During the 1980s and early 1990s recessions, British manufacturing Essay - 1

During the 1980s and early 1990s recessions, British manufacturing management restored profitability, sacked employees, and tran - Essay Example The depression had been caused by the great value of the pound, towering rates of interest, a firm fiscal policy, the economic boom and bust, high charges of mortgage interests, and the use of the Exchange Rate System Since the recession in the 1980s, British manufacturing has not been able to regain its position as the world’s top manufacturing nation. Although the decline experienced by Britain has been inevitable, a number of measures have been taken to improve British manufacturing. Among these is the New Growth Economics, which focuses on growth policy, convergence and catching-up, social capability, human capital, and investment. The United Kingdom has also made efforts to sustain a high level of foreign direct investment, which is one of the foundations to the revival of British manufacturing. Keywords: Recession, British Manufacturing, Gross Domestic Product, Inflation, Manufacturing Sector, Competitors, Unemployment, Economy A recession is a â€Å"downturn in the bus iness cycle during which real GDP declines, business profits fall, the percentage of the work without jobs rises, and production capacity is underutilized† (Tucker, 2008, p.252). GDP means, â€Å"the value of a country`s overall output of goods and services during one fiscal year at market prices, excluding net income from abroad† (â€Å"gross domestic product (GDP),† n.d.). ... Source: (â€Å"Causes of recessions,† n.d.). A recession consists of two quarters, whereby the decline in the GDP; during a recession the economy is functioning inside and further away from its production possibilities curve. During a recession the economy is affected in a downfall, demands begin to slowly go down; this is because the market is saturated and the demands for goods and services becomes weak (Montgomery, 2011). Factors that lead to the recession in Britain during the 1980s and early 1990s include: 1. Great value of the pound: This reduced the demand for exports since they became more expensive. British manufacturing was the sector that was mostly affected. 2. High rates of interest: Inflation in the UK was above 15% in 1979 (â€Å"Causes of Recessions,† n.d.). High inflation was inherited by the conservative government, which made a commitment to reduce it. The government focused on tight fiscal and monetary policies, which reduced inflation, but caused a reduction in investment, spending, and output. 3. A firm fiscal policy: The government focused on reducing its borrowing level to reduce inflation, which was necessary for the economy. To achieve this, taxes were increased, consequently reducing consumer spending due to the fact that their disposable income was reduced by the tax increase. 4. Economic boom and bust: There was rapid economic growth during the 1980s. As a result of this inflation increased above 10% (â€Å"Causes of Recessions,† n.d.). The UK government embarked on reducing the inflation by increasing the rates of interests, which led to a reduction in spending. 5. Use of the Exchange Rate System: The UK