Effect of Changes in the UK Economy on Businesses - Essay Example

The two main problems concerning the economy of the UK are Recession and Unemployment. Recession: Recession implies a slowdown in the economy, characterized by a contraction in demand for goods and services. Unemployment: Fall in demand during a recession leads to a slowdown of production activities, which is followed by the retrenchment of employees resulting in unemployment.

Statistics and forecasts regarding unemployment and the economy Ernest & Young Item Club have predicted that the UK economy will fall by another 1% in 2009. The unemployment rate is expected to touch 5% by 2009 end, which is double that of 2007. (“UK economy already in a recession” October 20, 2008). IMF has suggested that among all the developed countries the UK will be the hardest hit (IMF: UK economy will be hardest hit, January 28, 2009). The forecasts from the National Institute of Economic and Social Research (NIESR) are equally murky.

It has estimated the economy to be further squeezed by 1.5 percent in the first quarter of 2009; (Monaghan, April 8, 2009). It is believed that the hospitality industry will be the worst hit by the current recession. This is true because this sector is considered nonessential by the customers and hence any cut in their budget affects the hospitality industry first. TRI hospitality consulting has predicted that the Revenue per Available Room, in London will experience a drop by 10% in 2009. Inbound visitors who make up for half of the room vacancies will decrease by 2.

7% this year. (‘2009 Forecasts for the UK Hotel Industry’, March 26, 2009). Impact of recession and unemployment scenario on marketing mix Product   For the time being the travelers will be spending less and the industry has to learn to function under tight budgets. (Global financial crisis: Challenge for the hospitality industry, November 28, 2008). The main challenge for the industry will be to maintain the same level of service at a reduced cost. For this, the standard of service provided by the staff has to be raised.