The UK is poised to overtake France and close the gap with Germany, rising to become the second largest economy in the EU by the year 2020, while the United States and China will continue to dominate as the two largest economies in the world, according to PwC UK economists.
These estimates are based on 2013 figures from the International Monetary Fund (IMF), supplementing PwC projections for 2020 and 2030 at market exchange rates. The estimates will be published in PwC UK Economic Outlook report later this week.
By replacing France, the UK would succeed in breaking into the global top five economies by gross domestic product (GDP) by 2020, trailing the US, China, Japan and Germany. Its foray is destined to be short-lived, however, as India is forecast to overtake it by 2030.
In particular contrast with France, whose recent economic woes earned it the appellative of "sick man of Europe", Barret Kupelian, economist at PwC UK and co-author of the report, said Britain’s economy had recently "regained its dynamism".
He said: "The UK should also narrow the GDP gap with Germany over time, although this is projected to be driven mostly by the UK’s more favourable demographics with a less rapidly ageing population and strong labour force participation rates."
"In the longer run other emerging markets may overtake the UK," he predicted. "But only India looks set to do so before 2030 according to our latest projections based on GDP at market exchange rates."
Indeed, India looks set to climb the international ranking by GDP the most rapidly, from its first appearance in 10th place in 2013, to seventh by 2020 and third by 2030, relegating Japan to fourth place.
The US will remain the largest economy in the world and while China will consolidate its second place, PwC UK’s estimate suggested that the Middle Kingdom is closing in on the first spot and estimates beyond 2030 could well see China taking over the US.
Conversely, Italy is forecast to fall from eighth in 2013 to last in 2020 and is the only country currently in the top ten expected to exit it by 2030. Its place is expected to be taken by Mexico, set to climb to 10th by 2030.
Beyond GDPPwC UK Economic Outlook report will also include the firm’s ESCAPE index which combines 20 indicators of performance across economic, social, technological, environmental and political dimensions.
According to this index, among the G7 economies, the UK ranked fifth in 2013, ahead of France in penultimate and Italy in last place. Germany continued to rank first and Canada second, while Japan took the third place.
John Hawksworth, chief economist at PwC, pointed to the UK economy’s strength in areas including "political, legal and regulatory institutions, including ease of doing business, and communications technology".
"The UK also scores relatively well on some economic variables such as unemployment and its relative growth and inflation performance also improved in 2013, which looks set to continue in 2014," he conceded.
However, Britain does lag behind comparable economies in areas including education, investment, trade deficits and income inequality, he continued. "The UK has clear strengths to build on, but also some underlying weaknesses to address even given its recent relatively strong economic recovery."