Dull Christmas in UK
The severe cost cutting measures in the UK have dimmed the traditional Christmas lights. The official growth forecasts have indicated that the British government is preparing for a doubledip recession, as the Office for Budget Responsibility ( OBR) has found the debt challenge was “even greater than assumed because the boom was even bigger, the bust even deeper and the effects will last even longer”.
The British Government is engaged in a series of measures aimed at promoting growth, helping struggling families and boosting business, also including attractive freezes in fuel duty and limits on rail fare increases. But, it would be difficult for the government to avoid a new recession if no solution is found for the debt storm engulfing the Eurozone.
More than 50 percent of total UK trade is done with the EU and the UK enjoys benefits of the European single market. As part of the measures to stop the Eurozone crisis, EU leaders are likely to move towards an even closer cooperation on economic issues for their 17 countries.
That could potentially undermine the single market that all the EU members benefit from, regardless of whether they use the euro as their currency or not. Also, certain safeguards are being considered against measures that could, in the future, lead to protectionism within the Eurozone, thus harming those EU countries that are not affected by the crisis.
Experts have still not been able to quantify the loss of trade between UK and EU if there is no solution found to the crisis. But they are equally worried over the natural impact of less money in EU over its important trade partnership with UK.
A chronic lack of confidence in the ability of countries to deal with their debts is held responsible for the prolonged EU crisis. The domestic scenario of UK is being viewed as increasingly dire, as the bigger than expected fall in profits, made HSBC threaten that costly new capital rules might force it to leave the UK.
The Organization for Economic Cooperation and Development ( OECD) leaves the onus for boosting growth on the Bank of England, suggesting the expansion of money supply through its quantitative easing ( QE) programme for the year 2012. OECD stresses that the total amount of QE should be raised to £ 400 billion.
Within the UK, there is more woe for the public sector. The OBR has also warned that as many as 600,000 jobs could be lost from the public sector by 2015- 16, a dramatic increase on its previous estimate of 400,000. By the following year, the figure could reach 710,000.
The watchdog also predicts that the structural deficit will not be eliminated until 2016- 17, putting it well beyond the next general election in the UK. The OBR estimates that the government is now set to borrow £ 111 billion more than planned over the next five years to fill the gap. It predicts that unemployment will rise from 8.1 percent this year to 8.7 percent next year.
The UK Government is confident about its commitment to take the country safely through the recession, as it says, “What we offer is a government with a plan to keep interest rates low, a Government determined to support businesses and jobs, a government committed to take Britain safely through the storm. Leadership for tough times, that’s what we offer.”
Under this commitment, the British Government has announced that there will be a £ 40 billion “credit easing” to get money into small businesses and a £ 5bn fund for infrastructure projects. Families will be given a new ‘ right- tobuy’ with discounts of up to 50 percent on council houses, with the money raised paying for new affordable homes. Energyintensive industries will also receive £ 250 million in support. A further £ 1.2 billion of infrastructure spending will go to schools, including the creation of 100 new free schools, many of which will specialize in teaching mathematics.
There are efforts for an active enterprise policy to rebalance the economy with a hope to take Britain in the right direction