Training Blog

The “Credit Crunch” is the term used to describe the economic status which 1st became a problem in 2008. Basically the problem is that the banks are refusing to lend because they can’t afford it. This is causing a domino effect throughout the country.I should point out that it is not just the UK that are in the middle of this economic crisis. One problem which keeps cropping up is that public spending has been reduced this is creating problems for businesses as they are unable to borrow from the bank the next logical move would be to rely on public spending but as this had declined businesses are unable to get the cash that they
need from this source which can affect their long term cash flow. This in turn means that businesses have had to make some staff redundant but this is not without consequences; as if you make staff redundant it will not improve public spending as if you don’t have a job any money you do have goes on paying bills so you have no disposable income.

In some cases this is not enough and the business goes into liquidation as we have seen with Woolworths. This ultimately makes the problem worse as unemployment figures rise, thus decreasing the number of people with disposable income and increases the number of people relying on government schemes such as the dole just to make ends meet. Which is not without problems as the government does not have an infinite amount of cash, they are attempting to fix the economy with a number of things such as reducing the rate of VAT but this is not really ideal as demonstrated in the article about VAT changes. Another thing that you may not be aware of is that the government is borrowing money from other areas such as the NHS in an attempt to fix the banking crisis.

This creates even more problems such as the NHS having to make cut backs on some of the services that they offer which can impact on the public when they need treatment and waiting times are increased as they like everywhere else are having to make some staff redundant. The only plus side I am aware of is those lucky enough to have disposable income are able to purchase things fairly cheaply due to cuts in VAT and also businesses are so desperate to stay solvent that they are having massive sales which basically means that for the duration of the sale they have a fairly good cash flow unfortunately it is not good for business to have a permanent sale. So as you can see there are good points in between all the doom and gloom but when you look at the bigger picture the good points don’t seem quite so great.