Following the recession, which began in 2008 and intensified in 2009, it was hoped that the UK would now be firmly in the recovery stage. However, 2012 proved difficult for UK policy makers. Although 2010 and 2011 saw a very tentative return to positive growth, 2012 saw a slip backwards into negative territory — the so-called ‘double-dip’ recession. Even though the latest figures show a return to positive growth, the recovery is still not firmly established. This has prompted a vigorous debate as to whether the government’s austerity programme has hindered the process of recovery. In addition, the international economic climate remains highly volatile with the crisis in the eurozone still far from over. As a result, predictions for the coming year are less certain than ever.
Table 1 gives some basic summary information for the UK economy. The Gross Domestic Product (GDP) figures illustrate how the recession has developed and the tentative nature of the recovery. Recession began in 2008 when the effects of the banking crisis were first felt. However, the full force of the recession did not hit the real economy until 2009 when output fell sharply. This produced a sharp rise in unemployment from 5.3% of the labour force in 2007 to 7.7% in 2009, and 8.1% by 2011. It is noticeable that unemployment has continued to rise despite a modest recovery of real output growth in 2010 which continued into 2011. This is because changes in unemployment often lag behind changes in real output as it takes time for firms to adjust their labour force in response to movements in aggregate demand.
Your organisation does not have access to this article.
Sign up today to give your students the edge they need to achieve their best grades with subject expertise
Subscribe
