September 13, 2006

Economic downturn continues to threaten UK

by Brian Turner

If you're new here, you may want to subscribe to my RSS feed. Thank you for visiting!

SPECIAL REPORT

The UK economy is facing continued indicators of a slowdown, against the backdrop of a general warning on the state of the Global Economy.

Key challenges facing the UK ecnoomy are the twin evils of rising inflation and rising inflation.

Despite Tony Blair’s claim to the TUC that unemplyment figures are falling, he limited his reference to new claims for unemployment benefit - which many jobless will not qualify for.

The net result is an increase of 93,000 unemployed between May and July to 1.7 million - the highest jobless total for 6 years.

Perhaps of greater concern, though is the fact that inflation has continued above the 2% target for the fourth month in a row - now reaching 2.5%.

While people are quick to blame higher oil prices and utility bills, the Bank of England has been very slow to react to worrying economic indicators, instead suddenly putting their foot briefly on the brake in August.

The result is that in failing to raise interest rates earlier, they are now expected to have to slam on further interest rate rises later in the year.

The situation is like leaving a car to roll downhill with the brakes off, only to then start tapping the brake towards the bottom. The result of which means the length of economic correction in terms of a possible recession will almost certainly be lengthened.

The complicating factor now is that while the Bank of England face having to finally enage in a series of interest rate rises, it comes at a time of record debt and falling consumer spending. If the Bank of England wanted to invite recession they’ve made all the right moves.

Meanwhile, the property market - a key unchecked economic factor that the Bank of England should have properly addressed over the past year shows no sign of falling, with the Nationwide and Halifax both reporting a full percentile increase in property inflation over the past month.

This is at a time of record mortgage lending, continuing to exaggerate the seriousness of the debt bubble building up in the UK.

The overall picture is therefore one in which the UK faces an unsettling near-future, as interest rate rises become increasingly inevitable later in the year - and all to be laid down on an economy with a decreasing workforce, increasing debt, and weaker consumer spending.

Earlier in the year Platinax predicted the UK to have already begun an economic downturn - one that by all accounts, is already very much building up momentum.

Discuss this in the Internet Business forums

Story link: Economic downturn continues to threaten UK

Add to Bookmarks: