of Good Laboratory Practice (GLP) were finalised and led
to the OECD Council Decision: "Data generated in the testing of chemicals in
an OECD member country in accordance with OECD Test Guidelines and
OECD principles of Good Laboratory Practice shall be accepted in other
member countries for purposes of assessment and other uses relating to the
protection of man and the environment." At a meeting in 1983, concerning the
mutual recognition of compliance with GLP, the OECD recommended that
implementation of GLP compliance should be verified by laboratory
inspections and study audits.
The European Community (EC) later adopted the OECD principles and a
number of Directives stipulate that tests must be carried out to the principles
of GLP and also that EC Member States' must incorporate into their laws the
requirement for all the non-clinical safety studies which are listed in the
sectoral Directives, to be conducted to GLP and that premises conducting
such studies must be inspected by a National Authority. Consequently, on 1
April 1997 there came into force in the UK a Statutory nstrument entitled "The
Good Laboratory Practice Regulations 1997" which superseded the voluntary
United Kingdom Good Laboratory Practice Compliance programme. n 1998
the OECD issued the revised Principles of GLP and Compliance Monitoring.
These were adopted by the EC in October 1998 and issued as Directives
99/11/EEC and 99/12/EEC. Consequently, in 1999, the UK Regulations were
updated by Statutory nstrument 3106 and are accompanied by a new Guide
that interprets them and explains how compliance will be verified.
64
%efinition of +oo# *a2oratory ,ractice
Good Laboratory Practice (GLP) embodies a set of principles that provides a
framework within which laboratory studies are planned, performed, monitored,
recorded, reported and archived. These studies are undertaken to generate
data by which the hazards and risks to users, consumers and third parties,
including the environment, can be assessed for pharmaceuticals,
agrochemicals, cosmetics, food and feed additives and contaminants, novel
foods and biocides. GLP helps assure regulatory authorities that the data
submitted are a true reflection of the results obtained during the study and can
therefore be relied upon when making risk/safety assessments.
Structure
Responsibility for verification of adherence to the Principles of Good
Laboratory Practice is a devolved matter, thus the UK GLP Monitoring
Authority is a body consisting of the Secretary of State for Health, the National
Assembly for Wales, the Scottish Ministers and the Department of Health and
Social Services for Northern reland. Any one of the above acting alone or
jointly may perform its functions. The UK GLP Monitoring Authority (GLPMA)
may appoint such persons as they think necessary for the proper discharge of
their functions and currently comprises a Head of Unit and three nspectors.
Acti&ities
The Monitoring Authority formulates UK policy on the interpretation of the
Principles of Good Laboratory Practice and responds to enquiries from
industry, other Government Departments and other interested bodies in this
regard. Biennial inspections of all laboratories within the UK that perform the
regulatory studies that are required to be conducted to GLP are carried out by
the three full time nspectors. At present there are about 145 test facilities of
all sizes in the programme. Other inspections verify the implementation of
GLP for prospective members and surveillance inspections may also be
carried at the Authority's discretion.
65
n addition, at the request of a UK or overseas Regulatory Authority, in depth
audits of studies undertaken by members of the programme are carried out to
determine whether they are in compliance with the Principles of Good
Laboratory Practice. One such audit was undertaken on behalf of The
European Agency for the Evaluation of Medicinal Products (EMEA) in 1999.
The UK GLP Monitoring Unit is audited by the British Standards nstitute for
accreditation to SO 9002 and was successful at its first audit and accredited
in March 1999, three months earlier than its target date.
Coittees
The GLPMA has set up two committees that meet annually: The Consultative
Committee and the Liaison Committee. The Consultative Committee advises
and provides information to representatives of Trade Associations and other
Government Departments with respect to aspects of GLP.
Tra#e Associations0
Association of British Pharmaceutical ndustry
Association of Consultants in the Bioscience ndustry
British Agrochemical Association
British Association of Research Quality Assurance
Chemical Aspects of Toxicology Discussion Group
Chemical ndustries Association
National Office for Animal Health
Association of ndependent Research Testing Organisations
United Kingdom Accreditation Service
66
Other Government Departments:
Medicines Control Agency (pharmaceuticals)
Veterinary Medicines Directorate, DEFRA
Pesticides Safety Directorate, DEFRA
Food Standards Agency (feed additives, novel animal and human
foods, food additives and food contaminants)
Health and Safety Executive (mainly industrial chemicals/human safety
and biocides)
Environment Agency (mainly industrial chemicals/ environmental
safety)
Medical Devices Agency
The Liaison Committee comprises representatives from all the receiving
authorities in the UK listed above. The objectives of this committee are to
report and provide information with respect to the status of UK, EC and OECD
facilities claiming compliance with GLP and to act as a forum in which the
Monitoring and Regulatory authorities may discuss matters of interpretation of
European law and other topics of mutual interest.
The GLPMA may also convene annually a meeting to provide a forum for
discussions on all technical aspects of GLP.
67
Current topics
Guidance on claiming compliance with the principles of good laboratory
practice
RePuireent to coply 4it' t'e principles of +*,
n the European Union and many other parts of the world it is a regulatory
requirement that studies undertaken to demonstrate the health or
environmental safety of new chemical or biological substances shall be
conducted in compliance with the principles of GLP. n the United Kingdom
these requirements are contained within T'e +oo# *a2oratory ,ractice
Re/ulationsH Statutory Instruent 8999 NoF >8BA. These regulations
require that any test facility which conducts, or intends to conduct, regulatory
studies ust be a member of the UK GLP Compliance Monitoring
Programme. These regulations define a "regulatory study" as a non-clinical
experiment or set of experiments:
(a) in which an item is examined under laboratory conditions or in the
environment in order to obtain data on its properties or its safety (or both) with
respect to human health, animal health or the environment;
(b) the results of which are, or are intended, for submission to the appropriate
regulatory authorities; and
(c) compliance with the principles of GLP is required in respect of that
experiment or set of experiments by the appropriate regulatory authorities.
Work that does not constitute a regulatory study as defined above (or an
integral part thereof) is not required to be conducted in compliance with the
principles of GLP. For example work undertaken by Quality Control
laboratories in support of final product release, or laboratory work in support
of human clinical trials, #oes not require to be conducted in compliance with
the Principles of GLP.
68
7'at is t'e UD +*, Copliance Monitorin/ ,ro/rae J
The UK GLP Compliance Monitoring Programme is the mechanism whereby
the GLP compliance of test facilities that conduct regulatory studies is
assessed and monitored. n simple terms, test facilities are subject to routine
inspections by the Good Laboratory Practice Monitoring Authority (GLPMA),
the government body charged with enforcing the GLP Regulations.
Which test facilities need to be members of the UK GLP Compliance
Monitoring Programme ?
Test facilities that conduct regulatory studies must, by law, be members of the
Compliance Programme. Test facilities that are contracted to conduct work
which forms just a part of a larger regulatory study are not obliged to be
members of the Compliance Programme. However, the GLPMA will, at their
discretion, allow such test facilities to join the Compliance Programme in
respect of the work that constitutes part of a larger regulatory study.
f part of a regulatory study is contracted out to a test facility that is not a
member of the Compliance Programme, then the Study Director who has
overall responsibility for the study would not be able to claim GLP compliance
for that piece of work and would need to cite the use of that test facility as a
deviation from the Principles of GLP. For this reason, the organisation
responsible for the regulatory study will usually require that the test facility
contracted to conduct part of the study is a member of the Compliance
Programme.
)o4 can t'e +*, copliance status of a test facility 2e ascertaine# J
A test facility that is a member of the UK GLP Compliance Programme will,
after a satisfactory inspection by the GLPMA, be issued with a "Statement of
GLP Compliance". This statement gives the name and address of the test
facility, the date on which the inspection was carried out, and an indication of
the type(s) of work that is conducted in compliance with the Principles of GLP
69
at that test facility. Routine monitoring inspections are conducted at
approximately two yearly intervals.
A laboratory might choose to implement GLP as an appropriate quality
management system, but unless they are members of the Compliance
Programme they would not be in possession of a GLPMA Statement of GLP
Compliance.
f in any doubt as to the GLP compliance status of a test facility, the GLPMA
can be contacted for advice.
Classification of test facilities which are members of the UK Good Laboratory
Practice Compliance Monitoring Programme and fees
Test facilities, which are part of the UK GLP compliance-monitoring
programme, are classified for the level of annual fees payable according to
their size.The number of nspector/days taken to inspect the premises and
activities is used to estimate this. The fees are set at levels so that they meet
that part of the expenditure of the GLPMA, which is reasonably attributable to
the cost of inspecting and providing services.
International liaison
The GLPMA represents the UK at a number of international fora concerned
with the application of the Principles of Good Laboratory Practice. Regular
representation is maintained at the European Commission and the OECD.
The GLPMA has made significant contributions to the OECD publications that
interpret the Principles of Good Laboratory Practice. t has participated fully in
harmonisation of inspection activities both in the EU and the OECD. As a
demonstration of this participation, in 1999 the UK led an international team of
nspectors to taly and in 2000 to Canada as part of the Mutual Joint Visits
programme of the OECD.
As a result of the industry/GLPMA work on a document describing the
operation of multisite studies, the UK hosted an OECD Consensus workshop.
70
This workshop, which took place in June 2001, agreed a consensus
document on the interpretation of the GLP guidelines for multisite studies. The
document was circulated to all OECD member countries for consideration and
was approved by the OECD GLP working Group in December 2001. t will
now go to the OECD Joint Committee for final approval and then publication
in early 2002.
-TAs an# Custos Unions
The European Free Trade Association - EFTA - is an international
organisation promoting free trade and economic integration. The Association
maintains the management of (1) the EFTA free trade area, (2) the EFTA
participation in the European Economic Area (EEA) and (3) EFTA's network of
free trade agreements.
The EFTA Secretariat is located in Geneva (Headquarters), Brussels and
Luxembourg.
EFTA began with two goals: to establish free trade among members and to
seek a broader economic union with the rest of Western Europe. The first was
accomplished in 1966, when most of the intra-EFTA tariffs were abolished.
Negotiations toward the second goal began in 1961, when Great Britain
sought entry into the EEC. ts bid was rejected (1963) by France; however,
later discussions succeeded, and in 1973 Denmark and Great Britain left
EFTA to join the EC. The same negotiations produced a trade accord
between the newly expanded EC and the remaining members of EFTA. n
1986, Portugal also left EFTA for the EC. The development of a single market
between the EU and most EFTA nations was completed in 1994, when the
European Economic Area (EEA) came into being. EFTA members Austria,
Finland, and Sweden joined the EU in 1995, but in Norway the voters rejected
a similar move.
6
71
Single-market Europe is increasingly seen as a valuable marketplace for
North American goods. With its common language and highly developed
service sector, this presents the UK with enormous opportunities for
developing trading relations. DT's Gateway project, established in 1996/7, is
aimed to support this development and to encourage US and Canadian
companies to use UK services, and the UK as a base for their European
operations. "United Kingdom: Business gateway to Europe" follows up this
initiative and aims to provide a unique showcase of UK service capabilities
both for North American companies and other international businesses
seeking a European base.
European Union
Began with the Treaty of Rome in 1957: 6 countries
Common external trade policy.
Now 15 members: Belgium, Germany, France, taly, Luxembourg, the
Netherlands, Denmark, reland, the United Kingdom, Spain and Portugal,
Austria, Finland and Sweden
Plans to expand into Eastern and Southern Europe.
Unified Policies
Tariff policies
Quotes, VERS
nternational Trade bargaining
Product standards (e.g. electrical, transport)
Standardized labeling, health, safety requirements
Common Agriculture Policy (CAP)
Antitrust policies
Aid to industries
Borders
Most passport checks are gone.
Border crossing for goods is very easy.
No restrictions on capital movements, financial services
72
Trade Creation versus Trade Diversion
Trade Creationmostly in manufacturing
Trade Diversionin agriculture
Monetary Union
Single Currency Area as of January 1, 1999
Euro notes to circulate January 1, 2002
Benefits: no need to change currency when conducting business across
borders
Costs: individual countries lose the opportunity to conduct independent
monetary policy to serve different business cycle needs.
One central bank.
-ree Tra#e A/reeents
Bulgaria
Croatia
The Czech Republic
Estonia
Hungary
srael
Jordan
Latvia
Lithuania
Macedonia
Mexico
Morocco
PLO
Poland
Romania
Singapore
Slovak Republic
Slovenia
Turkey
73
%eclarations on Co1operation
Albania
Algeria
Egypt
Gulf Cooperation Council (GCC)
Lebanon
MERCOSUR
Tunisia
Ukraine
Yugoslavia
EC S4it3erlan# -ree Tra#e A/reeent
Aut'or :European Economic Community - Switzerland
-or : Agreement
Treaty : European Economic Community
Agreement between the European Economic Community and the Swiss
Confederation, the European Economic Community, of the one part, and the
Swiss confederation, of the other part.
Desiring to consolidate and to extend, upon the enlargement of the European
Economic Community, the Economic Relations existing between the
Community and Switzerland and to ensure, with due regard for fair conditions
of competition, the harmonious development of their commerce for the
purpose of contributing to the work of constructing Europe,
Resolved to this end to eliminate progressively the obstacles to substantially
all their trade, in accordance with the provisions of the General Agreement on
Tariffs and Trade concerning the establishment of free trade areas,
Declaring their readiness to examine, in the light of any relevant factors, and
in particular of developments in the Community, the possibility of developing
and deepening their relations where it would appear to be useful in the
74
interests of their economies to extend the into fields not covered by this
Agreement,
Have decided, in pursuit of these objectives and considering that no provision
of this Agreement may be interpreted as exempting the contracting parties
from the obligations which are incumbent upon them under other international
agreements,
UD 2usiness failures on t'e rise
More UK companies are being forced to sell up
The number of British businesses shutting up shop soared during the first half
of the year, while profitability remained stuck in a downward spiral, surveys
have shown.
Business failures during the first six months of 2002 were 8.2% up on the
same period last year at about 22,000, ratings agency Dun & Bradstreet said.
And separate research from market researchers Experian showed that British
firms' average return on capital a standard measure of profitability - fell to
8.4% during the first three months of the year from 10.8% a year earlier.
Experian said average business profitability has now fallen by 40% over a
record three years of unbroken decline.
A re&ie4 fro Asia
The cultural diversity of Europe, as well as the complexity of its business
practices, can make it very difficult for companies to establish themselves.
The UK, however, with its common language, entrepreneurial culture and
world-class service providers, can make a perfect gateway to Europe,
particularly for North American companies. This unique publication, supported
75
by the DT, provides an invaluable showcase of UK service capabilities,
focusing in particular on: marketing, market research,...
S'a#o4 of recession
The figures suggest that that British businesses have yet to emerge
convincingly from last year's economic slowdown, despite persistently high
levels of consumer spending.
"The impact of the global economic downturn, made worse by the events of
11 September, is clearly shown in the levels of profitability achieved by British
companies," said Peter Brooker, the author of the Experian report.
"The average return on capital across the UK industrial economy is now lower
than when the economy went into recession in 1992."
According to Experian, profits in the engineering, media, information
technology and transport sectors are being squeezed particularly hard.
The figures tally with recent surveys suggesting that a tentative recovery in
the hard-pressed manufacturing sector may be running out of steam.
Mi!e# results
But profitability in the oil, pharmaceutical, textile, leisure and support services
sectors edged slightly higher compared with the first three months of 200.
And the Dun & Bradstreet figures showed that while the number of business
failures is rising, the pace of the increase slowed sharply over the last three
months.
Business failures during the April to June period were up by just 2% on the
year, down from a 15.4% increase during the first three months of the year.
"From the second quarter's figures were can see that the trend is only slightly
up," said Dun & Bradstreet senior analyst Philip Mellor.
76
Re/ional ipact
Business failures for the six months rose most sharply in Wales, followed by
the south west, Scotland and London.
But insolvencies fell in the east Midlands, north east and east of England.
Profitability fell by comparison with the first three months of 2001 in all regions
except the west Midlands and Yorkshire, Experian said
IM- Report " T'e future
1. The U.K. economy is performing well. The past decade has witnessed a
sustained expansion of output and employment, coupled with low and stable
inflation. Although GDP growth fell below expectations in 2002, it remained
above that of other large EU countries, and output seems to have recently
recovered to its trend growth rate.
2. These economic achievements are due, in no small measure, to the
government's sound macroeconomic policies, in the context of a policy
framework that has emphasized division of responsibilities, accountability, and
transparency. The independence of the Bank of England in pursuing its
symmetrical inflation target has allowed it to respond appropriately to cyclical
fluctuations, including the recent slowdown in external demand. The fiscal
framework has oriented policy to medium-term goals within a sound
underlying position, permitting the fiscal expansion that has supported
monetary policy since mid-2001. The Financial Services Authority (FSA) has
effectively played its role as the single financial regulator. ndeed, the MF's
assessment of the financial sectorundertaken under its Financial Sector
Assessment Program (FSAP), at the invitation of the governmentfound the
financial system to be fundamentally sound and supported by a financial
stability policy framework that, in many respects, is now at the forefront
internationally.
77
3. No achievement, however, is without its challenges, and two are of
particular note:
The recent buoyancy in consumer demand has partly reflected a surge in
credit to households and in house prices. n the short-term, the challenge will
be to ensure that strong macroeconomic performance and financial stability
are maintained if these developments unwind, regardless of whether they do
so gradually or abruptly.
Over the medium term, the challenge is to raise productivity. n 2001, the
United Kingdom ranked only 19
th
among OECD countries in terms of per
capita incomeand poverty, while declining, remains high, particularly among
children. These outcomes reflect the United Kingdom's low labor productivity.
A key task for the government is to bring about the structural changes needed
to boost it.
4. Medium and long term economic developments will also depend on
whether the United Kingdom will enter EMU. We continue to regard as
appropriate the five economic tests that the government has set out to
evaluate whether there is a case for joining, and look forward to the
assessment of these tests by June 2003.
An Uncertain S'ort1Run Outloo.
5. Uncertainties in the period ahead may make for choppy waters. Against the
backdrop of a gradual recovery in global demand, our central projection is for
GDP growth to pick up to 2-2 percent in 2003, slightly below the lower end
of the government's forecast range (2-3 percent). There are, however,
significant downside risks. They relate to both external factorsin particular
whether the global recovery may stalland domestic factors.
6. The key domestic uncertainty is the strength of consumer spending. Our
central projection assumes that household consumption will remain strong
enough to support activity until external demand accelerates. But, a less
benign scenario may unfold if the house price increases of the recent past
78
unwind rapidly and unemployment starts risingindeed, the muted response
of unemployment to the recent output deceleration suggests some labor
hoarding. Although monetary policy would, in these circumstances, play a
supportive role, lower-than-expected output growth may be inevitable, given
the lags in the monetary policy transmission mechanism. The authorities
recognize that the successes of the last decade in containing output volatility
should not lead to the belief that business cycles have been eliminated in the
United Kingdom.
A Responsi&e Monetary ,olicy 4it'in a Clear Reit
7. The existing monetary framework has delivered impressive results. The
stability of inflation expectations around the inflation target in the five years
since the creation of the Monetary Policy Committee (MPC) attests to the
credibility of the framework and the MPC's actions within it. With respect to
recent developments, we note that the MPC's approach to reflecting asset
price considerations in its inflation-targeting framework is properly focused on
the behavior of inflation at different time horizons.
8. The present policy stance strikes the right balance between, on the one
hand, keeping the policy rate low enough to support demand at a time of
cyclical weakness, and, on the other, avoiding fueling an unsustainable rise in
credit and house prices that could eventually unwind rapidly, thereby
jeopardizing the inflation target further down the road. Looking ahead,
monetary policy decisions will continue to be finely balanced. f the global
outlook is weaker than anticipated, a rate cut may be needed, but would have
to be weighed against the risk of exacerbating economic imbalances, and the
fact that fiscal policy has been loosened significantly. Attention will also have
to be paid to wage developments. n particular, there is a risk that public
sector wage demands may intensify as public spending increases, and that
the spillover to the private sector, in a tight labor market, may be greater than
in the past. Developments in other cost factors are also uncertainin
79
particular, import prices, should sterling weaken, or the effect of the
forthcoming increase in social security contributions.
-iscal ,olicy C'allen/es
9. As in the past, the Pre-Budget Report (PBR) provides a transparent and
comprehensive account of the government's economic policies. We welcome
the enhanced documentation supporting the 2002 PBR, including the end-of-
year fiscal report and the long-term public finance report. Our discussions on
fiscal policy have encompassed both fiscal framework issues and policy
implementation. While the main challenges are in the latter area, it is useful to
focus first on the fiscal framework.
10. n the past few years, fiscal policy has been managed prudently within the
context of the golden rule and the sustainable investment rule. This approach
has served the United Kingdom well: its public debt ratio is now one of the
lowest in the EU; and the fiscal deficit-to-GDP ratio, while rising, will remain
lower this year than in any other large EU country. Given past surpluses,
however, the two fiscal rules are no longer as constraining as at the time of
their introduction. Moreover, it is not clear whether the sustainable investment
rule should be interpreted as setting a ceiling (on the net public debt ratio) that
has to be respected at all times, or only on average over the economic cycle.
n the latter case, the rule would currently place very little effective constraint
on future debt and deficit paths. We draw two conclusions from these
considerations:
First, almost five years after their introduction, there is a case for a study that
takes stock of the experience so far with the two rules. n particular, it would
be useful to assess whether the rules could be designed, or calibrated, so as
to reduce their dependence on past fiscal overperformance, avoiding the risk
that margins accumulated in the past allow excessive leeway in the future. t
would also be useful to clarify whether the sustainable investment rule implies
a debt ceiling that holds at all times or on average.
80
Second, current fiscal policies should be assessed not only against the rules,
but also in view of their broader economic effects. The range of policies that
are consistent with the rules is, at present, quite large and includes fiscal
outcomes that could have very different effects on the economy.
11. Turning to fiscal policy implementation, three developments since our visit
last year warrant attention:
The PBR fiscal outlook is weaker. The weakening is more marked in the
short-term, but the medium-term deficit has also been revised up to about 1
percent of GDP (from about 1 percent in the 2001 PBR).
The revenue projections underlying this fiscal outlook are more uncertain
than in the past. The additional uncertainty relates to three questions. First,
whether the higher potential growth rate now underlying the revenue
projections will materialize. Second, whether the noncyclical component of the
revenue shortfall registered this fiscal year will recover over the medium term.
And third, whether revenues could be boosted significantly by improving tax
compliance, as assumed in the PBR.
The 2002 budget and public spending review increased spending
significantly from growth rates that were already high, and this was only partly
offset by the rise in national insurance contributions. During FY2002/03-
2004/05, Departmental Expenditure Limits are targeted to rise, cumulatively
and in real terms, by some 27 percent on health, 37 percent on education,
and close to 50 percent on transportation. Real primary spending is targeted
to increase at the fastest rate in any three year period since the mid-1970s.
These developments raise questions related to both public expenditure
management and macroeconomic management.
12. With public spending low relative to both historical and EU averages, it is
reasonable to respond to the demand for better public services. But, at the
high rate of spending growth currently envisaged, it remains to be proved
whether public funds may be spent without incurring significant inefficiencies.
81
Over the past few years, the government has introduced bold and
comprehensive public expenditure management reforms. These reforms are,
in principle, sensible, but their effectiveness, in practice, remains to be tested.
Moreover, some aspects of public spending policiessuch as the structure of
economic incentives for public sector workers, including the degree of
geographic wage differentiation, and arrangements for greater private
provision of public servicesremain to be developed further. Finally,
spending is being increased also in areas (notably education) where, already
now, it is comparable to that of other countries, in relation to GDP. n these
circumstances, we would encourage the government to make further efforts to
ensure that the risk of inefficiencies is minimized, including by speeding up
the public spending reform process. Public spending could also be made
more efficient through the broader application of user fees, thus containing
excessive consumption and avoiding the subsidization of users from middle-
to-upper income brackets via tax revenues. Higher income transfersor,
when applicable, means-testing user feescan offset the negative impact of
such fees on the poor.
13. As to macroeconomic management, the short-term widening of the overall
deficit is not a source of concern: fiscal policy can play a useful supportive
role in a cyclically-weak economy when the underlying fiscal position is
sustainable. However, a stronger medium-term fiscal outlook than currently
envisaged in the PBR would have advantages as: (i) over the medium term,
higher deficits tend to crowd out private spending; (ii) a stronger underlying
fiscal position allows more room for fiscal policy to play a counter-cyclical role;
and (iii) repeated upward revisions in the deficit outlook, even if small every
year, may eventually weaken fiscal credibility. n light of these considerations,
there is a case for gradually strengthening the medium-term fiscal target,
moving it back to about 1 percent of GDP, in the context of revenue
projections less exposed to the downward risks mentioned above. To this
end, more moderate spending increases over the medium term would be
helpful.
82
14. Turning to tax policy, national insurance contributions will be raised in the
spring of 2003. As we argued last year, broadening the tax base, particularly
of indirect taxes, would have been a more efficient way to raise revenues, as
it would have improved the neutrality of the tax system. As with user fees,
targeted transfers could offset the adverse effects of base broadening on low-
income groups. Regarding other tax policy issues, we welcome the
authorities' intention to reform the corporation tax regime with a view to
simplifying it and bringing it closer to standard business accounting practices.
Further in this direction, the several special favorable tax treatments and
deductions introduced in recent years may usefully be streamlined. Although
a case can be made for special tax measures to address specific market
failures, their proliferation reduces the efficiency of the overall tax system and
increases compliance costs.
15. Over the long-term, the U.K. public finances appear in a better position
than those of many other advanced economies. Underpinning fiscal
sustainability are the low level of public debt, less unfavorable demographics
and, most importantly, limited future public pension obligations. The limited
nature of these obligations depends on maintaining a largely privately-funded
pension system and ensuring that individuals save sufficiently for retirement.
Thus, a commitment to policies that facilitate private saving and curb the
expansion of public liabilities will need to be sustained. n this respect,
simplifying the existing array of tax-supported long-term saving and pension
schemes may help increase take up among the target group of low-to-middle
income individuals. Transparency should also be improved, with consideration
given to establishing standardized life insurance products, along the lines
recommended by the Sandler Report.
Boostin/ *on/1Ter +ro4t'
16. Productivity per hour worked in the United Kingdom is one of the lowest
among advanced economies, reflecting both a low capital stock and low
efficiency in the use of factors of production (so-called total factor
83
productivity). We support the thrust of the authorities' strategy to raise the
capital stock. Maintaining a stable macroeconomic and financial environment
as reflected in low long-term interest rates-is the best way to elicit private
sector investment in capital and new technologies. Higher public investment
targeted at cost-effective projectsis also useful as the United Kingdom has
fallen behind on public infrastructure.
17. But the key challenge is to raise total factor productivity, as this would
allow output to increase without diverting resources from consumption to
investment. Government's policies seem broadly appropriate also in this area.
The focus has been on increasing competition and entrepreneurship;
improving work force skills; and facilitating R&D and the adoption of new
technologies:
We welcome the strengthening of the competition framework in recent years.
The Enterprise Act, and the enhanced powers of the Office of Fair Trade and
the Competition Commission, will foster a more competitive environment and
more innovative and cost-effective business practices. However, more needs
to be done to reform planning restrictions, which are hampering competition in
important segments of the economy (including wholesale and retail
distribution and housing).
Regarding skills, the focus should be on improving delivery. This is
particularly crucial in secondary school education and the development of
intermediate skills and vocational trainingareas where the United Kingdom
is behind comparable economies. Current efforts to increase in-work training
and effective apprenticeships should also enhance the skills of those that
have already joined the workforce and ease skill shortages.
The recently-introduced tax credit should provide a boost to R&D spending,
which has been lagging. More R&D, coupled with a competitive and
entrepreneurial business environment, should facilitate the adoption of new
technologies.
84
18. The U.K. labor markets are more flexible than those of other European
economies. This flexibility has significantly contributed to low unemployment
and high participation rates. Some of the authorities' active labor market
policies, notably the New Deal for the young unemployed, appear to have met
with considerable success. However, programs aimed at the unemployed
aged 25 and over, as well as at some other groups, have yet to prove their
effectiveness and may need to include stronger job-seeking incentives.
A 7ell1Re/ulate# an# Sta2le -inancial Syste
19. Continued financial system stability will be key to macroeconomic stability
and sustained growth. The FSAP team found that, despite a recent
weakening, U.K. banks generally appear sufficiently profitable and well-
capitalized to be able to absorb the effects of likely macroeconomic shocks
without systemic distress. This partly reflects the profits and capital
accumulated during the past decade of strong economic performance, as well
as the diversified range of bank activities and continuing improvements in risk
management practices. The financial stability policy framework is also sound.
The FSA's supervisory practices are strong and in line with the various
internationally-accepted standards and codes. Down the road, a key
challenge for banks will be to maintain their resilience to adverse shocks in
the presence of structural trends, such as increased competition, that may
lead to a gradual narrowing of their profit margins.
20. nsurance companiesmost notably life insurersare under considerable
stress, partly reflecting a decline in investment returns. However, the
difficulties in this sector are not expected to undermine the stability of the
financial system as a whole. Ownership links and credit exposures between
banks and insurance companies, including through risk-transfer markets, are
manageable, and less important in the United Kingdom than in some other
countries. n addition, life insurers are able to pass on to policyholders some
of the weakening in investment yields. Nevertheless, close monitoring of the
85
situation is required, and the FSA is moving quickly to strengthen significantly
its supervision of the insurance sector.
86
BIB*IO+RA,)Y
British Commercial News, January /February 2000, Grafix, London.
Foreign and Common Wealth Office, Britain's Economy, London.
Foreign & Common Wealth Office, Britain and ndia, , London.
EuropaWorld book
CA worldbook
Websites
www.bbc.co.uk
www.dti.uk
WWW.statistic.com
www.Uk Chamberofcommerce.com
87
ANNEXURE
Unite# Din/#o0 Econoic an# financial #ata
The data shown correspond to the data described on the nternational
Monetary Fund's Dissemination Standards Bulletin Board (DSBB).
Unless ot'er4ise in#icate#H #ata are not seasonally a#Iuste# 5NSA6F
-i/ures ay not su #ue to roun#in/F
REA* SECTOR
S%%S #ata cate/ory
an# coponent
Unit
#escription
O2ser&ations
*in. to latest
,ress Release
an# a##itional
inforation
,erio# of
latest
#ata
*atest
#ata
%ata for
pre&iou
s
perio#
;
c'an/e
fro
pre&ious
perio#
National accounts
UD National
Accounts
* GDP at current
market prices
billion
SA
Q3 2002 260.3 257.5 1.1 "
** Households
billion
SA
Q3 2002 165.2 163.6 1.0 "
** Non-profit
institutions
billion
SA
Q3 2002 6.5 6.4 1.6 "
** General
government
billion
SA
Q3 2002 53.1 52.2 1.8 "
** Gross fixed capital
formation
billion
SA
Q3 2002 40.5 40.6 -0.2 "
** Change in
inventories
billion
SA
Q3 2002 0.0 -1.2 N/A "
** Acquisitions less
disposals of valuables
billion
SA
Q3 2002 0.3 -0.1 N/A "
** Total exports
billion
SA
Q3 2002 66.1 68.3 -3.3 "
** Total imports
billion
SA
Q3 2002 72.1 72.3 -0.3 "
* GDP at constant
prices
At 1995 prices
billion
SA
Q3 2002 216.2 214.2 0.9 "
** Households
At 1995 prices
billion
SA
Q3 2002 147.5 146.3 0.8 "
** Non-profit
institutions
At 1995 prices
billion
SA
Q3 2002 5.4 5.3 1.1 "
** General
government
At 1995 prices
billion
Q3 2002 41.2 40.9 0.8 "
88
SA
** Gross fixed capital
formation
At 1995 prices
billion
SA
Q3 2002 36.4 36.8 -0.9 "
** Change in
inventories
At 1995 prices
billion
SA
Q3 2002 -0.1 -1.0 N/A "
** Acquisitions less
disposals of valuables
At 1995 prices
billion
SA
Q3 2002 0.3 -0.1 N/A "
** Total exports
At 1995 prices
billion
SA
Q3 2002 71.6 72.5 -1.2 "
** Total imports
At 1995 prices
billion
SA
Q3 2002 85.7 86.1 -0.5 "
Production index
ndex of
Production
SA
1995=100
Novemb
er 2002
99.7 100.2 -0.5
ndex of
Production
Employment
Workforce
jobs
'000
Q3 2002
29,54
9
29,496 0.2
Workforce in
Jobs
Employment
Labour Force
Survey
'000
Septemb
er 2002

Novemb
er 2002
27,77
8
27,759 0.1
Labour Market
Statisitics
Unemployment
Claimant
Count
'000
(2nd Thursday
of each
month)
Decemb
er 2002
919.1 905.6 1.5 Claimant Count
Unemployment
Labour Force
Survey
'000
Septemb
er 2002

Novemb
er 2002
1,515 1,532 -1.1
Labour Market
Statisitics
Wages/Earnings
Average
earnings
index
1995=100
Novemb
er 2002
134.2 133.5 0.5
Average
Earnings ndex
Consumer prices
Retail Prices
ndex
1987=100
Novemb
er 2002
178.2 177.9 0.2
Retail Price
ndex
Producer prices
Producer
Price ndex
1995=100
Decemb
er 2002
108.8 108.7 0.1
Producer Price
ndex
89
-ISCA* SECTOR
S%%S #ata
cate/ory an#
coponent
Unit #escription
O2ser&ations
Link to lastest
Press Release
and additional
information
,erio#
of
latest
#ata
*ates
t
#ata
%ata
for
pre&io
us
perio#
;
c'an/e
fro
pre&iou
s
perio#
+eneral
/o&ernent
operations
Public Sector
Accounts
* Revenue billion Q3 2002 103.6 93.8 10.5 "
* Expenditure billion Q3 2002 106.8 103.3 3.4 "
* Balance,
Deficit-/Surplus+
billion Q3 2002 -3.2 -9.5 N/A "
* Financing billion Q3 2002 -2.8 -8.9 N/A "
** Domestic banks billion Q3 2002 0.8 2.1 N/A "
** Domestic non-
banks
billion Q3 2002 6.3 4.2 N/A "
** Rest of the world billion Q3 2002 -3.1 1.0 N/A "
* Balancing item billion Q3 2002 -0.4 -0.6 N/A "
Central
/o&ernent
operations 8
"
Monthly data
Public Sector
Finances
* Revenue
Central
Government
Cash Receipts
billion
Novemb
er 2002
25.4 33.8 -24.8 "
* Expenditure
Central
Government
Cash Outlays
billion
Novemb
er 2002
31.9 30.8 3.8 "
* Balance,
deficit-/surplus+
Central
Government
Own Account
Borrowing
billion
Novemb
er 2002
6.5 -3.0 N/A "
Quarterly data
Public Sector
Accounts
* Revenue billion Q3 2002 76.1 66.8 14.0 "
* Expenditure billion Q3 2002 79.3 76.7 3.4 "
* Balance,
deficit-/surplus+
billion Q3 2002 -3.1 -9.9 N/A "
90
* Financing billion Q3 2002 -3.4 -9.9 N/A "
** Domestic banks billion Q3 2002 2.6 2.2 N/A "
** Domestic non-
banks
billion Q3 2002 4.7 5.2 N/A "
** Rest of the world billion Q3 2002 -2.9 1.0 N/A "
* Balancing tem billion Q3 2002 0.3 0.0 N/A "
Central
/o&ernent #e2t
Bank of
England:
Monetary &
Financial
Statisitics
* Total government
debt
billion
Novemb
er 2002
384.9 383.5 0.4
"
** Of which under 1
year residual
maturity
billion
Novemb
er 2002
128.5 127.5 0.8 "
** Of which greater
than 1 year residual
maturity
billion
Novemb
er 2002
256.4 256.0 0.2 "
* Total Sterling debt billion
Novemb
er 2002
381.5 380.1 0.4
"
** Of which under 1
year residual
maturity
billion
Novemb
er 2002
125.2 124.3
0.7>/font
>
"
** Of which greater
than 1 year residual
maturity
billion
Novemb
er 2002
256.3 255.8 0.2 "
** Holdings of
British government
securities
billion
Novemb
er 2002
270.1 269.8 0.1 "
** Other
instruments
billion
Novemb
er 2002
111.4 110.3 1.0 "
* Total foreign
currency debt
billion
Novemb
er 2002
3.4 3.4 0.0
Bank of
England:
Monetary &
Financial
Statisitics
** Of which residual
maturity less than 1
month
billion
Novemb
er 2002
2.0 0.0 N/A "
maturity 1 month up
to 3 months
billion
Novemb
er 2002
1.3 3.2 N/A "
91
maturity 3 months
up to 1 year
billion
Novemb
er 2002
0.0 0.0 0.0 "
maturity greater
than 12 months
billion
Novemb
er 2002
0.1 0.2 -50.0 "
-INANCIA* SECTOR
S%%S #ata
cate/ory an#
coponent
Unit #escription
O2ser&ations
More info (email
link to data
category owner)
,erio#
of
latest
#ata
*ates
t
#ata
%ata
for
pre&io
us
perio#
;
c'an/e
fro
pre&iou
s
perio#
Analytical accounts
of the banking
sector

Bank of
England:
Monetary &
Financial
Statisitics
* Monetary
aggregates

** narrow money
(M0)
billion
(monthly
average)
SA
End
Decemb
er 2002
36.7 37.1 -1.1
Bank of
England:
Monetary &
Financial
Statisitics
billion
(monthly
average)
NSA
End
Decemb
er 2002
39.5 37.2 6.2 "
** broad money
(M4)
bilion
SA
End
Novemb
er 2002
997.8 990.5 0.7
Bank of
England:
Monetary &
Financial
Statisitics
billion
NSA
End
Novemb
er 2002
1001.
2
991.2 1.0 "
* Domestic gross
credit to the public
sector
billion
End
Novemb
er 2002
37.1 37.0 0.3 "
* Domestic gross
credit to the private
sector
billion
End
Novemb
er 2002
1494.
1
1476.9 1.2 "
** of which: Sterling billion End 1265. 1254.4 0.9 "
92
Novemb
er 2002
3
* Gross credit to
non-residents
billion
End
Novemb
er 2002
1645.
5
1565.4 5.1 "
* Gross liabilities to
non-residents
billion
End
Novemb
er 2002
1688.
3
1602.1 5.4 "
* Net external
position
billion
End
Novemb
er 2002
-42.8 -36.7 N/A "
Analytical accounts
of the Central Bank
2

Bank of
England:
Monetary &
Financial
Statisitics
* Reserve money billion
End
Novemb
er 2002
34.6 31.2 10.9 "
* Domestic claims
on the public sector
billion
End
Novemb
er 2002
15.6 15.6 0.0 "
* Domestic claims
on the private sector
billion
End
Novemb
er 2002
10.9 4.5 142.2 "
* Gross credit to
non-residents
billion
End
Novemb
er 2002
9.3 8.9 4.5 "
* Gross liabilities to
non-residents
billion
End
Novemb
er 2002
7.1 6.6 7.6 "
* Net External
position
billion
End
Novemb
er 2002
2.2 2.4 N/A "
nterest rates 3
Bank of
England:
Monetary &
Financial
Statisitics
* Policy variable
rate (minimum
lending rate)
Percent
Decemb
er 2002
4.0 4.0 N/A "
* 91 day Treasury
Bill Rate (average
rate of discount)
Percent
End
Decemb
er 2002
3.9 3.8 N/A "
93
* British
Government Stock
20 year par gross
redemption yield
Percent</CENTE
R< font>
Decemb
er 2002
Monthly
average
4.6 4.6 N/A "
Stock market 4
FTSE All-share
1962=100
End
Decemb
er 2002
1893.
7
2003.0 N/A
Bank of
England:
Monetary and
Financial
Statistics
S%%S #ata
cate/ory an#
coponent
Unit #escription
O2ser&ations
More info (email
link to data
category owner)
,erio#
of
latest
#ata
*ates
t
#ata
%ata
for
pre&io
us
perio#
;
c'an/e
fro
pre&iou
s
perio#
Balance of
Payments

Balance of
Payments
* Current Balance billion Q3 2002 -0.9 -5.1 N/A "
* mports of goods
and services
billion Q3 2002 74.6 73.3 1.8 "
* Exports of goods
and services
billion Q3 2002 67.9 69.0 -1.6 "
* Net income
receipts
billion Q3 2002 7.3 1.5 N/A "
* Net receipts from
current transfers
billion Q3 2002 -1.7 -2.4 N/A "
* Financial
Transactions
billion Q3 2002 9.2 3.3 N/A "
* nternational
reserves
billion Q3 2002 -0.2 0.1 N/A "
* Balancing tem billion Q3 2002 -8.6 1.6 N/A "
nternational
Reserves
(Total Official
Reserves)
US $ billion
End
Decemb
er 2002
42.4 44.3 -4.3
Bank of
England:
Monetary &
Financial
Statisitics
Merchandise trade UK Trade
* Total exports billion
Novemb
er 2002
14.9 16.4 -8.8 "
* Total imports billion
Novemb
er 2002
18.6 20.1 -7.8 "
* Total balance billion
Novemb
er 2002
-3.6 -3.7 N/A "
nternational

Balance of
94
investment position Payments
* Assets billion Q3 2002
3124.
8
3262.0 -4.2 "
** Direct
nvestment
billion Q3 2002 650.7 665.0 -2.2 "
** Portfolio
nvestment
billion Q3 2002 824.5 929.6 -11.3 "
*** Equity billion Q3 2002 322.8 394.4 -18.2 "
*** Debt billion Q3 2002 501.7 535.3 -6.3 "
** Other billion Q3 2002
1623.
7
1641.8 -1.1 "
** Reserves billion Q3 2002 25.9 25.6 N/A "
* Liabilities billion Q3 2002
3161.
1
3299.6 -4.2 "
** Direct investment billion Q3 2002 390.6 387.4 0.8 "
** Portfolio
investment
billion Q3 2002 884.0 960.0 -7.9 "
*** Equity billion Q3 2002 414.2 505.5 -18.1 "
*** Debt billion Q3 2002 469.8 454.4 3.4 "
1886.
5
1952.2 -3.4 "
* Net position billion Q3 2002 -36.3 -37.6 N/A "
** Direct
nvestment
billion Q3 2002 260.1 277.6 N/A "
** Portfolio
nvestment
billion Q3 2002 -59.5 -30.4 N/A "
*** Equity billion Q3 2002 -91.4 -111.2 N/A "
*** Debt billion Q3 2002 31.9 80.8 N/A "
-
262.7
-310.5 N/A "
** Reserves billion Q3 2002 25.9 25.6 N/A "
Exchange rates 3
ndex
1990=100
Average
Novemb
er 2002
105.9 106.7 -0.7
Bank of
England:
Monetary &
Financial
Statisitics
POPULATON Million
Mid-year
2001
58.8 59.7 -1.5 Population
-ootnotes0 A flexibility option has been taken for the periodicity and
timeliness of Central Government financing.
95
ACDNO7*E%+MENTS
would like to thanks Mr. Sushil Kumar Public nformation unit for extending
all the help to me without which we would not have completed this project
report. am extremely grateful to Mr. Rivendra Lama-a Public Relations officer
at the British Embassy for providing us with the much-needed information.
wish to particularly thank all the staff members of the British High Commission
for guiding me at the most appropriate time.
am also thankful to Mr.Mathew Paul Officer British Library for Providing
valuable support
96
CONTENTS
Topics
/xecutive %ummary
7b8ectives of the Pro8ect
&ethodology
1imitations
Country ,rofile
E!port Iport Stu#y
Viable Trade
Geographical Distribution
Commercial Policy
Britains Econoy$%e&elopent
Economic Performance
Economic Strategy
Public Finance
Govt. and ndustry
Talking Points on Britain's Economy
In#o1Britis' Relations'ips
People to People
Trade and nvestment
Partners in Development
Bi2lio/rap'y
Anne!ure
97
A proe!t "eport
A proe!t "eport
#n #n
COUNTRY PROFILE
COUNTRY PROFILE
: UNITED
: UNITED

KINGDOM
KINGDOM
$u%mitted to: $u%mitted to:
Dr. M.S. LAKSHMI Dr. M.S. LAKSHMI
Prof. Prof. S. PANDA S. PANDA
$u%mitted %y: $u%mitted %y:
KARAN NAGPAL KARAN NAGPAL
Roll No. 19 A Roll No. 19 A
FR!UN" INS!I!U!" F IN!"RNA!INAL #USIN"SS FR!UN" INS!I!U!" F IN!"RNA!INAL #USIN"SS
98
N"$ D"LHI N"$ D"LHI
99

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