Bank of England and the British Economy October 2008 The fifth largest Economy in the world is the Economy of the United Kingdom also known as theBritish Economy and this is on the basis of the market exchange rates. in terms of purchasing power parity it is sixth largest in the world. In Europe it is the second largest Economy, second only to Germany’s Economy. There are three countries which make up the British Economy namely, England, Wales, Northern Ireland and Scotland. This paper will throe light upon how successful the government and the Bank of England have been in running the British economy over the past two years.

The major Economies of the world are facing a credit crunch and this has also affected the British Economy in more ways than one. Obtaining credit has become one of the most difficult tasks and in addition to this. the cost of mortgages has also adversely affected the major Economies of the world. “A significant level of short-term debt—unsecured or secured against property, as well as credit cards—is widespread. Over the last ten years the economy under the Labor government has grown in large part because of consumer spending financed by debt. (The Impact, 1 October 2008). According to a report it was found that out of 47.5 million adults in UK, 4.8 million people were found to be spending more than what they earned. It is predicted that in the near future the British Economy is going to be affected by the credit crunch, just like the economy of United States of America.

The British economy is facing two major problems as of now namely, the GDP (Gross Domestic Product) growth is really slow and the rising rate of Inflation has taken on a toll on the British Economy. The bank of England is trying everything possible to stimulate the economic growth in the British Economy. the cut in the interest rates proves the same. Currently the British Economy can take a little satisfaction from the fact that the employment rate has risen and there is less unemployment found in Britain than what it used to be earlier. ““The employment rate for people of working age was 74.5 per cent for the three months to October 2007, up 0.1 from the previous quarter but unchanged over the year. The number of people in employment for the three months to October 2007 was 29.29 million, up 114,000 over the quarter and up 226,000 over the year. Total hours worked per week were 940.0 million, up 5.1 million over the quarter and up 11.7 million over the year. These figures for people in employment and hours worked are the highest since comparable records began in 1971,” (British Economy, 1 October 2008).

(British Economic Condition, 1 October 2008)

The above chart shows that the gain that the British economy witnessed in the year 2007 has not been repeated in the 1st quarter of the year 2008. The economy witnessed no gain in the second quarter of the year 2008. The British economy is being affected by various reasons. some of the most important are the credit crunch in the various economies of different countries, the inflation rate has gone up because of the rise in oil prices and there are numerous other reasons for the same. Big Banks in England like Northern Rock are facing a really tough time in keeping up with the demands of the customers. Banks are cancelling the credit cards of the customers, so all these events show that all is not well in the British Economy and the government and the Bank of England have to do something about this before its too late.

References

British Credit Crunch. In Wealth Daily. Retrieved on 1 October 2008 from: http://www.wealthdaily.com/articles/british-credit-debt/1147

British Economy not looking good. In Global Politician. Retrieved on 1 October 2008 from: http://www.globalpolitician.com/23983-britain

The Impact of Credit Crunch. In World Socialist. Retrieved on 1 October 2008 from: http://www.wsws.org/articles/2008/feb2008/cred-f18.