Recession in the UK Economy - Research Paper Example

To what extent has recession in UK influenced the demand for middle class restaurants? Introduction The global recession has had various effects on various key sectors within the UK economy. Due to inadequate access to credit, many patrons had to reduce their consumption to levels that could be accommodated by the prevailing economic situation. Reduction in the level of consumption was noticeable among the middle class individuals within this economy. The reduction in consumption levels among the middle class group in the UK economy affected a number of significant economic ventures. One of the key sectors that was affected was the hospitality sector that serves the middle class group in the economy. Due to recession, various middle class families adopted cost-cutting measures with an aim of reducing the amount of credit that they committed themselves to repay in future. This choice was advised by the uncertainties within the UK economy. Literature review King (1997) defines a recession as a downturn in the economic performance due to the implementation of faulty monetary and fiscal policies in an economy. Recessions within an economy reduces access to credit and raises the inflation rates to supernormal levels. High levels of inflation result to increased commodity prices within an economy hence various groups of individuals are turned away from particular sections of the economy (Richardson, 2011). In addition, high levels of inflation affect the real wage levels within the economy hence; the purchasing power of individuals within an economy declines, but the wage levels still remain constant. The effects on the real wage within an economy have greater effects among the middle class since a majority of individuals within this group are waged employees (Great Britain, 2010). Therefore, during a recession certain sectors are key indicators of the financial position and direction of the middle class. These sections of the economy include hospitality sectors and the ostentatious sector. Methodology In this study, the researcher has utilized a number of methods to tackle the research question. These methods were employed in acquisition of data, evaluation and analysis of data. The methods used for acquisition of data are sampling and questionnaires.Evaluation and analysis of data used in answering this question is undertaken using time series method. Application of time series method is suitable since data is collected over time and the results attained by using this method are reliable and accurate. In this study, the researcher employs a number of primary and secondary sources of data with an aim of acquiring diversified and detailed information on the subject. Primary sources used in this study present the advantage of availing unbiased data on the middle class hospitality sector in the UK economy (Great Britain, 2010). Findings and discussions on findings Through this research, various findings indicated that demand within the middle class hospitality industrywas significantly affected by the recession. This was as a result of a number of factors. These factors include :changes in real wages among the middle class in the UKeconomy; high inflation rates; inadequate access to credit and high commodity prices (King, 1997). High inflation rates Through various research tools, the researcher found out that one of the key factors that contributed to a decline in the demand for services from the middle class restaurants was high inflation levels during the recession. High inflation levels within the UK economy resulted to a decline in the purchasing power of the major currencies in the UK economy. A decline in the purchasing power among the middle class resulted to cost cutting and prioritization inspending. This resulted to members within the middle class opting to prepare meals in their homes rather than purchasing ready made meals from the restaurants. This greatly reduced the effective demand for services offered at the middle class restaurants in the UK.In addition;High inflation rates also affected the real wage to the middle class in the UK economy. This resulted to a decline in the effective demand for various goods and services from middle class restaurants. Inadequate access to credit During the recession, access to credit in the UK economy was limited. This was because increased levels of uncertainty in the economy resulted to a decline in the banks will and ability to provide credit to the middle class within the economy. Inadequate provision of credit led to reduced purchasing power among middle class consumers in this economy. This resulted to spending adjustments thus resulting to a decline in the demand for services offered by the middle class hospitality sector. This contributed greatly to the reduction of demand during the recession. Decline in employment rates During the recession, employment rates declined considerably as organizations attempted to cut various overhead costs. This factor affected the employment levels among the middle class in the UK economy. A decline in the employment level among the middle class resulted to a decline in the effective demand for goods and services among this group of individuals. This contributed to the extensive decline in the demand levels for services offered by the middle class hospitality sector in the UK economy (King,1997). High commodity prices During the recession, costs of essential raw material increased. This translated to higher commodity prices in the middle class hospitality sector in the UK. According to the theory of demand, an increase in commodity prices results to a decline in quantity demanded. Therefore, increased commodity prices in the UK economy resulted to a decline in the effective demand within the key sectors in the economy. In addition, an increase in commodity prices resulted to cost cutting measures within the hospitality industry in the UK(Richardson, 2011). This was accompanied by a relative decline in quality of service within some middle class restaurants hence resulting to a decline in demand for the ventures services. Recommendations During the recession, various middle class restaurants faced the challenge of declined demand. However, this can be averted in the future through implementation of a number of recommendations. First, application of ethics in pricing activities will be essential in ensuring that middle class consumers are not exploited yet the middle class restaurants maintain a suitable profit margin. This will enable these organizations to have an incentive for the middle class despite the decline in their purchasing power. This will also create loyalty among consumers since they will view this sector as supportive. Secondly, this sector is to develop loyalty schemes for their clients. This will help various patrons to accrue various benefits and help the middle class restaurants to maintain high demand levels for services despite prevailing economic trends (Great Britain, 2010). Thirdly, these restaurants should develop various economical user experience services. These will help to fuel demand for the sector’scommodities hence; making the middle class hospitality sector maintain high demands despite any economic down turns. To hasten recovery of the sector suitable marketing should be undertaken to demystify various believes within the economy and among the middle class group of the population. This will enable various patrons to resume their previous consumption trends (Richardson, 2011). Conclusion The global recession has affected various sectors within economies of the world. This has been as a result of a number of problems that have contributed to a change in the consumption trends among the classes in the world economy. These factors include; decline in the employment rates within the world economy; hyper inflation rates; decline in real wages; limited access to credit facilities and increased commodity prices. In this study, focushas been placed on the middle class hospitality industry in the UK.Due to the recession, thissector has recorded a decline in demand for various commodities and services. This has been attributed to a number of factors that affect the effective demand within the middle class in UK.These factors include; high inflation rates in the economy, increased unemployment rate, high commodity prices; decline in the real wage earned by members of the middle class and poor monetary policies within the economy. These factors affected the demand levels significantly,however, various recommendations provide a remedy to the problem. Some of these recommendations include; introduction ofloyaltyprograms; development of user experience services;introduction of suitablemarketing strategies and application of ethics in organization activities. References Great Britain. (2010). National minimum wage: Low Pay Commission report 2010. London: Stationery Office. King, S. S. (1997). Lessons from the recession: A management and communication perspective. Albany, NY: State Univ. of New York Press. Richardson, J. (2011). From recession to renewal: The impact of the financial crisis on public services and local government. Bristol, UK: Policy Press. Read More