Principal industry sectors
To understand UK economic trends, it’s important to understand the UK’s principal economic sectors. In 2024, 80% of output came from the services sectors and 9% from manufacturing (see Table 4.3 and Figure 4.4). Nevertheless, the manufacturing sector accounted for about half of UK exports, which means it is critical for the health of UK trade and on which the sector depends.
Gross Value Added (GVA) measures economic output (see definition below). In 2024, total UK GVA was £2.5 trillion.
- Service industries made up 80.2% of GVA or £2.0 trillion.
- Manufacturing provided 9.0% or £0.2 trillion.
- Construction, utilities, mining and agriculture provided the remaining 10.8% or £0.3 trillion.
Other non-service sectors contribute smaller percentages but are nevertheless important areas of economic activity: construction (5.9%, £149 billion); utilities (3.1%, £77 billion); mining and extractives (1.1% £28 billion); and, last but not least, agriculture, forestry and fishing (0.7% and £18 billion).
Table 4.3: Output by sector 2024 (source: ONS)
| Sector | GVA – £ billion (2024) | % of total UK output |
|---|---|---|
| Manufacturing | 227.4 | 9.0% |
| Construction | 149.3 | 5.9% |
| Utilities | 77.4 | 3.1% |
| Mining & extractives | 27.9 | 1.1% |
| Agriculture, forestry & fishing | 17.9 | 0.7% |
| 499.8 | 19.8% | |
| Services | 2,025.1 | 80.2% |
| Of which: | ||
| Real estate* | 349.2 | 13.8% |
| Retail & wholesale | 246.8 | 9.8% |
| Professional, scientific & technical | 220.5 | 8.7% |
| Health & social work | 214.7 | 8.5% |
| Finance & insurance | 199.6 | 7.9% |
| Information & communications | 158.0 | 6.3% |
| Education | 146.2 | 5.8% |
| Public administration & defence | 129.1 | 5.1% |
| Administrative & support services | 128.2 | 5.1% |
| Transport & storage | 88.8 | 3.5% |
| Accommodation & food | 70.2 | 2.8% |
| Other services | 36.7 | 1.5% |
| Arts, entertainment & recreation | 34.0 | 1.3% |
| Households as employers | 3.0 | 0.1% |
| All industries | 2,525.0 | 100% |
| Source: ONS, real prices | ||
Figure 4.4: Percent of total UK output in 2024
Employment by industry was broadly in line with output. In Q3 2025 the UK employed 34.2 million people:
- Service industries employed 28.5 million people, 83.3% of UK workers.
- Manufacturing employed 2.6 million people or 7.6%.
- Construction industry employed 2.1 million people or 6.0%.
- Utilities and mining employed 0.6 million people or 1.7%.
- Agriculture, forestry and fishing employed 0.3 million or 0.9%.
Definition of Gross Value Added. The economic output of part of the economy, such as an industry sector or region can be measured and compared using Gross Value Added (GVA), a measure of economic activity. In brief, GVA is the contribution of part of the economy, minus any costs of materials or services used in the production of the output. GVA forms the basis out of which salaries and wages are paid and profits for shareholders are earned.
Sources:
ONS, Employment by industry, November 2025
ONS, GDP output approach – low-level aggregates, November 2025
Output trends and business activity
Output is the end result of all the other economic trends. Since the first quarter of 2007, UK GDP has grown 24.1% in real terms by the third quarter of 2025 (see Figure 4.5).
- Services sector output drove the UK’s GDP recovery after the 2007/8 financial crisis and after Covid.
- Services have grown faster than manufacturing since Brexit.
- By Q3 2025, services output had grown by 33.9% since 2007.
- Manufacturing sector output grew after the financial crisis but did not recover from its post-crisis dip 2009 to 2012.
- After the introduction of the post-Brexit trade agreement with the EU on 1 January 2021, manufacturing growth has been much slower than that of services.
- By Q3 2025, the sector had grown by 15.4% since 2007.
- Construction sector output experienced more volatile growth after the financial crisis. Its output was then hit the worst by Covid.
- Construction has been growing slightly faster than manufacturing since Brexit.
- By Q3 2025, construction remained below manufacturing at 12.5% above its 2007 level.
Figure 4.5: Sectoral output and GDP (indexed)
Source: ONS, First Quarterly Estimate of GDP data tables, November 2025
Sterling exchange rate
The trend in the sterling exchange rate depends on many factors. The factors related to Brexit that weaken overseas demand for sterling include:
- political and business uncertainty
- trade barriers that impede UK export
- reduced appetite for inward foreign investment
The Brexit referendum result in June 2016 caused sterling to fall sharply both against the US dollar and the euro (see Figure 4.6). The range of potential economic harm of leaving the EU was well understood by the markets even if the precise model of Brexit had not yet been determined.
By September 2025, sterling had weakened against the euro by 12% and the US dollar by 9% (see Table 4.4).
The softening of sterling has helped UK exporters and supported the FTSE100 index (around 80% of FTSE100 earnings are earned overseas, so, when sterling weakens, the FTSE goes up), but also contributed to inflation through higher priced imports.
Some argue that May 2015 is the relevant benchmark because the Conservatives won the General Election with a manifesto promise to hold a referendum on EU membership. Markets would have started to adjust to the political uncertainty as soon as this was known. The corresponding exchange rate falls are 18% against the euro and 13% against the dollar.
There are also many factors behind the Bank of England’s base rate decisions and the interest rate trend shown in Figure 4.6:
- In response to the Brexit referendum result, the Bank of England dropped interest rates in August 2016 (from 0.5% to 0.25%).
- As a result of Covid-19, the Bank dropped interest rates twice in March 2020 to 0.10%.
- From December 2021 to August 2023, reacting to inflationary pressure, the bank rate rose in 14 steps to 5.25%.
- As inflationary pressures have subsided and concerns about the global economy have grown, the UK base rate gradually fell to its current level of 4%, set in August 2025.
- On 18 December 2025, BoE lowered base rate to 3.75%.
Figure 4.6: Euro and US dollar exchange rates
Table 4.4: Sterling exchange rates
| Exchange rates | May 2015 | 23 June 2016 | 24 June 2016 | September 2025 | vs May 2015 | vs 23 June 2016 |
|---|---|---|---|---|---|---|
| GBP/EUR | 1.40 | 1.31 | 1.21 | 1.15 | -18% | –12% |
| GBP/USD | 1.55 | 1.49 | 1.37 | 1.35 | -13% | -9% |
Source: Bank of England spot rates
Inflation trend
In 2020 the effects of Covid reduced inflation to almost zero but, in 2021, due to supply chain issues and labour shortages, inflation picked up. The war in Ukraine was a major factor as were hikes in global oil and gas prices. CPI inflation peaked in 2022 at 11% and was 3.8% in September 2025.
In November 2025, the BoE projected CPI inflation to slow to 3.2% by March 2026:
- Over half of the expected decline reflects a fall in fuel and energy bills. Food inflation and, to a lesser extent, core goods inflation, are expected to remain elevated.
- Higher global tariffs appear to be weighing a little on UK non-energy import prices.
- While it remains too early to assess fully the impact of higher global tariffs on UK inflation, there has been tentative evidence of trade diversion, whereby exporters facing higher US tariffs, particularly in China, may have redirected goods to alternative markets.
- Chinese exports to the UK and euro area have increased, while those to the US have declined, and UK import prices from non-EU countries have edged down over 2025.
- Together with a small appreciation in sterling, lower global export prices have contributed to subdued inflation in UK import prices since the start of the year.
Figure 4.7: Bank of England inflation trend and projection
Source: Bank of England, Monetary Policy Report, November 2025
Employment and inactivity
The UK has high rates of employment but low productivity.
The employment rate is the proportion of people aged from 16 to 64 in work. Employment rates had been increasing since early 2012 until Covid in 2020 when the rate dipped. The rate then recovered, but recently it has been flat.
For the latest period, July to September 2025, the UK employment rate was 75.1%, still below the pre-pandemic peak of 76.1%.
For the same period, the unemployment rate is 5.1%, and has been slowly increasing since 2023.
Economic inactivity had been increasing since Covid and was 22.3% in early 2024, but since then the rate has been steadily declining and was 20.8% for July to September 2025.
However, the OBR noted that on 10 November 2025, the government had launched an independent investigation into the rise in youth (age 16 to 24) inactivity which had been rising.
Figure 4.8: Employment, unemployment and inactivity rates
Sources:
ONS, Labour Market Overview, November 2025
House of Commons Library, Autumn Budget 2025: background briefing, November 2025
Employment trend by nationality
The employment trend since mid-2016 has been one of growth in non-UK employment, with strong growth in non-EU and a slight fall in EU employment (see Figure 4.9).
- Total UK employment (left-hand axis) grew by 2.3 million from 31.9 million in mid-2016 to 34.2 million in 2025 (an increase of 7%), mainly through a growing non-UK and non-EU workforce.
- Employment of UK nationals (left-hand axis) grew by 0.9 million from 28.4 million in mid-2016 to 29.3 million in mid 2025 (an increase of 3%).
- Non-UK employment (see right-hand axis) grew by 1.4 million from 3.5 million in mid-2016 to 4.9 million in 2025 (an increase of 40%):
- non-EU employment grew steadily by 1.6 million to 2.8 million;
- EU employment declined from 2.3 million to 2.1 million.
Figure 4.9: Employment trends for UK by nationality
Source: ONS, A12: Employment, unemployment and economic inactivity by nationality and country of birth, November 2025
Productivity trend
UK productivity growth has slowed since the 2007/8 financial crisis. Growth has been inconsistent, intermittent, markedly below pre-2008 levels and has even shown recent declines (see Figure 4.10). The long-term trend has been for the growth rate to decline steadily to near zero. Recently, output per hour has been below the long-term trend (see Figure 4.11).
This is a critical issue because productivity growth largely determines long-term economic health and competitiveness. Improved productivity provides scope for raising living standards and informs government policy.
Brexit has exacerbated the productivity problem. Post-Brexit trade barriers (such as customs checks, rules of origin requirements, and regulatory divergence from the EU) have increased bureaucracy, which reduces productivity and competitiveness in the businesses affected.
International comparisons show the UK has lower productivity than similar nations. For example, PwC analysis in November 2019 found:
- Labour productivity in the UK has consistently lagged other advanced economies such as France, Germany, Sweden and the US.
- The main reasons for lower UK productivity relative to other advanced economies are:
- Lower UK levels of investment and R&D spending;
- Many companies and workers with relatively low productivity and skills.
- UK’s flexible labour markets, supported by migrant workers and longer working lives, may encourage relatively labour-intensive business models.
Figure 4.10: Growth in UK output per hour worked 1990 – 2025
Figure 4.11: Output per hour 1997 – 2025
Sources:
ONS, Productivity flash estimate and overview, UK: July to September 2025 and April to June 2025
Real wage levels and growth
With poor productivity, real wages grow slowly. Following years of decline after the 2007/8 global financial crisis, real average weekly earnings started to recover from the beginning of 2018, dipped with the pandemic, and started to rise from mid-2020 (Figure 4.12).
The growth rate became a ‘shrink rate’ in 2022 and 2023 as inflation ate into pay packets (see Figure 4.13). By September 2025 real average weekly wages matched the level they had achieved before the financial crisis 17 years ago in 2008, but were slightly lower than the new peak in early 2025, as inflation ticked up again.
Figure 4.12: Real average weekly earnings using CPI (total pay)
Figure 4.13: Real average weekly earnings single-month annual growth rates in Great Britain
