UK could remain a top 10 global economy in 2050, despite Brexit

Feb 07, 2017

  • The UK could be the fastest growing economy in the G7 to 2050, with average annual growth of 1.9%
  • Remaining open to talented workers and developing successful trade links with fast-growing emerging economies will be critical to realising the UK’s long-term growth potential
  • The world economy is projected to double in size by 2042, growing at average annual rate of 2.5% to 2050
  • Six of the seven largest economies in the world are expected to be emerging markets by 2050, led by China
  • India could overtake the US as world’s second largest economy in PPP terms by 2050, with Indonesia rising to fourth place
  • The EU27’s share of world GDP could fall to below 10% by 2050, with France out of the top 10 and Italy out of the top 20

The UK could grow faster than other large European countries like Germany, France and Italy in the long run, despite some medium-term drag from Brexit, according to new analysis by PwC.

The World in 2050 report projects the UK will fall just one place from 9th to 10th in global economy rankings in purchasing power parity (PPP) terms by 2050. If measured instead by GDP at market exchange rates, the UK could fall from 5th to 9th place by 2050, but will remain in the top 10 on either measure.

With potential average annual growth of around 1.9%, the UK is projected to be the fastest growing economy in the G7 over the whole period to 2050. The UK’s position is sustained by its relatively larger projected working-age share of the population than in most other advanced economies. However, this growth potential depends on the country remaining open to talented people from around the world after Brexit. 

John Hawksworth, chief economist at PwC, said:

“After a year of major political shocks with the Brexit vote and the election of President Trump, it might seem brave to opine on economic prospects for 2017, let alone 2050. But a long-term view is crucial for considering areas like pensions, healthcare, energy and climate change, housing, transport and other infrastructure investment. By looking beyond unpredictable short-term economic and political cycles and focusing on fundamentals, long-term growth projections can actually be more reliable than short-term forecasts.

“Our relatively positive long-term growth projection for the UK is due to favourable demographic factors and a relatively flexible economy by European standards. However, developing successful trade and investment links with faster-growing emerging economies will be critical to achieving this, offsetting probable weaker trade links with the EU after Brexit.”

Table 1: Projected global GDP rankings in PPP terms (US $bn at constant 2016 values)

GDP PPP rankings

2016 rankings

2030 rankings

2050 rankings

Country

GDP at PPP

Country

Projected GDP at PPP

Country

Projected GDP at PPP

1

China

21269

China

38008

China

58499

2

United States

18562

United States

23475

India

44128

3

India

8721

India

19511

United States

34102

4

Japan

4932

Japan

5606

Indonesia

10502

5

Germany

3979

Indonesia

5424

Brazil

7540

6

Russia

3745

Russia

4736

Russia

7131

7

Brazil

3135

Germany

4707

Mexico

6863

8

Indonesia

3028

Brazil

4439

Japan

6779

9

United Kingdom

2788

Mexico

3661

Germany

6138

10

France

2737

United Kingdom

3638

United Kingdom

5369

11

Mexico

2307

France

3377

Turkey

5184

12

Italy

2221

Turkey

2996

France

4705

13

South Korea

1929

Saudi Arabia

2755

Saudi Arabia

4694

14

Turkey

1906

South Korea

2651

Nigeria

4348

15

Saudi Arabia

1731

Italy

2541

Egypt

4333

16

Spain

1690

Iran

2354

Pakistan

4236

17

Canada

1674

Spain

2159

Iran

3900

18

Iran

1459

Canada

2141

South Korea

3539

19

Australia

1189

Egypt

2049

Philippines

3334

20

Thailand

1161

Pakistan

1868

Vietnam

3176

21

Egypt

1105

Nigeria

1794

Italy

3115

22

Nigeria

1089

Thailand

1732

Canada

3100

23

Poland

1052

Australia

1663

Bangladesh

3064

24

Pakistan

988

Philippines

1615

Malaysia

2815

25

Argentina

879

Malaysia

1506

Thailand

2782

26

Netherlands

866

Poland

1505

Spain

2732

27

Malaysia

864

Argentina

1342

South Africa

2570

28

Philippines

802

Bangladesh

1324

Australia

2564

29

South Africa

736

Vietnam

1303

Argentina

2365

30

Colombia

690

South Africa

1148

Poland

2103

31

Bangladesh

628

Colombia

1111

Colombia

2074

32

Vietnam

595

Netherlands

1080

Netherlands

1496

Sources: IMF for 2016 estimates (with an update for Turkey), PwC projections for 2030 and 2050

China has already overtaken the US to become the world’s largest economy in PPP terms and will move further ahead by 2050. India currently stands in third place and is projected to overtake the US by 2050. Indonesia moves up the rankings to fourth place, overtaking not just Germany and Japan but also Brazil and Russia by 2050. Germany and the UK hold on in the top 10, but France falls to 12th place and Italy to only 21st as it is overtaken by a succession of faster-growing emerging economies like Vietnam.

PwC projects that the world economy will double in size by 2042, growing at an average annual rate of just over 2.5% between 2016 and 2050. Growth is expected to be driven largely by emerging market and developing countries, with the E7 economies of Brazil, China, India, Indonesia, Mexico, Russia and Turkey growing at an annual average rate of 3.5% over the next 34 years, compared to an average of just 1.6% for the advanced G7 nations of the US, Canada, France, Germany, Italy, the UK and Japan.

The E7 could comprise almost 50% of world GDP at PPPs by 2050, while the G7’s share could decline to just over 20%. But emerging economy growth will also slow down over the period, as these economies mature and the scope for relatively easy ‘catch-up growth’ by importing advanced economy technologies is reduced over time.

John Hawksworth commented:

“The global economy faces a number of challenges to prosperous economic growth in the long-term. Ageing populations and climate change require forward-thinking policy which equips the workforce to continue to make societal contributions later on in life and promotes sustainable development. Falling global trade growth, rising inequality and increasing global uncertainties are intensifying the need to create diversified economies which offer opportunities for everyone in a broad variety of industries.

“Emerging economies offer great opportunities for business – the numbers in our report make it clear that failure to engage with these markets means missing out on the bulk of economic growth we expect to see in the world economy between now and 2050. To succeed, businesses will need to adopt strategies with the right mix of flexibility and patience to ride out the short-term economic and political volatility that is a normal feature of emerging markets as they mature.”

Ends.

Notes for editors.

1.      PwC’s latest World in 2050 report projects GDP to 2050 for 32 of the largest economies in the world, which together currently account for around 85% of global GDP. PwC’s model accounts for projected trends in demographics, capital investment, education levels and technological progress to estimate trend growth rates. This long-term growth model was first developed in 2006 and has been updated periodically since then, most recently in 2015.

2.     The full report entitled The long view: how will the global economic order change by 2050? will be available online from 7th February 2017 here: http://www.pwc.com/world2050

3.     Purchasing power parity (PPP) estimates of GDP adjust for price level differences across countries, providing a better measure of the volume of goods and services produced by an economy as compared to GDP at current market exchange rates, which is a measure of value. The report focuses primarily on the PPP measure, but also includes projections for GDP at market exchange rates (MERs).

4.     The analysis assumes the main economic impact of Brexit occurs over the period to 2020, based on latest IMF medium-term projections for UK GDP growth. After 2020, UK growth is assumed to revert to its long-term trend as determined by the fundamentals of working age population growth, investment in human and physical capital, and technological progress.

5.    For a shorter term view of global economic prospects and risks, see PwC’s 2017 Global CEO Survey which suggests that 89% of UK CEOs are confident of their company’s growth over the next 12 months, compared to a global figure of 85%.

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