How Does Inflation Affect Uk Business

645 Words2 Pages
bulb-icon

Recommended: What is the relationship between unemployment and inflation

Inflation and Unemployment Effects on UK Businesses on 2014 Macroeconomic factors like inflation and unemployment are considered as a top-down approach that portrays the bigger picture of the functioning of the whole economy. In every region, it is the macroeconomic factors that determine the manner of operation of the economy with stability in these factors indicating economic stability and an unstable condition of the factors equally leading to poor performance of the overall economy. The paper examines how inflation and unemployment affected businesses in the UK in 2014. Despite 2014 recording the lowest ever levels of inflation since the time of global financial crisis in 2009 with a decline of 1.6 percent, the effects of the inflation …show more content…

It is, however, important to note that the higher the numbers of persons are employed within a nation, the higher the purchasing power parity of the people of such a nation increases. After the 2009 global crisis, unemployment levels hit a significant high in the ensuing years as companies worried to push further investments in the market. From 2010 to 2012, unemployment rates stood at 7 per cent to eight per cent (Flanders, 2012). Beginning of 2013 saw a decline in unemployment levels with a further decline evidenced from 6.6 percent to 6.5 percent in 2014. Towards the end of 2014, statistics indicated that around seventy-eight percent of men were employed with the rate of women employed standing at sixty-eight per cent that in total yields a total employment rate of 73.1 percent. Despite the rise in employment levels recorded, businesses failed to register significant benefits with the major cause of failure in consumer spending attributed to low wage growth. With wage rates growth at 0.3%, the level of consumer spending is equally affected that as a result leads to a decline in consumer spending. Furthermore, failure of decline in interest rates affects the level of income with banks the most affected businesses in 2014 (McVey, 2014). The reduced rise in wage rates indicates a decline in consumer spending with savings facing a …show more content…

(2014, December 27). How does inflation affect a business? - Telegraph. Retrieved from http://www.telegraph.co.uk/sponsored/business/sme-home/news/10841654/low-inflation-business.html Flanders, S. (2012, January 18). UK unemployment increases by 118,000 to 2.69m - BBC News. Retrieved from http://www.bbc.com/news/business-16608394 McVey, E. (2014). UK unemployment falls to six-year low of 2.12m - BBC News. Retrieved from http://www.bbc.com/news/business-28325361 Simon. (2014, November 18). UK inflation rate rises to 1.3%: How will it affect you? - Business Comment - Business - The Independent. Retrieved from

Show More
Related

  • The Pros And Cons Of Macropoland

    719 Words  | 2 Pages

    First, I will discuss the time period between 1973-1974. Because the unemployment and inflation rates are higher than normal, we can assume that the aggregate-demand curve is downward-sloping. When the aggregate-demand curve is downward-sloping, we know that the economy’s demand has slowed down. When the economy’s demand has slowed down, businesses have to choice but to raise prices and lay off workers in order to preserve profits. When employers throughout the country respond to their decrease in demand the same way, unemployment increases.

    Read More

  • Macroeconomics In Unemployment

    1233 Words  | 3 Pages

    Clark, Todd and Christian Garciga. "Recent Inflation Trends." Economic Trends (07482922), 14 Jan. 2016, pp. 5-11. EBSCOhost, cco.idm.oclc.org/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=112325646&site=ehost-live.

    Read More

  • The Great Recession

    670 Words  | 2 Pages

    Every few years, countries experience an economic decline which is commonly referred to as a recession. In recent years the U.S. has been faced with overcoming the most devastating global economic hardships since the Great Depression. This period “a period of declining GDP, accompanied by lower real income and higher unemployment” has been referred to as the Great Recession (McConnell, 2012 p.G-30). This paper will cover the issues which led to the recession, discuss the strategies taken by the Government and Federal Reserve to alleviate the crisis, and look at the future outlook of the U.S. economy. By examining the nation’s economic struggles during this time period (2007-2009), it will conclude that the current macroeconomic situation deals with unemployment, which is a direct result of the recession.

    Read More

  • The Australian Labour Market

    776 Words  | 2 Pages

    Changes in unemployment in Australia is a key issue in this news article. In the last twelve months, unemployment in Australia has dropped from 5.6 per cent to 5.1 per cent which is described as ‘a puzzle’ in the news article. Looking closer, there are some possible explanations for this change in statistics. Previously, unemployment in Australia increased in the time of the recent global economic downturn, although didn’t suffer as poorly as other countries according to data from the Organisation for Economic Co-Operation and Development. However, while unemployment rose, so too did the number of people in other forms of underemployment such as part-time and casual work (OECD, 2010). According to Sappey et. al., the status of employment requires workers to only work one hour per week and so therefore many underemployed workers receive the same employed status in this data as full-time workers (Sappey et. al., 2010, p. 111). According to the OECD, under-employment increased significantly during the downturn, rather than unemployment. Unemployment has dropped in the last twelve months but that does not mean that those who have obtained work have gained full-time employment. In fact, according to the Australia labour market trends of the last twelve months, it is more than likely that those who have become an ‘employed’ statistic rather than ‘unemployed’ have not gained full-time work. This news article quotes figures fro...

    Read More

  • What Happened in Britain During the Great Depression?

    1061 Words  | 3 Pages

    The effects of prolonged unemployment went from lowered health and living standards, to protests, and general anger at the current state of affairs. This high unemployment rate was brought on by the economic backwash caused by the Great Depression. The depression took the wind out of the sails of British commerce. It lowered the expectations of common people and made them question the system under which they lived.

    Read More

  • Capstone Project

    1573 Words  | 4 Pages

    An economic management issue in the public sector is unemployment (or joblessness) occurs when individuals are without work and actively applying and looking for work. The unemployment rate is a measure of the prevalence of redundancy and it is calculated as a percentage by dividing the quantity of those unemployed by all individuals currently in the labor force. Throughout periods of recession, an economy usually encounters a relatively high unemployment rate. According to International Labor Organization report, “more than 197 million individuals globally are not in workforce or six percent of the individuals were without a job in 2012.” (Allegretto & Lynch, 2010) Persistently high rates of unemployment in Europe throughout the last two decades show that unemployment is, at least to a reasonable degree, not just business cycle anomaly. This reflects a proceeding waste of labor and of human capital in most European nations and the United States. It appears reasonable to inquire, if given levels of unemployment impact long-run productivity growth or the long-run level of productivity itself. While unemployment is an extreme issue in Europe, not in the U.S., the decrease in productivity growth has been stronger in the United States. “Between 1979 and 1997 the average rate of unemployment in the US was 6.7% and the average growth rate of labour productivity was 0.9%. In Europe the average rate of unemployment was 9.3% and the average growth rate of labor productivity was 2.2%.” (Allegretto & Lynch, 2010) The reason given for these facts is: high wages lead firms to substitute labor with capital. This can lead to increasing unemployment and productivity since the workers who are still utilized become more productive Therefore, it is ...

    Read More

  • Rising Inflation in the UK

    1391 Words  | 3 Pages

    Inflation; ‘a situation in which prices rise in order to keep up with increased production costs… result[ing] [in] the purchasing power of money fall[ing]’ (Collin:101) is quickly becoming a problem for the government of the United Kingdom in these post-recession years. The economic recovery, essential to the wellbeing of the British economy, may be in jeopardy as inflation continues to rise, reducing the purchasing power of the public. This, in turn, reduces demand for goods and services, and could potentially plummet the UK back into recession. This essay discusses the causes of inflation, policy options available to the UK government and the Bank of England (the central bank of the UK responsible for monetary policy), and the effects they may potentially have on the UK recovery.

    Read More

  • Inflation

    1903 Words  | 4 Pages

    With inflation rates now in the low single digits, attention has become more narrowly focused on the problem of determining quantitatively what the "optimal" inflation rate should be. Evidence to date suggests that policymakers�iews have coalesced, however tentatively, around a "2% solution" to this question. For example, consider these explicit inflation targets: 2.5% for the...

    Read More

  • The Current Macroeconomics Situation

    1947 Words  | 4 Pages

    It seems that it is apparent that the current macroeconomics situation in US is bit difficult in numerous ways.   The situation relating to employment, inflation, monetary and fiscal policies has been detrimental to US citizens who have undergone through an trembling economy for a lot of years.   When there is enlargement in monetary activity, then the affluence will be experienced by a larger number of fiscal entities, in addition to industries, firms, workers, owners of capital as well as others. When there is a fall in fiscal activity, then the segment of companies’ encounters with decrease in production and further sectors of the financial system with the decrease in consumption. Accordingly due to reduced production, the companies lay off certain employees or condensed their hours in addition to their wages. These pessimistic trends have an effect on the decline of standard of living as well as excellence of life of inhabitants and augment the deficiency rate, which positively represent the most complicated difficulty for each nation. Consequently, economists attempt to determine the causes of these affairs (stages) of trade cycles and formulate suggestions concerning what could be done by way of suitable economic policies to tone down such depressing phenomena of depression. Recession ought not to be observed as incident from which there is no way out, but as a very severe indicator that point out that the financial system is unhealthy and we ought to take dynamic measures to its quicker recuperation.

    Read More

  • Different Types of Unemployment

    1050 Words  | 3 Pages

    People need money to purchase all kinds of goods and services they needed every day and sometimes, for goods or services they desire to own. To fulfill that, they have the essential need to earn money. In order to earn money, they must work in either in fields related to their interests or to their qualifications. However, people will meet different challenges during their jobs-hunting sessions, such as many candidates competing for a job vacancy; salaries offered are lower than expected salaries and economic crisis or down which causes unemployment. Unemployment is what we will be looking into in this report. Dwidedi (2010) stated that unemployment is defined as not much job vacancies are available to fulfill the amount of people who want to work and can work according to the current pay they can get for a job they chose to work as. There are four major types of unemployment: frictional, structural, cyclical and seasonal unemployment.

    Read More

  • Macroeconomic Objectives Essay

    1754 Words  | 4 Pages

    It is difficult for government to achieve all the macroeconomics objectives at the same time. Conflicts between macroeconomics objectives means a policy irritating aggregate demand may reduce unemployment in the short term but launch a period of higher inflation and exacerbate the current account of the balance of payments which can also dividend into main objectives and additional objectives (N. T. Macdonald,

    Read More

  • Relationship Between Inflation and Unemployment

    1860 Words  | 4 Pages

    Inflation and unemployment are two key elements when evaluating a whole economy and it is also easy to get those figures from National Bureau of Statistics when you want to evaluate it. However, the relationship between them is a controversial topic, which has been debated by economists for decades. From some famous economists such as Paul Samuelson, Milton Freidman etc to some infamous economists, this topic received a lot of attention. However, it is this debate that makes the thinking about it evolve. In this essay, the controversial topic will be discussed by viewing different economists’ opinions on that according to time sequencing. But before started, it is worthy getting a better understanding of the terms, inflation and unemployment.

    Read More

  • Effects of Inflation

    2891 Words  | 6 Pages

    Effects of Inflation Inflation is the most commonly used economic term in the popular media. A Nexis search in 1996 found 872,000 news stories over the past twenty years that used the word inflation. The "Unemployment" ran a distant second. Public concern about inflation generally heats up in step with inflation itself. Though economists do not always agree When inflation starts to interfere with market signals, the public tends to express serious alarm once the inflation rate rises above 5 or 6 percent.

    Read More

  • Effects Of Inflation Essay

    1615 Words  | 4 Pages

    Unemployment rates is the number of unemployed people divided by the number of people in the labor force. According to IndexMundi (2018), the unemployment rate of whole world in year 2017 is 7.9%, which was increased 0.6% compare with year 2016.

    Read More

  • The Social Impact Of Unemployment And Its Impacts

    754 Words  | 2 Pages

    Inflation is a wide phenomenon where prices increase thus resulting less buying power of individuals. Unemployment affects not just the person himself but also his/her family. Unemployment brings with it despair, unhappiness and anguish. It forces people to live their lives in a way they do not wish to, the life expectancy is negatively affected.

    Read More

More about How Does Inflation Affect Uk Business

Open Document