Free Essay: the Challenges Facing Economy of the United Kingdom
The economy of the UK has faced many challenges over the past few years. One of the biggest problems the country’s economy is facing is lack of full economic recovery. The country suffered an economic fall in 2008/09 and has not recovered since then. The situation became worse in 2012 with a double dip economic recession.
The UK has therefore been in a longer economic downturn more than the Great Depression. This is one of the reasons as to why economic experts are left wondering whether the UK’s economy will stagnate or it can return to its normal level in the coming years.
Due to poor economic growth, other factors including monetary policy and unemployment have also affected the economy of the United Kingdom.
The Euro debt crisis has largely affected the economy of the UK since 2008. The government has been working hard to rebuild its economy and even so, double dip recession was experienced in 2012. The second recession was a blow to the economy because it meant that tax revenues were less than what the government expected.
The government would also miss out on its deficit reduction targets. Markets are also interested in buying UK debt even though bond yields are falling by 2 percent.
Monetary policy and inflation are also challenges facing the UK economy. Inflation has been over the government’s target by 2 percent. It is imperative to note that with fiscal or monetary policy, the government’s attempt to reduce deficit has not been successful. This is because of a greater pressure to create economic stimulus.
Due to inflation, the government is worried about its economy because; chances are high that it will stagnate if deficit targets are not achieved.
The UK economy is also affected by unemployment. Unemployment rate in the country has grown over the past few years and over 8 percent ever since economic recession started. It is however lower compared to other recessions in the past when the rate of unemployment was relatively higher.
Unemployment rate reveals that UK labor market is very flexible. This means that it is hard to get benefits from the market. It is of great concern that unemployment in the country has increased to over 2.6 million people and more specifically long term unemployment rate.
The latest figures show that more than 900,000 people are out of work for more than a year. It is a challenge that is damaging the country’s economy and those involved emotionally and financially. High unemployment rate in the country also causes social problems and social divisions.
Current account deficit in the UK
The current account deficit in the UK also affects the country’s economy. Its effects are however lower compared to unemployment. The account according to government economists is a rough guide and leads to economic pressures. There has been a rise in the amount of exports and a drop in import levels.
In addition, the account deficit is growing hence, a major cause of concern because it reveals lack or declining competitiveness in the UK. A solution can however be achieved if the account is well financed.
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