The Impact of Global Financial Crisis on the United...

The impact of global financial crisis on the United Kingdom Introduction This report will examine the affects of the global financial crisis, which was a result of the collapse of the sub-prime mortgage market in the United States, on the UK economy. First of all, it will look at the background of the global financial crisis. Secondly, this paper will analyses why the UK economy has been influenced by the global financial crisis, what effects of the financial crisis on the United Kingdom have been, especially labour market. Lastly, brief conclusions will be drawn and a number of recommendations will be made. * Outline Financial crisis is a sharp deterioration of a group of financial indicators, such as business and financial†¦show more content†¦Thus, when interest rates rose in 2007, most of banks could not put cash back because more and more homeowners with mortgages were forced to default, and they also could not borrow money from wholesale market because others were involved in the same situation. Lastly, although Bob Bennett, the finance director, said ‘the credit crunch that was obviously coming should have led to more restrained [mortgage] volumes.’ in February 2007, managers of banks did not believe that rising interest rates would affect lending (Brummer, 2008, p.10). Moreover, another reason is the changing of the UK economic structure. From 1945, significant sectors were run by the state, because the Labour Government stated that the economy must be centrally managed. However, it was a big challenge for the local government to run them efficiently because of a limited budget. In order to solve this problem, Conservative governments transferred some state industries to private sectors from 1979 to 1997. After that, the Labour Government also accepted privatization. Nowadays, there is a free market economy in the United Kingdom (Oakland, 2006). That means the UK government plays a neutral role in its administration and legislation of economic activity. It was so difficult for companies, especially for the private sector, to deal with the negative effects of the global financial crisis of 2007-2008. Furthermore, It is no wonder that the UK government should takeShow MoreRelatedThe contemporary Great Recession and the global financial crisis1032 Wor ds   |  5 Pagessubprime crisis in 2007 that it is commonly believed to have led to the Great recession and to the present global financial crisis, these issues have been subject to much research. 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