subject: The Economy And How It Affects Everyone [print this page] It is common knowledge that the United Kingdom is in a double dip recession. This began in December 2007 with the collapse of major banks in America. As it has developed there has been rising unemployment, high inflation, higher bills and the demand for low cost items from new emerging retailers that offer branded products at low and affordable prices. As unemployment rates soared these people were left with next to no money meaning they could hardly afford to feed themselves or their family.
Unemployment has risen due to the fact that businesses cannot afford to employ people anymore. With rising costs for raw materials and bills they are struggling to make a profit. So some companies had to make one of two choices, either trim their workforce down or cut costs which was near impossible. Companies that could not cut costs and did not want to make their staff redundant ended up accumulating huge debts and eventually going bust which is what Woolworths did in January 2009 leaving all of their 27,000 employees unemployed. Unemployment in May 2012 was 2.58 Million which had increased from 2.45 million. Although this is bad it is not as bad as the recession in 1992 where at its peak 3.02 million people were left unemployed.
People that managed to keep their jobs started facing bills that were becoming more and more expensive. The average person earns 27,000 pounds per annum to which on average again 6096 pounds goes on their mortgage alone. Then if you add on the rising cost of utility bills and other bills like insurance, TV Licence, council tax etc the disposable income someone has is not much at all meaning they cannot afford luxuries like holidays. All though most bills are continuing to rise some companies are starting to compete on price which is good news for the consumer. Companies like British Gas and EON have recently began a price war which has led to both companies freezing their prices to try and attract each others customers.
With the lower disposable income people are shopping around more and are after the lowest price they can get. This is shown by the fact that high cost supermarket Waitroses profits fell by 5.8% in 2011 but Wall-mart, who own Asda, their profits rose by 3.45% in the same period. This has led to low cost retailers opening 100s of new stores all across the country offering products at prices fixed around 1 pound.
To compete against this high cost supermarkets like Waitrose are now offering an essential range at a relatively lower to try and drive customers back into their stores. This is a change from the companies previous ideas of offering high quality products and an above average price. They do still offer these products at high prices but the number of people buying these products is declining. The higher prices do not look like changing either, this is because the interest rates are still relatively high (3.1% in May 2012). If you combine this with the fact that many people are getting salary freezes people will soon be plunged into debt.
To make matters worse there has also been in a sudden growth in short-term loan companies which may seem like a quick fix to all of your financial problems but they eventually drive you into more debt. The rising bills and debts have led to an increase in repossessions. 41,000 homes were repossessed in 2007 when compared to 9,000 in 2005. In addition the price of petrol has also crippled many people as in June 2005 in cost 85.6p per litre but now it costs 138.9p per litre a 43.3p rise per litre.
This once again leads to the search for lower prices when shopping and the surge in low cost retailers. These companies are growing rapidly and more of them are popping up around the country. In July Poundland announced that they will be opening their 400th store which is a huge landmark when compared to other struggling competitors. As well as this they announced that profits were up 27%. Their low cost rival Home Bargains announced that their profits were up 27% so there is obviously a lot of money to be made within this market. As more of these stores open it is even better news for the consumer as it is likely that these shops will soon be competing on price which will then drive down the price of their products bit by bit. This can only be good news.
