Bank of England and the British Economy - Essay Example

The fifth-largest economy in the world is the Economy of the United Kingdom also known as the British Economy and this is on the basis of the market exchange rates; in terms of purchasing power parity, it is the sixth largest in the world. In Europe, it is the second-largest economy, second only to Germany’s Economy. There are three countries that make up the British Economy namely, England, Wales, Northern Ireland and Scotland. This paper will throw 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 the 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 the 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).
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. Read More