The business cycle

by Gordon on Monday 16th January, 2012

According to economic forecaster, the Item Club, the UK may have already slipped back into recession.  The think tank said that gross domestic product (GDP) shrank in the final quarter of last year and would contract again in the current three-month period.

The Item Club said that even if the eurozone could resolve its problems the UK economy would grow by just 0.2% this year.  It also predicted unemployment would rise by a further 300,000 to just below three million people.   (BBC, 16th January 2012)

The recession phase of the business cycle has a number of impacts on businesses.  Typically at this time, demand for products and services is lower, businesses need to reduce costs to survive, and so unemployment is higher.

Management accountants can provide the sort of strategic analysis to help a business focus on core profitable activities, whilst ensuring the business has the resources to help it grow when economic recovery starts. CIMA, the Chartered Institute for Management Accountants, is the world’s leading body for training management accountants.

The Item Club’s chief economic adviser, Peter Spencer, told the BBC, ‘We are probably in technical recession. Consumption was very badly hit by rising inflation last year, business spending has been paralysed, and of course recruitment has also gone on hold as a result of the euro crisis.

The Item Club said the economy would not return to normal levels of growth until 2014 as the eurozone crisis continued to hold back investment in the UK.  It said that even if a solution was found, Britain’s economy would still only grow by 1.75% in 2013 and 2.8% in 2014.

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