Britain

The British economy vies with France for the position of the world's fourth largest economy. As in the United States, private consumption has been driving growth. Manufacturing's share of the economy has declined relative to the services sector, but the fall has been more pronounced than in most other industrialized countries, and now represents less than one-fifth of national output. Meanwhile, the services sector has grown in importance and now accounts for about two-thirds of GDP.

Britain is one of three European Union (EU) nations that chose to remain outside the European Monetary Union for now. The British Treasury has set five tests, which were originally stated in October 1997, that have to be met prior to entry. They are -

• Can the economy demonstrate sustainable convergence with the eurozone?
• Is the economy flexible enough to cope with economic shocks once interest rates are set in Frankfurt?
• What is the impact of the euro on investment?
• What is the impact on the City - the financial Wall Street of Britain?
• What is the impact on employment? British unemployment is half that of the eurozone.

Immediately after Tony Blair's reelection in 2001, sterling fell in value on anticipation that joining the EMU was just around the corner because of the Labour Party's bias towards entry. That clearly was not the case. After the government's most recent assessment, it was announced that that the economic conditions are still not right for Britain to join the European Monetary Union. Only one of the five tests above - the impact on the City - was met.