[Kajian Post] Reasons for 2012 UK recession

Oleh : Tifani P.S | Trainee Kajian Kanopi 2012 | Ilmu Ekonomi 2012

In the year 2012 some number of figures already show that UK is in another recession in 2012. There are various reasons of why UK is in this condition now. One of them is the extra bank holiday and also poor weather around the UK that slowdown thecounty’s economic activities

The building sector’s output also fell by 5.2% in the second quarter compared to the first. This would be expected to continue, as there is a drop in social housing and infrastructure projects.
Inflation has also a contribution to this case which makes government ended up to increase the interest rate that will also increases the mortgage rate. As it is more expensive to borrow money from banks to buy houses, the demand for housing falls. Government may also increase the taxation rate to increase government money for infrastructure. However, this would make people’s income seems to be decreasing and also decrease the demand for housing.

Within the production industries, including manufacturing sector, decreased by 1.3% this is because European crisis make the demand from Eurozone decreases, but the Eurozone was the major consumers. The crisis happening in some European country has also affected the UK in making high unemployment.

This is cause by decreasing demand from Eurozone so that there is less job to do for the people, resulting in the increasing unemployment rate. As there less workers in the companies so UK’s output will decrease resulting decreasing economic activities which lead to recession in 2012.

Therefore, UK is affected by the crisis in the Eurozone, as it’s the major consumers. The recession is hoped to recover soon, but it seems to be hard to stabilize the economy in the UK as the condition in Eurozone is not yet stable as well. The government might search for alternatives decision rather than increasing interest rate and tax rate that make the UK’s citizens save their money more instead of spending the money.

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