Main Problems in UK Economy

Readers Question: What are the main problems in UK since the recession started?

Decline in GDP. The IMF recently forecast UK GDP would decline by 3.8% in 2009. This makes the recession very deep.

Rise in Unemployment. Unemployment figures recently passed 2 million and there is every likelyhood it will rise to 3 million by the start of 2010. Unemployment is the biggest cause of relative poverty in the UK. Unemployment is the most damaging event to people’s quality of life. It is not just the decline in income, but the stress and depression associated with periods of unemployment.

Bank Lending. At the core of this current recession is an unwillingness / in ability for banks to lend. Due to global credit constraints banks have cut back on lending to firms, households and for mortgages. It has effected investment and demand for housing.

Rise in Government Borrowing. The recession has caused a rapid rise in government borrowing. Public sector debt has risen to 47% of GDP and could rise to nearly 60% of GDP by the end of the recession. Including the liabilities of nationalised banks and the figures look even worse. Higher government borrowing has been a factor in the weaker Pound and raises the prospect of future tax rises. Yet, at the same time government borrowing is a key factor in limiting the depth of the recession

UK Economy 2009