Challenges facing UK Economy

The Financial Crisis of 2008 had severe detrimental effects on the UK Economy. Since then, the UK has recovered, and the Economy has been ticking along at a reasonable pace; baring a few events which could have disrupted economic progression, for example a coalition government. Despite this relatively stable recovery, the UK has many underlying problems that, if left ignored, could inflict serious damage on the progress that has been made. 

One surprising challenge on the UK Economy is actually it's consumers. This is due to the effects that inflation had on the Economy. To put it simply, a knock-on effect of inflation is that prices are rising, yet wages aren't. For example, in the second quarter of 2017, Visa's index of consumer spending recorded the weaker quarter for consumer expenditure since 2013. This shows that fault-lines are being found in the Economy, and that it is slowly falling away, unbeknownst to the general public. Furthermore, a Chief International Economist at ING (James Knightly) claims that "My immediate worry is for the UK consumer". Using my GCSE Economics knowledge, the only way that I can describe this is that due to a rise in inflation, prices have gone up, and along with wages staying the same, this has led to a DECREASE in the purchasing power of UK consumers. 

A huge problem that is also facing the UK Economy is the interest rate at the current time, and the Bank of England's dilemma. Essentially, Brexit has caused inflation to increase, which requires an increase in interest rates in order to prevent companies coming into the UK for example; however it has also caused a slowdown in the Economy and diminishing consumer spending, which would require a decrease in interest rates, for example lower interest rates may encourage people to take out loans thus increasing consumer spending. 

In addition to this, Productivity is an underlying, and unexpected, challenge to the UK Economy. According to Adam Chester, Head of Economics at Lloyds Bank Commercial Banking, the issue is that "Arguably the biggest challenge for the UK at the moment is productivity", or the LACK of productivity. The problem is that although people may be working more hours, the actual levels of productivity are declining rapidly, as productivity is at it's lowest since before the 2008 Financial Crisis. This also creates a knock-on effect in the Economy, as employment is currently at 4.5%, which begs the question as to WHERE GDP growth is going to come from if productivity continues to decrease. 

After reading an article produced by 'Business Insider UK', they claim that a further challenge to the UK Economy is simply pessimism. Key figures relating to the UK Economy are Bank of England Governor Mark Carney and Chancellor Philip Hammond, both of which have been subjected to criticism over being 'deliberately negative about the Economy in the time since the (EU) referendum'. Mark Beck, the lead UK Economist at Oxford University claims that "the biggest threat to the UK Economy's prospects is undue pessimism about those prospects among policymakers, forecasters and commentators". Overall this is a challenge to the Economy as the division that Brexit has caused may actually create more problems than leaving the EU itself.  

To conclude, the UK Economy is facing serious challenges on a daily basis. The majority of these problems have been brought about due to a rise in inflation and the decision to leave the EU, thus acting as the forces pushing over a chain of dominoes in the UK Economy. Overall something needs to be done to combat these challenges; and in my opinion MORE UNITY over decisions such as Brexit could go a long way in helping the UK Economy to recover.