UK Business and its Correlation to the Manufacturing Sector

By: Gen Wright

Britain's businesses are reeling from a deep recession and strong shocks are consequently being felt by the manufacturing sector.

According to data from the office for national statistics, in the fourth quarter of last year, GDP fell 1.9% compared with previous year. This is the worst performance since 1991.

What this portends for UK's business is drastic reduction of profit margins that eventually, almost inevitably translate to massive loss of jobs. Already it is confirmed that Briton's wage growth is so minimal that it has caused a steep drop in how the consumers spend which has in turn wilted the economy.

In the previous few months a sharp slump has presented itself in the spending of household stuff with over 0.7%.This is a sure mark that businesses are in trouble and the banks as the recession goes will not be much help.

The banks lending capabilities to help offset and cushion some of this businesses from collapse, already some have now gone under, is unavailable a recipe for even tougher times ahead. Moreover, economists project that the United Kingdom could simmer in recession for the most part of this year.

So if the businesses are unable to meet their working capital targets, their profit margins are on an all time low, they are unable to increase pay to their workers and will be therefore forced to cut jobs for some others, the manufacturing industry will also pay for this financial downturn.

The manufacturing and production sector in the fourth quarter shows a sharp slide of 4.5% compared to a fall of 3.9% of the previous year. But, interestingly, a more than expected performance by the service industry which only dropped by 0.9 % compared to the expected 1% drop, and this helped to make up for the sharp drop by the aforementioned production sector.

This means that the health sector, though receiving sharp criticism before, seemed to have carried itself paradoxically well, considering the eventual slump.

But, even as we examine the recession through economic binoculars, economic experts say that even considering the bleak situation, UK is not economically in the ICU as many might expect.

However, for the country to escape the near death experience, the experts still insist that the bank of England must do its very best to ensure that first, they put their house in order, ridding themselves of excess baggage, fill all the money porous loopholes and endeavor to alleviate the monetary burden by printing money.

Both the businesses and the manufacturing sector will also have to depend on the government bailout money to boost their dwindling financial strength. Without it, it seems, no new mergers are in the offing and even those who are currently in the merger negotiations or some that are building new companies are at risk of not meeting the targeted returns.

As it is also, local workers unions are bracing themselves for countrywide strikes and sit-ins. As it has been evidenced some have already began, a way of getting themselves of this economic quagmire.

Article Source: http://www.factly.com

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