Economic recovery pains Since the world financial crisis of 2008 the United Kingdom (UK) economy has recovered more quickly than some other advanced economies but the recovery has been uneven. In 2010 the UK government aimed to reduce a huge government debt by cutting government expenditure and by increasing economic growth through encouraging more private sector activity. By 2014 total unemployment in the UK fell below two million for the first time since 2008. This economic recovery was due especially to an increase in jobs in the private sector, mainly in service industries. This increase outweighed the loss of jobs, such as hospital workers, in the public sector. A government spokesperson said ‘every job created is a family made more secure and a step towards a stronger economy.' Monetary policy was also aimed at economic recovery. The central bank fixed interest rates at their lowest ever level of 0.5%. It expanded the money supply through quantitative easing. To do so the central bank purchased huge quantities of government bonds to increase liquidity in the economy through the commercial banking system. However, some critics of the government's macroeconomic aims were of the opinion that recovery in the economy was uneven. In 2014 only the services sector output exceeded its pre-2008 peak. Industrial production, construction and agriculture each failed to reach pre-2008 levels of output. Further, for UK households, there was a reduction in real household incomes and, although unemployment decreased, UK households faced a fall in living standards. Households feared that interest rates would rise and they were also wary that inflation could fall further and there might be deflation. Businesses were concerned that their main export markets in Europe would decline if the UK pound (£) continued to strengthen against the euro due to the UK's relatively stronger economic growth. [Table 1] In spite of some positive economic indicators in Table 1, there was uncertainty whether the recovery could be sustained. During the last quarter of 2014, for example, the annual rate of GDP growth was 3% but this fell sharply to 2.4% in the first quarter of 2015. Source: Adapted from The Times, 16 October 2014, and The Guardian, 29 April 2015 Table 1 Selected UK economic indicators for 2008 and 2014 Economic indicators | 2008 | 2014 ---|---|--- GDP | £1.632 trillion | £1.656 trillion GDP growth (2nd quarter) | 0.9% | 0.2% Real household disposable income per head (2nd quarter) | £4320 | £4263 Household debt to income ratio (March) | 162.9% | 136.3% Average house price (August) | £209 000 | £274000 Annual wage growth (August) | 3.2% | 0.7% Annual inflation (September) | 5.2% | 1.2% Interest rate (October) | 4.5% | 0.5% Source: Office of National Statistics