Forecasts for 2026 UK annual Real GDP Growth (%)
| Date of forecast | Real GDP Growth (%) |
|---|---|
| Feb-24 | 2.10 |
| May-24 | 1.80 |
| Aug-24 | 1.40 |
| Nov-24 | 0.90 |
| Feb-25 | 0.40 |
| May-25 | -0.20 |
Forecasts for 2026 UK Current Account Balance (% of GDP)
| Date of forecast | Current Account Balance (% of GDP) |
|---|---|
| Feb-24 | -2.20 |
| May-24 | -2.50 |
| Aug-24 | -2.90 |
| Nov-24 | -3.50 |
| Feb-25 | -4.10 |
| May-25 | -4.80 |
Source: Consolidated Macroeconomic Forecasting Group Consensus
The trajectory of global economic integration—commonly known as globalisation—is undergoing a profound transition. Historically, the expansion of global value chains (GVCs) allowed firms in developed economies like the UK to offshore manufacturing, reducing production costs and lowering consumer prices. However, this deep interdependence has also exposed the domestic economy to severe systemic supply-chain contagion.
Some dimensions of this integrated global economy are structural and planned. The UK's integration into mega-regional trade blocs, such as its formal accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), represents a strategic alignment designed to reduce tariff barriers, harmonise standards, and boost long-term service sector exports. Similarly, global green-energy investment treaties encourage the flow of foreign direct investment (FDI) into high-tech renewable sectors, accelerating structural transitions and shifting long-run aggregate supply (LRAS) outwards.
Yet, this extreme integration means that unscheduled, volatile global events are rapidly transmitted to the domestic economy. Geopolitical fragmentation and the rise of defensive trade policies—such as 'friendshoring' and bilateral tariff walls—threaten to raise the costs of essential raw materials and intermediate components. Major shipping chokepoint blockages, such as climate-driven low water levels restricting transit through the Panama Canal, force vessels onto longer, costlier alternative routes. These bottlenecks cause immediate spikes in freight rates, leading to cost-push inflation.
Ultimately, whether globalisation acts as an engine of growth or a source of macroeconomic instability depends on domestic supply-side resilience. If the UK has a highly adaptable labor market, robust domestic logistics infrastructure, and diversified trading partners, it can mitigate the impact of external shocks. However, the effectiveness of supply-side policies is heavily constrained by demand conditions, fiscal limitations, and the trade-offs faced by monetary policymakers when dealing with stagflationary pressures.
Extract B states that "this deep interdependence has also exposed the domestic economy to severe systemic supply-chain contagion."
Using the data in Extract A and your economic knowledge, assess the significance of global economic integration (globalisation) and its associated supply-side shocks to UK macroeconomic performance.
310 exam-style questions on AQA A Level Economics 2.6 The international economy (A-level only), covering 2.6.1 Globalisation, 2.6.2 Trade, 2.6.3 The balance of payments, 2.6.4 Exchange rate systems, and 2.6.5 Economic growth and development. Each one has a worked solution and a mark scheme showing where the marks go.