In its latest assessment of top world economies, CEBR says the UK has dropped to 7th, down from 4th largest economy in 2004. It says in the last five years the economies of France, Italy and China have all overtaken the UK.
CEBR says if population and growth continues in the same direction, Brazil and Russia will overtake the UK as soon as 2012. It says India will almost certainly overtake the UK as well, though not till 2015.
But CEBR also warns that Canada could, if demand for natural resources continues to rise strongly, catch up and surpass UK GDP around 2015. Even Australia is likely to have overtaken Britain by 2020.
CEBR chief executive Douglas McWilliams says: “In a decade, the UK could have dropped from being number four in the world to being outside the top ten at number 11 in 2015.”
McWilliams admits that most other European economies are likely to do nearly as badly as the UK in the coming years, so it is probable that the UK’s relative position in the EU will not change much from now on.
He says: “It seems reasonably certain that within a decade the UK could move from largest economy in the Commonwealth to the third or fourth largest. Does this matter? Well in many ways no. In the real world there is no league table, no relegation or promotion. And these are only forecasts that would change if trends in GDP, inflation or particularly exchange rates start to change. But there will probably be some psychological implications.”
CEBR says a drop in economic size will bruise the British psyche, but says more importantly the diplomatic clout the UK currently holds may be affected by a drop in the league table.
McWilliams says: “It will be difficult to maintain the UK’s current high diplomatic profile when we are no longer in the world’s top ten. Can we maintain a permanent seat on the UN Security Council?
“I’m not sure that public opinion in the UK has yet caught up with the potential impact of this change. Among other things, it means that whether we like it or not, we are going to have to be prepared to put up with economic, political and social decisions that are made internationally. Adjusting to this change could prove quite traumatic.”