European Business - The Composition of the UKs Balance of Payment - Assignment Example

The paper "European Business - The Composition of the UK’s Balance of Payment" is a wonderful example of an assignment on business. Balance of payments refers to all financial transactions that occur between the government, consumers, and businesses of a certain country and the other countries. Balance of Payments helps in conceptualizing the spending of various consumers and firms on various imported goods and services as well as showing how the country has been successful in exporting various commodities and services to other countries (Riley, 2016). In the determination of the balance of payments, overseas exports are considered as positive entries while the importation of goods and services is considered as positive entries.

Structure of the balance of payments

 The European Union balance of payments consists of the current account, financial account, capital account, and balancing items.

Current account

According to Riley (2016), the current accounts consist of four sections which include a balance of goods trade, services trade, and net primary income and secondary income.  The net primary income refers to the dividends profits and interests that are generated by individuals from a certain country working abroad.

According to Pettinger (2016), the UK realized a current account deficit of 32.7 billion pounds which was equal to 7 percent Gross Domestic Product in the last quarter of 2015. In the whole of 2015, the UK recorded an increased current account deficit of up to 96.2 billion pounds from 92.5 billion pounds as recorded in 2014. Based on the current price, 2015, the current account deficit equaled 5.5 percent of the Gross Domestic Product. Based on the current account deficits, the 2015 deficit was the highest since 1948 (Riley, 2016).

The net secondary income refers to the annual contributions that a certain country makes. Based on the case of the UK, the net secondary includes the annual contribution of the country to the European Union including the military and overseas development aid.

Capital account

Capital account refers to the transfer or sale of leases, goodwill, copyrights, patents, and ownership of fixed assets.