The United Kingdom (U.K.) recorded its 12th consecutive year of uninterrupted annual economic growth in 2005. In this extended period, the growth performance has outshone that of its 'AAA' rated peers, having been driven by job growth, bringing the unemployment rate down to historic lows. That said, the economy expanded at a much slower rate in 2005, and future growth will increasingly depend on improvements in labor productivity. The general government revenues-to-GDP ratio remains among the lowest in high-income countries, as do net debt levels, providing the U.K. with significant revenue-raising flexibility and ample room for maneuver. Nevertheless, the current Labour Party government has embarked on an expansive path since 2001, sharply raising investment spending to improve critical public services.
