UK GDP contracted in the IV quarter of what it mea...

UK GDP contracted in the IV quarter of what it means for the inhabitants of the country?

The fall in GDP means an actual reduction in the economy, if we translate the term into plain language. Companies produced fewer goods and services, reduced sales and reduced tax payments. Companies do not hire new workers, and in some cases, even fired the old ones.

The deteriorating situation in the labor market has led to a drop in income. Ordinary people buy fewer goods and services, resulting in decreased demand. Demand reduction will automatically lead to a drop in production, the circle closes. Add to this the reluctance of Britons to take mortgages and buy homes, to get the full picture.

The well-being of all inhabitants of the country falls in the case of reducing the economy to varying degrees. Revenues decreased by the British 1.2% in the IV quarter of 2011, which was the worst figure since 1977. Why is this situation threatens the country in the long run?

The fall of the quality of life creates the preconditions for the voters came to power populists. Politicians promise the people an immediate improvement, which is impossible in principle. They make attempts to deliver on their promises, taking populist laws. The worsening business climate, the fall in investment activity and further economic decline are the result of such action.

The recent government decision to raise taxes for Cameron’s rich Britons is an alarming bell. The Conservative Party, which has traditionally defended the interests of business and the middle class, began to drift to the left political spectrum. Businessmen and entrepreneurs will be left without their representatives in government, if the trend will not change.

What to do? UK residents should accept the fact that out of the crisis can not be quick and painless. The British should not encourage populism in the election. This will help the country’s leadership is really to solve the problems of the economy, rather than trying to look good in the eyes of voters.

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