The UK is on course to overtake Japan and become the world’s fifth-largest economy by the end of the next decade, according to new long-term projections from Centre for Economics and Business Research (CEBR).
In its latest global outlook, the think tank forecasts that Britain’s gross domestic product will rise from just under $4 trillion in 2025 to around $6.8 trillion by 2040, lifting the country back into the global top five when measured at current prices. Sluggish growth prospects in France and Germany are expected to reinforce the UK’s position behind the US, China, India and Germany over the period.
The projections suggest the global economic hierarchy will continue to shift eastward. The United States is forecast to remain the world’s largest economy by 2040, with GDP of about $53 trillion, but China is closing the gap rapidly and is expected to reach just under $48 trillion. On purchasing power parity measures, which adjust for price levels and exchange rates, China has already overtaken the US, and CEBR now expects it to surpass the US on headline GDP measures by 2045, earlier than previously anticipated.
India is projected to become the world’s third-largest economy by 2040, overtaking both Japan and Germany, reflecting strong population growth and sustained investment. Japan, by contrast, is expected to slip to sixth place, while Germany remains fourth after several years of near-recessionary growth.
Nina Skero, chief executive of the CEBR, said global economic power was undergoing a “gradual rebalancing”, with momentum shifting away from heavily indebted western economies towards faster-growing nations in Asia and the global south. Indonesia, she added, could break into the world’s top ten economies by the early 2030s as its investment base expands.
However, the upbeat headline for the UK masks a less encouraging picture for living standards. While GDP per capita is forecast to rise from around $57,000 this year to $89,000 by 2040, Britain’s global ranking on this measure is expected to fall from 19th to 21st, meaning it will be outpaced by a number of richer peers.
Countries such as Luxembourg, Ireland, Switzerland, Singapore and the United States are projected to remain well ahead of the UK in terms of income per head, highlighting persistent challenges around productivity, wage growth and public finances.
CEBR also warned that the global economy faces a tougher near-term outlook. World growth is expected to slow to around 2.5 per cent next year, weighed down by rising trade barriers, high levels of public debt and ageing populations across advanced economies.
“Elevated uncertainty stemming from shifts in the global trade order, combined with geopolitical tensions, is dampening activity,” the report said, adding that these pressures would continue to test governments’ ability to raise living standards even as headline economic size increases.
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UK set to become world’s fifth-largest economy by 2040, but living standards slip