Effects of Euro Zone Crisis on UK
The UK economy has received the worst hit from the Euro zone crisis. The professional and financial service sectors in the UK benefit significantly from their access to the Single Market. 40% of the trade in the UK is conducted with the Euro zone and it is the weakness in the key markets due to sovereign debt crisis that has constrained its contribution to domestic growth.
Compared to other countries though, the UK is not the worst hit by the crisis but there are effects that the people have to contend with and they are as listed below:
- Mortgages and homes-Banks have become cautious in the matters of giving loans out and this means that the conditions have become tougher for all first time buyers. There is also a decrease in the number of people able to invest in property leading to an increase in the number of tenants. The increase in number of tenants means that there will also be an increase in the rent prices. Also, investors from other countries that have been hit worst by the crisis are investing in the country by buying property in major hubs and keeping the prices high in such regions.
- Savings-Euro banks are fighting to survive and in trouble. For those individuals with money in banks in the UK, there is a need to know whether the money is safe and whether they should spread the same across building societies and a couple of banks in order to ensure when a bank busts, they are still safe.
- Employment-A report from the BBC has official stats that showed 47%of United Kingdom exports went to Euro
zone in 2011 while close to 43% came from the euro zone. In the event that the euro crisis is not brought to an end, the demand for products will continue to fall resulting to job losses. - Investments-Investors are experiencing difficult times as well because the crisis has brought with it uncertainty about the future. It has become especially difficult to forecast what will happen if the crisis continued keeping investors away from the UK market.
- Pensions-Pensions are huge investments in the United Kingdom government bonds and if the buying costs rises and returns on holding them fall, such funds will no longer be in a healthy position. The main worry about pension schemes is the fact foreign investors to the government bonds will push final salary pension schemes in the private sector into the red.
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