Economy Comparison: United Kingdom Vs German


The reason behind selection of the two economies – Germany and the United Kingdom – is the fact that they are the leading economies in Europe.  German is considered to have the largest economy in the Europe continent and is the fifth largest in the world (Storm and Naastepad, 2015). Germany is recognized for its high-quality vehicles and machinery, household equipment’s and chemicals that form the export bulks for the country. UK is the leading financial and trading power and the second largest economy in Europe after Germany (Chadha et al., 2017). Over the past few decades the, country has highly developed its economy as well as market orientation. They are known for their intensive agriculture which is highly mechanized and resourceful by the European standards. This paper will compare the economies of Germany and the United Kingdom as well as their major economic divers and challenges within the two economies.

Growth Performance of UK and Germany 2010-2015

United Kingdom was highly affected by the collapse of the bank industry in 2008 which led to financial crisis. However, for the last few years they have had an economic focus which has led to huge changes in the country.  In 2010, the GDP increased by 1.7% then later in 2011 and 2012 increased by 1.5%, 2013 by 2.1%, 2014 3.1% and 2015 by 2.3% (World Bank, 2018). This shows that the country’s economy has been expanding since 2010 up to today. This shows that the British economy has been able to pick up at a higher pace.

German has been enjoying the strongest economic growth after the country was reunified after they had suffered the worst recession during the second world war. Powered household spending and business investment, low interest rates, weak exchange rate and strong exports have boosted the economy of the country which has grown and recovered from the crisis surprisingly well. In 2010, the GDP growth rate was at 4.08%, 2011 was at 3.66%, 2012 and 2013 was at 0.492%, 2014 increased to 1.493% and then in 2015 increased to 1.743%.


Economy information about the two country’s economies has been sued to get a full comparison between United Kingdom and Germany. This includes the gross domestic product rate from 2016 to 2018, the drivers and challenges of the economies that compare and contrast the two economies.

Gross domestic product (GDP)
  German UK
2018 1.5% 1.4%
2017 2.22% 1.79%
2016 1.94% 1.94%

  Table 1: GDP growth rate 2016 to 2018; Source, (World Bank. 2018).

 The statistics above show the growth rate in the real Gross domestic product in the United Kingdom and Germany from 2016 to 2018. The GDP is an important indicator of the performance of the national economy since it is the final market value of all goods and services.

United Kingdom German
The Gross domestic product growth rate of the United Kingdom has started to level for the last few years after a huge blow of financial collapse in 2008.  However, the UK economy has expanded in 2016 and 2017 but has slowed down in 2018 due to the Brexit negotiations. The largest contributor of their economic growth performance of the UK’s service sector.


German’s economic growth has remained positive with a positive GDP growth from 2016 to 2018. The GDP growth rate of German shows that the country is continuing to grow strongly over the years. In 2017, the country enjoyed their fastest GDP growth rate by 2.22%. In 2018, their growth rate slowed down due to struggles within the automotive sector which is the strong contributor of the country. There has been a broad deterioration in the Industrial output which continued to contract throughout the financial year. The country has also been supported by the public and private consumption which has driven GDP growth throughout the years.


Drivers and challenges for United Kingdom and German economy


The main drivers of economic growth in United Kingdom are the service industry at 80%, manufacturing industry and agriculture industry at 0.52%. Germany is considered to be one of the largest nominal Gross domestic production with a high labor force, high innovation and tech products as well as a large capital stock. The three major economic drivers are agriculture at 0.9% of the GDP, industry 29.1% and service sector at 68% of the economy (World Bank. 2018).

Service industry (business services).

The service sector considered as the strongest driver of German’s GDP at 68.2%. The subsequent service sector components include renting, financial services, hotels and restaurants, trade and transport. The contribution of the service sector to the economy of German is lower as compared to the contribution of service sector in United Kingdom. The service sector has been considered the largest in England fueling economic growth through the growing services within the country such as business services and other administrative services. Currently the service sector comprises of 80% of the gross domestic product. The service sectors in the UK include retail industry, restaurant and cafes, hotel and tourism services, insurance services and transport and communication services (Fethi and Katircioglu, 2015). The growth of the service industry has been contributed by improved technology and better labor productivity, rising real wages and incomes as well as increase in demand.

Production industry and manufacturing industry

Production industry has contributed to 25.8% of the gross domestic product in 2018 employing 24.2% of individuals within the workforce. German has increasingly excelled in innovation of machinery, automotive and electrical equipment’s (Michelsen et al., 2018). It is recognized as the largest exporter and producer of automobiles. In the world market, they have covered 90% of the market share. Therefore, this is a strong driver of the economy with German companies occupying different markets segments internationally. On the other hand, the manufacturing industry in UK has replaced the production industry in German contributing 18% on the GDP. The manufacturing industry has been essential in increasing the level of employment and increased productivity which has led to economic growth. This is because industrialization has led to increased growth and prosperity of the economy.


In UK agriculture is extensive and contributes to 0.6% of the country’s GDP. Agriculture is highly mechanized in UK with low labor force due to technology. Farming has contributed to increased environment management thus contributing around £ 8.5 billion Gross value that was added into the economy in the past few years. A range of actions such as agricultural technologies have secured sustainable growth within the future of agriculture and thus economic growth.

On the other hand, agriculture has accounted for 0.9% of Germany’s GDP employing 2.4% of the country’s population (Michelsen et al., 2018). Agriculture has been productive thus positively contributing to the economic growth, it has covered 90% of the domestic needs with products such as wheat, barley, fruits and sugar beets. Major industries in agriculture services have boosted economic growth through increased productivity and prosperity within the agriculture industry.


Uncertainty from Brexit move and uncertainty of industrialization

Since the 2016 Brexit vote, the consumer spending has been held up. Though there is increase in prices from the impacts of Brexit devaluation, there is a decrease in consumer confidence. Firms have experienced concerns of the uncertainty of the future due to the Brexit move which will impact the trade relations in their international business (Pollard, 2018). With regards to the weak consumer spending and uncertainty of the Brexit move, firms have increasingly held back from investments thus slowing the economic growth.

On the other hand, German is facing challenges of industrialization of its major markets such as the Asian countries. Ideally, German has heavily relied on its export market in Asian countries and the auto industry. However, due to revolution, most of the countries are industrializing thus the country has to invest more on R&D, digital ventures and small-medium size enterprise that pursue technology and software innovations.

Poor productivity growth and Low growth rate.

One of the greatest problems in U.K is the slow economic growth which has been contributed by the dramatic fall below productivity within the country. The country has been trying to catch up since recession but the trend continues to become difficult since their productivity is facing major competitors in different industries. This has had adverse effects on the tax receipts as well as living standards. This will inurn contribute to reduced government spending on various public services and rising the living standards.

On the other hand, one of the major challenges that German is facing is low wage growth and inflation. It is clear that German workers have accepted low pay in order for job security. However, an increase in the wages would increase the spending power and lower saving thus boosting the economy. Thus, the country is facing challenges of lagging behind inflation due to the low wage and pays to the workers.


Inflation and High current account surplus

According to the historical standards, inflation in the United Kingdom is currently above the country’s inflation target which is 3%. The housing prices have increased more than inflation hence reducing affordability. Reduced disposable income due to rising population thus lowering the living standards in the country. This therefore has led to slowed economic growth.  This is likely to lower the purchasing power and impact people’s wages and incomes in the country.

On the other hand, German is facing challenges in balancing investments and savings. German has been considered to have the highest current account surplus in the world (Pilbeam, 2018). This means that the country export has increased more than their imports. This means that the German citizens are spending less and saving more. This has had a great impact on economic growth. The current account surplus has had significant challenge for the economy in terms of meeting the needs of the people who are saving for their retirement.

Conclusion and Recommendation

The reason behind comparing the economics is to see the difference between the two countries. According to the data above, it is evident that each of the economy has major drivers that contribute to its economic growth and as well challenges in its economic growth. UK and Germany share some key drivers in economic growth such as service industry, agriculture, manufacturing and production industry that would enable improve the economy of the country. Due to increased industrialization, it is important that these economies invest in innovation which has been considered one of the leading drivers for economic growth in other countries. Significant amounts will be invested through development of new innovations and technologies.


Chadha, J. S., Crystal, A., Pearlman, J., Smith, P., & Wright, S. (Eds.). (2016). The UK Economy in the Long Expansion and its Aftermath. Cambridge University Press.

Fethi, S., & Katircioglu, S. (2015). The role of the financial sector in the UK economy: evidence from a seasonal cointegration analysis. Economic Research-Ekonomska Istraživanja28(1), 717-737.

Michelsen, C., Breuer, C., Bruns, M., Clemens, M., Hanisch, M., Junker, S., & Schlaak, T. (2018). German economy remaining robust in uncertain times. DIW Weekly Report8(36), 334-337.

Michelsen, C., Breuer, C., Bruns, M., Hanisch, M., Junker, S., & Schlaak, T. (2018). Growth rate of German economy normalizing after prolonged economic boom. DIW Weekly Report8(50/52), 510-513.

Pilbeam, K. (2018). Finance & financial markets. Macmillan International Higher Education.

Pollard, J. S. (2018). Brexit and the wider UK economy. Geoforum.

Storm, S., & Naastepad, C. W. M. (2015). Crisis and recovery in the German economy: The real lessons. Structural Change and Economic Dynamics32, 11-24.

World Bank. (2018). World Bank Open Data from The World Bank: Data. Reterieved from:

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