The British and French economies developed during the same era, are roughly the same size and are geographically connected via a tunnel. But in spite of these similarities, the British and French economies have some interesting differences. In this economics post, we’ll compare and contrast the UK economy and the French economy.
Gross Domestic Product (GDP)
The best economics books will quote GDP figures endlessly to measure the size of an economy. GDP, depending on how you measure it, either represents the total value of goods and services produced by an economy, or the total income of the economy. The more you learn about macroeconomic principles, the more you’ll realise why those two bases are effectively the same (give or take imports and exports).
GDP is an excellent statistic to understand the pure might of an economy. Economies like China now hold great power over geopolitical issues due to the fact they carry a lot of economic heft behind their policies.
The GDP of the UK is $2.7 trillion (Source: World Bank 2020).
The GDP of France is $2.6 trillion.
As you can see, the absolute size of each economy is in the same ball park with the UK slightly leading in size. This difference can be accounted for entirely by the large financial sector in the UK which dwarfs its French equivalent.
Measured in Euros, the GDP of London as a city is €802bn, compared to Paris which is €686bn (Source: Statista 2017/18)
GDP per Capita
GDP per capita is a revealing measure that is indicative of the average income per person in a country. It’s obtained by dividing the total GDP by the size of the population. Due to income inequality, GDP per capita will always exceed the median income of an individual. This is because the top 10%, 1% and 0.1% of earners will always claim a disproportionate share of the total income. This means that in practice, the income shared in reality between the rest of the populace is not pro-rata.
Therefore we don’t recommend using GDP per capita as a realistic gauge of what the average salaries in different countries are. However, it’s a very useful metric to use in relative terms to compare countries. A country with a higher GDP per capita is likely to enjoy higher incomes and a larger and more comfortable middle class.
The GDP per Capita of the UK is $40,284 (Source: World Bank 2020)
The GDP per Capital of France is $38,625 (Source: World Bank 2020)
By this metric, the GDP per person in the UK is also slightly higher than France. This implies that the difference in overall GDP is a function of higher productivity in the UK, rather than necessarily just a larger population.
Indeed, the population statistics from 2020 hold true with this hypothesis. The UK population was 67,200,000. The French population is 67,400,000. (Source: World Bank 2020)
Therefore, we can see that while the UK has an incrementally smaller population (and therefore, workers) its workers are more productive. This could be due to higher investment in training, education, capital or longer working hours. Econometrics books can help you isolate numerous factors and causation patterns using advanced mathematics.
Research & Development (R&D) spend as a % of GDP
In 2019, the UK spend on research and development was equivalent to 1.74% of GDP (Source: Gov.uk 2019).
In 2018, France reported that their R&D spend was worth 2.2% of GDP. Therefore R&D levels don’t appear to be a continuity factor; although it’s worth highlighting that the impact of R&D has a time lag.
Working hours per week
British workers are estimated to spend an average of 42.5 hours per week at work, which is above the broader European average. (Source: EuroStat). French workers clocked in at 40.4 hours per week.
It’s interesting to see that this represents 5.1% extra hours, compared to GDP per capita being 4.2% higher. Therefore it’s sensible to conclude that these additional hours worked by each UK employee on average are one of the key reasons why the UK economy has a slightly larger footprint.
It’s worth noting that the average hours worked in some emerging markets economies are much higher than 40-42, therefore hours alone are not a sufficient factor to explain higher economic output. Exactly how skilled the workers are, and whether they are able to work efficiently also play a large part.
I hope you’ve enjoyed this comparison of these two rival economies.