The UK economy has experienced a long period
of economic growth from 1993 - 2008. However,
this unprecedented period of unbroken economic
growth is coming to an end.
The UK economy is experiencing a number of problems.
Credit crunch leading to shortage of borrowing
and lending Falling house prices, which is reducing
consumer confidence and consumer spending.Record
debt levels which leave little room for manoeuvre
in a recession.Cost push inflation making it difficult
for the MPC to cut rates. Inflation well above
the government's target of 2%Increased government
borrowing, as the cyclical downturn worsens the
governments finances.
Global economic downturn causing lower exports.
e.g. even the devaluation in the pound has done
little to boost growth.
Persistent weakness in Manufacturing sector -
contributing to persistent current account deficit.
In the next 12 months, growth will slow and the
economy will enter recession. However, with the
slowdown in growth and lower oil prices, inflation
will fall enabling lower interest rates. This
will help the economy to recover.
The housing market will struggle to recover whilst
the shortage of mortgage finance persists. Also
whilst house prices are falling people won't want
to buy so the problem will be exacerbated.
Falling house prices will also continue to have
a negative impact on the economy in 2009.
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