UK At Risk Of A Recession
The effects of the credit crunch have become clear for all to see in recent months, particularly in the housing market sector, with building firms, estate agents and banks and building societies all suffering the consequences and finding business extremely difficult, with many being forced to make redundancies.
The lending market is also suffering, as many loan and mortgage providers are closing their doors to new business, or at the very least tightening their lending criteria, making it more difficult for an individual to obtain any type of personal loan.
These factors, coupled with rising costs of living, are having a knock on effect on other businesses throughout the UK economy and the stark warning has come from both businesses and also the British Chamber of Commerce that Britain is facing the prospect of a technical recession.
The word “recession” strikes fear into the hearts of many, particularly those who remember the early nineties, which was the most recent recession in the UK. But the actual definition of a recession is “two consecutive quarters of negative economic growth.” This means that we won’t actually know that we are in a recession until it has already happened.
Of course, many individuals are now drawing comparisons between where we are now and the recession of the early nineties, when the UK saw five consecutive quarters of negative growth, interest rates on loans and mortgages were extremely high as was the rate of inflation, house prices dropped much further than they have done currently and unemployment was much higher than it is today.
We are in a much stronger position now than we were eighteen years ago, with low interest rates on loans, much lower inflation and unemployment rates (although we are likely to see both of these rise to some degree) and still a shortage of housing to meet the needs of a growing population.
Yes, we are almost certainly in for a rough ride in the near future, possibly for another twelve months or even more, but although a technical recession looks likely it is not a definite outcome. The economic adviser at the British Chamber of Commerce said “A major recession can still be avoided, but forceful measures are needed to improve confidence.”
He also called on the Monetary Policy Committee within the Bank of England to cut the base rate of interest to help restore confidence and ease the pressure on both businesses and individuals.
