United Kingdom country brief

Introduction

The United Kingdom of Great Britain and Northern Ireland, also known as the UK, has a population of 65.6 million (2016). The UK is a multi-national state composed of four parts: England, Wales, Scotland and Northern Ireland.

Political overview

UK Parliament

The UK Parliament is the supreme legislative body in the UK and British overseas territories. The Parliament is a bicameral assembly, with an upper house, the House of Lords, and a lower house, the House of Commons. At its head is the Sovereign, Queen Elizabeth II.

The House of Commons and the House of Lords are both involved in passing legislation, scrutinising the work of the Government and debating current issues. Members of the House of Commons are publicly elected. Members of the Commons alone are responsible for making decisions on financial bills, such as proposed new taxes. The Lords can consider these bills but cannot block or amend them.

Members of the House of Lords are mostly appointed (for life) by the Queen, generally on the advice of the major political parties. A fixed number of hereditary members are elected internally (an election occurring when a vacancy arises), and a limited number of Church of England archbishops and bishops also sit in the House. The House of Lords acts as a chamber of review for legislation passed by the lower house.

Government

The political party or coalition that wins the most seats in a general election forms the new government, led by its party leader — who becomes Prime Minister. The Prime Minister appoints ministers, including Cabinet members. Government ministers are chosen from the ranks of serving MPs and Lords in Parliament.

At the general election held on 7 May 2015, the Conservative Party, then led by David Cameron, won 330 of the 650 seats in the House of Commons. This enabled the Conservatives to form a majority government without having to rely on a coalition partner (they had previously been in a coalition with the Liberal Democrats). Following the resignation of David Cameron, Theresa May became Prime Minister on 13 July 2016.

The UK Government held an early election on 8 June 2017. The Conservatives won 317 seats in the House of Commons, meaning the party was unable to form a majority government. The Conservatives subsequently entered into a formal agreement with the Democratic Unionist Party, giving the Government an assurance of a working majority in the Parliament for all matters of confidence and supply.

Crown

The Crown is an integral part of the British Parliament, although the Queen’s modern role has become largely ceremonial. Generally, the day after a general election, the Queen invites the leader of the party that won the most seats in the House of Commons to become Prime Minister and to form the government. The Queen opens Parliament through the State Opening and informs Parliament of the Government’s policies and plans for new legislation in a speech delivered from the throne in the House of Lords. When a bill has been approved by a majority in the House of Commons and the House of Lords, the Royal Assent by the Crown turns the bill into an Act of Parliament, and it becomes law in the UK.

Devolution

Parliamentary reforms in the UK, referred to as "devolution", have created a number of national assemblies, including a national Parliament in Scotland, and national Assemblies in Wales and Northern Ireland. This process transferred varying levels of power from the UK Parliament to the national assemblies — but preserved authority over the devolved institutions in the UK Parliament itself.

In 2014, Scotland voted in a referendum on independence from the UK. The outcome was a vote of 55 per cent for ‘no’ to independence and 45 per cent for ‘yes’. All of the major political parties then agreed to devolve further powers to Scotland, with further devolution also planned for Wales and Northern Ireland. In early 2017 the Scottish government formally requested the transfer of constitutional powers from Westminster to conduct a second independence referendum. The UK Government rejected the request.

Europe

On 23 June 2016, the UK held a referendum on whether to remain a member of the European Union (EU). The UK voted to leave the EU by a margin of 51.9 per cent to 48.1 per cent. On 29 March 2017, the UK Government triggered Article 50 of the Treaty of Lisbon, notifying formally the EU of its intention to leave. In accordance with the terms of Article 50, the act of notification begins a two-year negotiation period in which the UK and the EU must determine the terms of the UK’s exit. If negotiations become protracted, the two-year period can be extended by the unanimous agreement of the EU’s 27 member states and the UK. Otherwise, the UK is scheduled to leave the EU by 29 March 2019, whether an agreement is reached or not. Until such time as the UK leaves, the UK remains a member state of the EU and is subject to EU legislation.

Economic overview

In GDP terms, the UK is the world’s fifth largest economy, with a comparative advantage in services, particularly financial services. The growth rate in 2016 was 1.8 per cent and the unemployment rate 4.9 per cent. The UK’s growth prospects continue to depend to a significant extent on a recovery in the global economy and in the EU particularly, which, as a bloc, is the UK’s largest export market.

According to the UK Government’s Autumn Budget Statement, Britain’s net debt is set to rise from 84.2 per cent of GDP to a peak of 90.2 per cent in 2017-18. The return to surplus, previously slated for 2019-20, has been deferred. The deterioration in finances is down to lower income tax receipts over the forward years, due to higher unemployment and lower wage growth expectations. The UK Government plans to increase expenditure to counterbalance a potential fall in investment and weak productivity growth, and cut the corporate tax rate from 20 to 17 per cent by 2020.

Bilateral relationship

Australia has a significant relationship with the UK underpinned by our shared heritage, common values, closely aligned strategic outlook and interests. We share a distinguished record of active service and cooperation in conflict zones around the world, often in partnership with the United States. We are regular dialogue partners at the highest levels across government and are like-minded on pressing global issues, including international security, multilateral cooperation and economic issues on the G20 agenda. We share an extensive economic, trade and investment relationship. We also benefit from strong people-to-people links. There are regular high-level visits in each direction.

AUKMIN IX

The annual Australia-UK Ministerial Consultations (AUKMIN) bring together foreign and defence ministers from both countries. AUKMIN is the premier bilateral forum for consultations on foreign policy, defence and security issues. At AUKMIN, ministers look for ways in which Australia and the UK can work together more effectively to deal with contemporary global challenges. Australia hosted the ninth AUKMIN in Sydney in July 2017.

At AUKMIN IX, ministers discussed the security environment in East Asia; the future of Europe, including in light of the UK’s decision to leave the EU; using the multilateral system to promote shared values; the Middle East; defence planning; and countering terrorism and violent extremism. They agreed to continue close cooperation in a range of areas.

Aid cooperation

DFAT has a strong and productive partnership with the UK Department for International Development (DFID), working closely together on a range of shared development priorities. These are outlined in the 2014 DFAT-DFID Partnership Arrangement.

Central to the Australia-UK donor partnership is a shared commitment to increasing the effectiveness, transparency and accountability of our respective development programs. We have a long history of close cooperation, particularly in health, education and food security.

High-level visits

The strength of the Australia-UK bilateral relationship is reflected in the large number of high-level visits in both directions. Bilateral visits facilitate consultation and cooperation across the broad range of policy issues of common interest.

Visits to the UK

 

  • The Hon Malcolm Turnbull MP, Prime Minister, visited the UK in July 2017 for calls on ministerial counterparts and an audience with HM The Queen.
  • The Hon Julie Bishop MP, Minister for Foreign Affairs, visited the UK in February 2017 for consultations with ministerial counterparts.
  • The Hon Steven Ciobo MP, Minister for Trade, Tourism and Investment, visited the UK in March 2017 for the Commonwealth Trade Ministers meeting and bilateral calls.

Visits from the UK

  • The Rt Hon Boris Johnson MP, Secretary of State for Foreign and Commonwealth Affairs, visited Australia in July 2017 for the AUKMIN IX meeting. He also delivered the 2017 Lowy Lecture.
  • The Rt Hon Sir Michael Fallon MP, Secretary of State for Defence, visited Australia in July 2017 for the AUKMIN IX meeting and a bilateral program in Sydney.
  • Lord Price, Minister of State for Trade Policy, visited Australia in November 2016 to meet with Minister Ciobo and hold the first meeting of the Australia-UK Trade Working Group.
  • Mr Alok Sharma MP, then Minister for Asia and the Pacific, visited Australia in November 2016 for calls on ministerial counterparts and to attend an anti-corruption event in Sydney.

People-to-people links

The strength of Australia-UK official linkages is complemented by the depth of people-to-people links, especially travel and migration flows between the two countries. The 2016 Census results showed 4.6 per cent of Australia’s resident population was born in the UK.

The UK is Australia’s fourth largest source of visitors with more than 715,600 UK residents visiting Australia in the year ending March 2017.

The UK records around 1 million Australian visits to its shores each year. Australians represented the 10th largest source of visitors to the UK in 2015. There is also a large Australian population resident in the UK, estimated at 125,000 people in 2015.

Bilateral agreements and official dialogue

Australia has many bilateral agreements with the UK including in the areas of taxation, health services, criminal investigations, national security, science and innovation, and migration. Shared perspectives on contemporary security threats, and common commitment to responses to those threats, have given new impetus to our close bilateral dialogue on a wide range of diplomatic, intelligence, military and strategic issues.

Australia joined the UK’s Youth Mobility Scheme in 2008, allowing young Australians to continue to be able to visit and work in the UK, subject to certain conditions. UK nationals are able to visit and work in Australia under a Working Holiday Arrangement. Australians who hold any class of UK visa might also be eligible to apply for the UK’s Registered Travellers Scheme (RTS), which enables faster clearance through UK border control. The RTS entitles people to use electronic passport gates (or the UK/EU passport queue) at most UK airports and Eurostar stations.

The most up-to-date information on UK immigration policies can be found on the UK Visas and Immigration website.

Bilateral economic and trade relationship

Australia and the UK have an extensive economic and trade relationship. For trade in goods and services, the UK is Australia’s fifth largest two-way trading partner, our fifth largest export market and our sixth largest source of imports. The UK is also our leading trade partner in Europe. We each have a large commercial presence in the other’s country.

In 2016, two-way trade was worth around $29.1 billion, with Australian exports worth $15.0 billion and imports from the UK $14.1 billion. Services trade is an important element of our bilateral trade relationship. The UK was Australia’s fourth largest services export market in 2016. Australia’s services exports to the UK were valued at $4.8 billion and services imports from the UK valued at $7.0 billion.

Gold ($7.0 billion) was Australia’s primary merchandise export to the UK in 2016. Other significant exports included lead ($520 million), alcoholic beverages ($359 million) and pearls and gems ($326 million). Significant merchandise imports from the UK included passenger motor vehicles ($1.4 billion), medicaments (including veterinary) ($462 million), alcoholic beverages ($273 million) and printed matter ($263 million).

Australian wine is a market leader in the UK and has been for a decade. One in five imported bottles of wine consumed in the UK is Australian. The UK is currently Australia’s third most valuable wine export destination.

Australia and the UK established a Joint Trade Working Group in September 2016 to scope out the parameters of a future, comprehensive free trade agreement (FTA) and exchange views on global trade policy issues and developments. Both governments have committed to ensure an expeditious transition to FTA negotiations when the UK has left the EU and the time is right.

Investment

The UK is the second largest source of total foreign investment in Australia. As at the end of 2016, total UK foreign investment in Australia was valued at $515.5 billion. Direct UK foreign investment in Australia was valued at $67.9 billion.

As at the end of 2016, total Australian investment in the UK was $350.5 billion – making the UK Australia’s second most important foreign investment destination.

Bilateral investment

British businesses view Australia as an attractive base for regional operations and have invested in a wide range of industries, including the infrastructure, pharmaceuticals, energy and travel industries. Approximately a third of all regional headquarters operations in Australia are European, and of these almost half are British. Major UK investors in Australia include Shell, BP, British Aerospace, BT and Vodafone.

Approximately 1,500 Australian companies are active in the UK, with a large number using the UK as a base for continental Europe. Key Australian investors in the UK include: Macquarie, Wesfarmers, AMCOR, Lend Lease, Mayne Nickless, Westpac, the Commonwealth Bank, ANZ, Cochlear, ResMed, CSL, Boral, and dual-listed companies GKN Brambles, Rio Tinto, and BHP.

Export opportunities

Australian goods and services exports to the UK have a broad base, covering a wide range of sectors. This base includes major firm activity (such as in financial services, with Australian banks having a longstanding presence in the market), through to small and medium enterprises. The UK was ranked as one of the four most important markets by Australian businesses participating in Australia’s International Business Survey 2016 (AIBS 2016). For the UK, familiarity of culture and language and the opportunity for growth and profits were the most frequent reasons listed for targeting the UK as an early market. Of those that identified the UK as their most important overseas market, almost three quarters (73 per cent) listed the ease of doing business as the same, or better, than in Australia.

The Australian Trade and Investment Commission (Austrade) is the Australian Government’s trade, investment and education promotion agency. Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally. In established markets, such as the UK, Austrade assists Australian exporters through referrals to specialist service providers and business advisors for assistance on a commercial basis. There is a wide range of support available to Australian firms from specialist service providers in the UK. Austrade London can assist with details of service providers in areas such as business services, and market entry and strategy advice.

Last Updated: 7 July 2016