Effects of Euro Zone Crisis on UK

The effects of euro zone crisis on UK can be seen in different sectors of the economy of the United Kingdom. Euro zone crisis can be defined as a period of an economic uncertainty within the euro zone that began in 2009 due to high public debt levels especially in the countries grouped as PIIGS. PIIGS is an acronym for Portugal, Ireland, Italy, Greece and Spain. Since the United Kingdom is not one of the countries in the euro zone, it did not contribute to Greece bailing out after the country fell in trouble following the financial crisis.

What are some of the effects of euro zone crisis on UK?

• Tourism

Euro zone countries such as Greece are some of the most popular tour destinations for the UK with 1.73 million visits by the residents of the UK in 2014. Due to the situation in countries like Greece which are facing the crisis, the Association of British Travel Agents has been forced to warn UK citizens that they should take precautions while touring the countries in the Euro zone. The association suggests that holiday makers ought to carry extra Euros because they can face the problems of withdrawing cash while in the countries. Holiday makers have also been advised to check what is covered by their travel insurance and take appropriate precautions because there are thieves who may want to get money from them.

• Trade

UK exports half of its export services and goods to Europe. Greece, which was worst hit by the euro crisis, make up a relatively small portion of the total exports. However, the total amount of the exports of services and goods from the UK to Europe, especially Greece are important. In 2013, UK exported services and goods worth £2.82 to Greece. This represents about 1.2 percent of the exports from the UK to the European Union. UK professional and financial services sector enjoys significant benefits from its Single Market access. 40 percent of the UK trade is conducted with the countries in the Euro zone. Weakness of the key markets because of this crisis will only constrain the vital role that this trade plays towards enhancing domestic growth in UK.

• Banks

About £7.7 billions of UK are tied up in the loans issued to banks in Greece, customers and businesses. Most of this amount is in form of the exposure from the UK banks, standing at £ 5.3 billion. If Greece can cease being a member of the euro zone, it would occasion a complicated process of trying to get that money back.

• Business

Some businesses in UK have significant operations in the euro zone countries such as Greece. Such businesses include Unilever, Dixon Car-phone and Vodafone. Marks and Spencer has been operating in Greece since 1990 and it now operates 14 stores within Athens only. Although such businesses have not come out publicly, it is apparent that they have contingency plans in place in case Greece leaves the euro zone.

How the effects of euro zone crisis on UK are being dealt with

Although the UK has not played a major role in resolving the euro zone crisis since it is not part of it, it is playing a role in mitigating the effects of this crisis on its citizens, businesses and operations. For instance, the UK has offered assistance indirectly via its contributions and membership to the International Monetary Fund or IMF. Open Europe reports that the UK gave the International Monetary Fund £ 1.72 billion of the total £37.8 billion assistance that was given to Greece by the IMF. Nevertheless, since the UK has not been affected much by the crisis it has not played a direct role towards resolving it.

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Sources

http://www.britannica.com/topic/euro-zone-debt-crisis

http://www.thecityuk.com/blog/the-impact-of-the-eurozone-crisis-on-uk-financial-and-professional-services/

http://www.bbc.com/news/business-33165580