In 2008, an economic recession throughout the industrialized world was suggested by several important indicators of economic downturn. Contributors to this downturn included high oil prices, high food prices, and a substantial credit crisis leading to the drastic bankruptcy of large and well established investment banks as well as commercial banks in many nations around the world. This crisis has led to increased unemployment, and other signs of contemporaneous economic downturns in major economies of the world.
The economy of the United Kingdom has been hit by rising oil prices and the credit crisis. The decade of the 2000s saw a commodities boom, in which the prices of primary commodities rose again after the late-twentieth century commodities recession of 1980-2000. But in 2008, the prices of many commodities, notably oil and food, got so high to cause genuine economic damage, threatening stagflation and a reversal of globalization.
In January 2008, oil prices surpassed $100 a barrel for the first time, the first of many price milestones to be passed in the course of the year.] In July, oil peaked at $147.30 a barrel and a gallon of gasoline was more than $4 across most of the U.S.A. These high prices caused a dramatic drop in demand and prices fell below $35 a barrel at the end of 2008.
The economy of the United Kingdom has also been hit by the vicious cycle of the Financial crisis. Because banks have lost money, people have been selling shares in banks. This fall in their share prices was speeded up by aggressive 'shorting’ of banking stocks. The fall in share prices have compounded the problem of banks because investors / consumers lose confidence and it’s more difficult to raise finance on the stock market.
Part of the UK plan is to buy bank share capital to give greater confidence to the banks and enable them to raise sufficient finance.
The shortage of finance means that banks have had to reduce lending, especially mortgages. The...