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UK Economy Emerges from Recession

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Many of the analysts believe that government intervention has played a vital role in reviving the economy towards growth. Chris Leslie who is the director at think-tank the New Local Government Network stated that fiscal stimulus has contributed greatly to get rid of this steep recession. He further added that the local council’ s initiative to provide loans and support to small firms has been successful. Regional Development Agencies also played a critical role by providing investment in infrastructures such as roads, derelict land clearance for land development and regeneration activities. In addition to that, some analysts predicted that there will be 3.5 million unemployed people by the end of 2009 whereas the actual figures are placed at 2.5 million which suggests that government intervention through fiscal policy has worked to a certain extent (Cook & Hayman, 2010).

The second indispensable tool for government, monetary policy, has also been deployed to monitor the economy. The key objective of the monetary policy is to control the stability of prices and in the case of the UK it was set a target of 2%.

Few years before this target was a formidable challenge for the government in the backdrop of global volatility. However, the latest reports show that CPI would remain as low as 1 % in the period of recession. It implies that interest rates will also be hovering on the lower side which is encouraging news for the consumers. During the last year of October, Monetary Policy Committee cut the discount rates by four and a half percentage points and injected £ 175 billion into the economy. This quantitative easing has helped in stimulating the aggregate demand and is also an important element for the UK to recover from the recession.

However, the full impact of this monetary relaxation will not be evident within a short period as certain lags are bound to occur. We have analyzed a wide range of indicators that emphasize that the UK is recovering from the recession; however, there are other indicators that indicate that recession could be protracted and long. At the current moment, the UK is at very early stages of a resumption of growth. Many of the businesses are yet faltering and they will further see a decline of activity in their sectors.

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