A Resolution Foundation study issued on Sunday said the reasons for the looming slump are both global and domestic in nature, including the slowing global economy on the backdrop of trade tensions and uncertainties over Brexit.
The last five recessions cost around £2,500 (US$3,150) per household and left nearly one million people unemployed in the UK, the think tank said in its report titled ‘Failing to plan = planning to fail’. If the government had failed to address the impact of the latest downturn, GDP could have fallen by 12 percent, equivalent to over £8,000 for every family in the UK.
However, what was effective in mitigating the last recession, like big interest rate cuts, would hardly work when a new recession comes due to the current economic climate, the think tank said, calling for a new approach.
“Worryingly, however, policymakers are unlikely to be able to respond in the same way should another recession hit,”Research Director James Smith said in the report. He explained that there is little room to maneuver given the current Bank of England base rate of just 0.75 percent and debt-to-GDP ratio, which is more than double that which prevailed ahead of the 2008 crisis.
“So it is a big concern that the legacy of the crisis will limit the ability of policy to support the economy,” he added.
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