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The Credit Cruncher was conceived to help you to keep up to date with credit crunch and recession developments, it provides some helpful credit crunch advice and it addresses personal debt. The Credit Cruncher also seeks to explain how the credit crunch started and shed some light on the worldwide recession. Recently, we have begun to look at how BREXIT will affect the UK economy. Please feel free to leave comments where relevant.

8 Apr 2009

Financial crisis in the UK

The UK economy is obviously not the only economy to be hit by the current crisis, but it may be hit harder than others - why is this?
The fact is that over recent decades the UK economy has shifted towards service industries and has been particularly successful in the financial sector. The UK has concentrated on new innovative financial 'products' and is therefore overly exposed on this front. Although we are heavily reliant on the financial sector, we are nowhere near as exposed as Iceland, who's entire GDP was more or less totally dominated by it's banks. Nevertheless, it is a fact that the proportion of the UK GDP which comes from 'service' rather than physical goods actually produced on a shop floor, makes us vulnerable in this crisis. If you were wondering why Gordon Brown is on a crusade to stimulate the global economy, the reason is simple. The UK still has the ears of both the US and Europe (and the commonwealth) amongst others and still has some global influence, Gordon is trying to use this influence to get the global economy moving in order to help out the home market as much as anything. We have more global influence than Iceland, and we have more at stake than Germany and the rest of Europe, possibly even more at stake than the US since their manufacturing base up until now is still largely intact compared with the UK.
The more reliant, we have become upon banking, the more exposed we became to a banking collapse. This does not bode particularly well for the future as there is no doubt that the banking sector will be more heavily 'policed' and regulated meaning that there will probably be a net decline in UK productivity even after the worst of the crisis is over. We must wave goodbye to the carefree days of limitless revenue from shady financial products and knuckle down to some hard graft.

Related posts:
How long will the credit crunch last?

UK reports GDP decline
Icelandic banks in trouble
Automobile industry bailout

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