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Has the Recession Changed the way UK banks measure performance

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This led to the implementation of risky lending practises. Aside from this, the increase in food and oil prices had its own share of negative effects on this dire financial situation. In 2007, the sub-prime loan losses have been pointed out as one of the primary causes of the crisis which paved the way for other risky loans and unusually high asset prices. When these loan losses mounted and the Lehman Brothers declined in September 2008, the international bank loan market experienced major panic. Housing and share prices declined as a large number of well-established commercial and investment banks in the United States as well as in many parts of Europe went through huge losses and faced bankruptcy (Gullapalli and Anand 2008).

However, Hamilton (2009) argues that the increase of oil prices from 2007 to 2008 has also been an important cause of the economic recession. After his study on the impacts of oil price on the economy, there was only one conclusion that if there had not been an increase in oil price in the period between 2007 and 2008, the global economy may not have experienced a financial downturn between the same years.

To simply put it, oil price increases significantly contributed to the decline of economic growth. Marren and Kennedy (2010) was concluded that the economic recession had been caused by excessive financial expansion, prolonged by the inability to assess risks due to unclear financial statements, and worsened by the erratic and ever-changing responses of the government toward the crisis. In other cases, it has been debated that the overproduction of goods, which was caused by globalization, is also a root cause of the financial downturn as global industrial production was increased at a low cost (Bello 2008).

Due to these causes, international firms and companies have experienced a significant decrease in profits; therefore, a large number of these organisations have cut back on their sales prices due to the low sales. The recession has also resulted to a decline in the international trade as well as the increase of unemployment rates and a drop in the prices of goods and services (Martin 2000). In the United Kingdom, particularly, the manufacturing industry was highly affected by the international recession.

On the other hand, agriculture, forestry and fishing were the only industries that remained unaffected over the recent years. International trade is an extremely important element of the UK economy and has been significantly affected by the recession due to the fact that the financial crisis in Europe has caused a decline in demand for UK exports.

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