The UK economy has been facing economic challenges since the financial crisis of 2008/2009 and it is only in 2011/2012 that some positive indications could be seen. It is reported by the Confederation of British Industry that since 1990, the average selling prices for factories had not passed the 33 points mark until 2011 when it rose to 36. By 2007, the pound had dropped by about 23% on a trade weighted basis, making British goods cheaper to buy, which greatly boosted manufacturers ability to buy (Ryan, 2011). The credit crunch and job loss fears which were a consequence of the global recession saw many people cutting on spending and paying off debts quicker, with more and more people opting to save rather than invest or spend. This fall in demand affected not only the UK internal market but the import and export business as well. Borrowing from banks became more expensive and difficult to access. The economy of the UK has since 2008 till now been characterized by short bursts of growth or revival, followed by contractions, causing more anxiety and economic instability (BBC News, 2013).
The UK (England, Scotland, Wales and Northern Ireland) was the number six and eight largest economy in the world, according to a 2010 rating based on GDP (prices, US dollars) and GDP (PPP) accordingly. The UK’s GDP (PPP) in 2010 was US$ 2.172 trillion which translated to 2.982% of the world’s GDP. UK continues to use the Pound Sterling even though it is a member of the European Union, where the Euro is the dominating currency (EconomyWatch, 2010). Even though the global economic prospects have improved since the 2008 recession, the UK continues to record negative forecasts and experiences with its economy. In April 2011, the International Monetary Fund (IMF) reduced the UK’s growth forecast by 1.75%, a third downgrade in the year. The UK was also ranked as the slowest growing economy of the G7 together with Japan, by the Organization for Economic Cooperation and Development (OECD). It is reported that the UK’s detrimental performance has been contributed to by its austerity plan which was introduced to reduce level of debts which had been aggravated by the 2008 recession. The austerity plan includes reducing public spending and services and implementation of new tax increases (EconomyWatch, 2010; The Economist, 2011).
Since 2007, the UK economy had been on the decline until the first quarter of 2011 when it rebounded to overcome the surge that had plagued the service industry all along. The adverse weather and climatic conditions during severe Winter season in 2010 is highly attributed to the declines in economic performance, but which improved marginally in first quarter of 2011.It is during the first quarter of 2011 that the Gross Domestic Product (GDP) rose by 0.5% and services improved by 0.9%, a marked growth since 2006. During the first quarter of 2011, UK manufacturing rose by 1.1% which resulted in a 0.4% gain in industrial production, though construction declined by 4.7% in the same period (Ryan, 2011). This followed a dip in production level which in 2010 had seen UK’s business disrupted negatively affecting the overall economy. Despite these positive reports, many economists, including Jens Larsen, Chief European Economist at RBC Capital Markets in London, were still skeptical regarding the overall stability of the economy. However, some economic experts were relatively optimistic going by the positive financial changes and reports (Ryan, 2011).
Situation of the UK Economy
The UK economy reported positive results of growth in 2011, and Britain, a member of the seven UK nations which makes up 76% of the economy was the first to report growth in the services and finance sectors (Ryan, 2011). In 2012, the UK GDP was still 4.5% below its peak in 2008 during the pre-crisis period, and the total ouputs remained at the same level as they were in 2006. The economy had also contracted by 0.3% by 2012 since the coalition government officially took over in 2010 (BBC News, 2013). Economic outlook shifted in June 2012 when due to the Queen’s Diamond Jubilee celebration, the banks as well as all other sectors including financial and industrial had to take a holiday for a day. This meant that overall ouput for June 2012 was greatly affected reporting a decline (EIU, 2012).
- Quote paper
- Wilson Truman (Author), 2013, Is the UK economy heading towards a triple dip recession?, Munich, GRIN Verlag, https://www.grin.com/document/269943