From global food price inflation to the blow-up in the US subprime mortgage market, the world's major economies are in a highly vulnerable position. The UK economy is no exception. Spin doctors seem to be instructing the governments, "Never refer to the current economic turmoil without adding the prefix `global'." The underlying message is clear: "The current economic problems are not homegrown and they are not responsible for the current mess." Yes, there is nothing wrong about this notion and there are powerful global forces at work, and the fact is that no economy is immune.
The UK economy, the fifth-largest in the world in 2007, continues to go from bad to worse down a trail of economic woes after 16 years of strong GDP growth. The housing market disaster, highest inflation levels, tight credit conditions are severely hurting businesses, and confidence has slumped across the board in the UK economy. The roots of the slowdown lie in two inter-linked sectors, financial services and property, which form an excessively large part of the economy. Bank write-downs continue as a result of the blow-up in the US subprime market, amidst falling house prices and weaker consumer spending, banks are rising mortgage rates. In the UK, retail spending is often financed by either overextended credit cards or equity from overvalued homes, so the impact on the economy has been magnified. |
