The UK is back in the depths of recession. Recovery failed to gain any pull in 2011. In 2011 the economy grew by 0.9 percent for the complete year. And 2012 saw a bad beginning as the economy fell by 0.4 percent in last quarter of 2011 and then another 0.3 percent in first quarter of 2012.This can clearly indicate that UK is in recession. It’s double-dip recession, where an economy goes back into recession again without having a chance to recover from the previous one.
Reasons for Recession:
There are many reasons for recession and one of them is because of slow growth of Gross Domestic Product (GDP). This is because of the slowdown in manufacturing and falling house prices and sales; which in turn has seen a rise in the levels of unemployment and employees getting laid off.
Basically banks lend loans to people with added interest even though they know they are unable to pay the money back; it’s called subprime lending. Later on when these people are not in a position to pay the loans back, banks generally sell their house because they didn’t pay the mortgage. This way when banks don’t have money to lend for loans or payday loans house prices go down because people can’t afford to buy them; this means banks go bankrupt. It’s known as a subprime crisis which actually happened in the USA and rapidly spread across the world within a short span of time. Right now the UK is also part of the Euro Zone crisis in which all the European countries are affected. High interest rates are also one of the causes for recession because of the shortage of liquidity.
Solutions:
It’s really hard to predict what the future holds for the UK in this present economic crisis. But there are many ways to get out of recession. During this type of financial predicament it’s very important to give encouragement to people to work towards achieving economic recovery.
- As the foreign secretary of the UK said, people have to really “work hard” to get rid of recession they have to create more jobs and do lot of exports rather than complaining about the recession.
- Lower VAT should be imposed to encourage exports, which itself brings the foreign exchange currency
- Tax rates for low income level families should be abolished.
- Bailout plans should be given to corporate companies to come out of the recession, so that they in turn generate job opportunities for the unemployed youth
- Banks should give payday loans to people with very low interest rates to setup their own business which generates self-employment and individual profit.
About the author:
The guest post was contributed by Alicia, financial guest blogger from Manchester, UK. Find out more about her finance related blogs @financeport.
Good article, but should have been a bit more informative.
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