The UK is on track to overtake Japan and become the world’s fifth largest economy by the end of the next decade, according to new long-term forecasts from the Center for Economics and Business Research (CEBR).
In its latest global outlook, the think tank predicts the UK’s gross domestic product will rise from just under $4 trillion in 2025 to around $6.8 trillion in 2040, catapulting the country back into the top five in the world at current prices. Sluggish growth prospects in France and Germany are expected to strengthen the UK’s position behind the US, China, India and Germany over the period.
The forecasts suggest that the global economic hierarchy will shift further east. The United States is forecast to remain the world’s largest economy by 2040 with a GDP of about $53 trillion, but China is quickly closing the gap and is expected to reach nearly $48 trillion. China has already overtaken the US in purchasing power parity measures, which adjust for price levels and exchange rates, and CEBR now expects it to overtake the US in overall GDP measures by 2045, sooner than previously expected.
India is forecast to become the world’s third-largest economy by 2040, overtaking both Japan and Germany, driven by strong population growth and continued investment. Japan, on the other hand, is expected to fall to sixth place, while Germany remains in fourth place after several years of near-recession growth.
Nina Skero, chief executive of the CEBR, said global economic power was experiencing a “gradual realignment”, with momentum shifting away from heavily indebted Western economies towards faster-growing countries in Asia and the Global South. She added that Indonesia could become one of the world’s top 10 economies by the early 2030s as its investment base expands.
However, the positive headline for the UK masks a less encouraging picture for living standards. While GDP per capita is expected to rise from around $57,000 this year to $89,000 in 2040, Britain’s global ranking in this regard is expected to fall from 19th to 21st, meaning it will be overtaken by a number of richer competitors.
Countries such as Luxembourg, Ireland, Switzerland, Singapore and the United States are expected to be well ahead of the United Kingdom in terms of per capita income, highlighting ongoing challenges in productivity, wage growth and public finances.
CEBR also warned that the global economy faces a more difficult outlook in the near term. Global growth is expected to slow to about 2.5 percent next year, weighed down by rising trade barriers, high government debt and aging populations in advanced economies.
“Increased uncertainty due to changes in the global trading order combined with geopolitical tensions are dampening activity,” the report said, adding that these pressures would continue to test governments’ ability to raise living standards even as overall economic size increases.
