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Is the UK heading for a recession in the next two or three years?

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Introduction

Is the UK heading for a recession in the next two or three years? Evaluate the evidence and arguments for and against the economy going into a recession. A recession is a stage in the business cycle when economic activity is in slow decline, and it is usually characterised by economic indicators such as rising unemployment, high inflation and economic growth. By these characteristics, the UK is heading for a recession, as it currently contains all of these characteristics. The UK is also suffering from a 'Credit Crunch'1, which enforces the view that the UK is heading for a recession. On the other hand, there is evidence that suggests that the UK is not heading for a recession, for example the 2008 Budget made by the Chancellor of Exchequer Alistar Darling. The level of inflation indicates a recession as it is caused by demand for goods and services, followed by an increase in price levels, which leads to an increase in inflation. ...read more.

Middle

Economic growth is when the level of income in the economy is rising. It is a "long-term expansion of the productive potential of the economy"4. In the last few years, as the standard of living in the UK has risen, so too has consumer spending, with more people than ever buying materialistic goods on a level similar to that of 1920s America. Yet it is uncertain if a recession of such a scale will follow the current boom in the UK. Though it may seem like a recession is inevitable in the next two or three years, the UK Government are attempting to prevent a recession from happening in the UK. This is clear from the 2008 Budget made by Alistar Darling earlier this month. Despite obvious signs suggesting that the economy is heading for a recession, he was "remarkably upbeat about the nation's economic prospects"5. ...read more.

Conclusion

Furthermore, the economy is unlikely to suffer from a recession due to London hosting the 2012 Olympics. This means that over the next two-four years, the UK Government, along with other countries and companies, will be investing heavily into the economy. It also means that there will be more job opportunities, therefore reducing the level of unemployment. To conclude this argument, although there are a number of indicators that suggests that a recession is likely to naturally occur in the next two to three years as it is part of the business cycle, the UK Government is introducing methods, such as higher levels of taxes, to prevent a recession from happening as it will mean that the UK economy will fall into a slump. Word count: 720. 1 A 'Credit Crunch' is a sudden reduction in the availability of loans or credit, or a sudden increase in the cost of obtaining a loan from the banks. 2www.statistics.gov.uk 3 www.statistics.gov.uk 4www.tutor2u.com 5 www.money.uk.msn.com 6 www.theguardian.co.uk 7 http://www.economicshelp.org/blog/unemployment/the-true-level-of-unemployment-in-uk/ ?? ?? ?? ?? Kiran Sharma Page 1 ...read more.

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