Unemployment in UK auses and effects on economy Assignment

Unemployment in UK auses and effects on economy - Assignment Example Unemployment is one of the challenging and serious issues that usually effect a country's economic development in negative manner and the countries having high rate of unemployment often face sharp economic downturn. In this regard the paper presents an overview of the unemployment situation in the country and discusses the causes and effects of unemployment on the economic development of the country. Furthermore, the paper also describes some possible ways that can help the country in reducing the unemployment rate.This paper is intended to identify the main causes of unemployment in the United Kingdom.The history of unemployment in the UK tells that during Great Depression the rate of unemployment was very high in the country. It reached to the level of 25 percent but after that time, unemployment rate used to remain at low level and with the help of different policies and strategies the government of the UK succeeded to attain more or less full employment level until 1970s. Howeve r, after oil prices fluctuation in 1970s the unemployment rate was also badly affected and gradually it began to rise. The recent rise in the unemployment rate is highest during the last decade and the country is facing worst situation with respect to unemployment crisis in the country (Pettinger, p2, 2009). The following table shows the United Kingdom unemployment rate during last three years and it is clearly seen in the table that unemployment rate is continuously increasing in the country with each passing year. Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 3.80 2008 2.50 2.50 2.50 2.50 2.60 2.60 2.70 2.80 2.90 3.10 3.30 3.60 2007 2.90 2.90 2.80 2.80 2.70 2.70 2.60 2.60 2.60 2.60 2.50 2.50 2006 2.80 2.90 2.90 2.90 2.90 3.00 3.00 3.00 3.00 3.00 2.90 2.90 The recent statistics also show that the unemployment is recorded at highest rate in last eight years. The rate of unemployment is rising at alarming pace due to which the year 2009 is also expected as a stagnant year for the economy of United Kingdom. (Monaghan, p1, 2008) The country while responding towards the global financial crisis is witnessing worst situation of unemployment and there is high level of concerns and worries at all level regarding the rise of unemployment rate. The following chart shows the current situation of unemployment in the country that is expected to rise even more. Causes of Unemployment in United Kingdom Unemployment is closely related with the economic development of a country. When economy faces recessions, the rate of unemployment also increases. Thus, the economic recession is the major cause behind the high rate of unemployment in the UK and it is expected that if the UK will face deep economic recession in 2009 then the unemployment will also reached the level of 3 million. (Pettinger, p2, 2009) Hence, the recent economic instability can be sought as one of the major causes of unemployment in the UK. Furthermore, the credit crunch is also viewed as an important cause of rise in the unemployment rate in the country. Due to market uncertainty it has become difficult for the investors to get loans and credits from the banks and financial institutions. The financial instruments in the UK economy are witnessing worst effects of global financial crisis due to which the credit and mortgage market is also going through a recession phase. The banks in the UK are now reluctant towards le nding loans, credits and mortgages to the people and business that led to reduction in the consumer spending. The investment level is also very low and many of the bid investment projects are delayed. This entire situation is responsible for reduction in productivity and demand for labor in the country.