4.1.1 - Growing Economies

UK and emerging growth

The UK is a developed economy, so its markets are relatively mature. That often means growth is steadier rather than dramatic. Emerging economies can grow more quickly because output, industrial activity and consumer spending are expanding from a lower base. If factories, infrastructure and incomes are all rising at the same time, percentage growth can be higher than in a mature economy such as the UK.

For a business, that comparison matters. A slower-growing economy such as the UK may look safer and easier to predict. An emerging economy may look more attractive because incomes are rising, middle-class consumers are expanding and firms can capture demand before markets become crowded. Because disposable income rises, consumers buy more goods and services; this increases firms' revenues; therefore more businesses are attracted into the market.

However, fast growth is not automatic. Different economies have different growth paths: corruption, political instability, weak infrastructure or low commodity prices can hold growth back. In an exam, the best comparison is usually: the UK may offer greater stability, while emerging economies may offer faster growth but with more risk.

Growing economic power

The original five-country BRICS grouping comprised Brazil, Russia, India, China and South Africa; BRICS has since expanded, so that historical mnemonic is not its complete current membership. MINT is a separate mnemonic for Mexico, Indonesia, Nigeria and Turkey. These mnemonics illustrate emerging economies rather than guarantee any country's current growth rate. These groups matter because growth changes where world output, trade and investment are centred. When large emerging economies expand, they do not just become bigger markets. They also gain more influence over supply chains, export flows and international investment.

China and India illustrate these possible shifts. China has been one of the world's largest economies for years, a leading exporter and a major destination for foreign investment. India has also grown rapidly and become one of the world's largest economies. If countries like these keep expanding, a larger share of world GDP growth comes from outside the traditional developed economies. Therefore economic power becomes less concentrated in places such as Western Europe.

China's manufacturing strength also affects nearby economies. Efficient suppliers, strong infrastructure and access to lower-cost labour in other parts of South East Asia help reinforce an Asian production network. At the same time, rising Asian consumer spending supports more local production and distribution. Some economies in Africa and Central and South America are also producing larger international firms, although growth is less even and not every country follows the same path.

Trade and employment patterns

Economic growth matters to businesses because it can create trade opportunities. As an economy grows, disposable income often rises as well. That means consumers can spend more on everyday products and, eventually, on more discretionary goods and services. If demand becomes stronger, firms can increase sales; if sales increase, profits may rise; therefore exporting to that market or investing in it becomes more attractive.

This also has implications for individuals. More international trade can bring lower-priced imports and greater consumer choice. If households can buy a wider range of goods at lower prices, their standard of living may rise.

Economic growth can change employment patterns as well as demand. In many growing economies, employment gradually shifts away from low-productivity agriculture towards manufacturing and services. Urban jobs may expand, wages may rise, and firms may demand more workers with technical, managerial or customer-service skills. For individuals, that can create more job choice and higher incomes, although not every worker benefits equally and some traditional sectors may shrink.

For businesses, changing employment patterns affect both labour supply and market demand. A larger urban workforce with rising incomes can create more customers for branded goods, retail, transport and leisure. At the same time, firms choosing where to invest will look at whether the workforce has the skills, productivity and cost profile needed for production or service delivery.