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Explain the difference between the current account and the financial account in the UK balance of payments.

      

Explain the difference between the current account and the financial account in the
UK balance of payments.

  

Answers


marlyne
The current account is principally a record of transactions as a result of exports and imports of goods and services. However, it also contains sections relating to income and current transfers.
• trade in goods: revenue received from exports of goods less payments made for imports of goods
• trade in services: revenue received from exports of services less payments made for imports of services. The main categories of service are financial services, travel and royalties
• income: this consists mainly of the returns from UK investment in other countries less the income earned by foreign businesses operating in the UK. It also contains a section for compensation
of employees which relates to the repatriated earnings of UK citizens working abroad less a similar flow for foreign workers based in the UK
• current transfers: these arise mainly from the UK’s membership of the EU and is the net figure for payments to and from that body. It also includes private transfers. The financial account records all outflows and inflows of capital from and to the UK. These include:
• direct investment: this refers to UK firms setting up overseas and foreign firms acquiring assets in the UK
• portfolio investment: this refers to the purchase of shares and bonds and the placing of funds in foreign banks
• changes in reserve assets: this relates mainly to drawing from and adding to foreign currency reserves.
marlinbito answered the question on July 8, 2018 at 18:25


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