Global Financial Crisis and Quantitative Monetary Easing in UK

Running Head: GLOBAL FINANCIAL CRISIS AND QUANTITATIVE MONETARY
EASING IN UK
Global Financial Crisis and Quantitative Monetary Easing in UK
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GLOBAL FINANCIAL CRISIS AND QUANTITATIVE MONETARY EASING
IN UK
Table of Contents
Introduction................................................................................................................................2
Global Financial Crisis and impact on UK................................................................................2
Important Sectors of UK economy and their contribution.........................................................3
Sources of Comparative advantage in UK.................................................................................3
Dynamic of change in the nation’s comparative advantage.......................................................4
Analysis of Balance of Payment................................................................................................8
Trade Balance of UK.........................................................................................................8
Current Account Balance...................................................................................................9
Flow of capital in UK.........................................................................................................9
Quantitative easing monetary policy in UK.............................................................................10
Conclusion................................................................................................................................11
References................................................................................................................................12

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GLOBAL FINANCIAL CRISIS AND QUANTITATIVE MONETARY EASING
IN UK
Introduction
In the world economy United Kingdom is considered as one of the leading power in
global trade. The nation has a strong financial sector. Following Germany and France it is the
third largest European economy. The nation possesses an intensive agricultural sector that
meets 60 percent of the nation food demand. Insurance, banking and business services are
main drivers of UK’s economic growth. In the phase of global financial crisis in 2008, the
economy was severely affected because of its heavy reliance on the financial sector. In order
to combat crisis the fiscal and monetary policy stimulus taken by different nations that lead to
another round of crisis in 2011. The paper critically evaluates impact of recent global
financial crisis and the ongoing quantitative easing monetary policy in UK.
Global Financial Crisis and impact on UK
First phase of the global financial crisis began on September 2007. This is the time
when banking system in United States ceased to supply funds to the mortgage debt. This
financial crisis finally broke out in September 2008. During this time the invest bank in US
Lehman Brothers went bankrupt. The incident eroded all the faith on banking system. The
flow of credit to the private sector and consumer become restricted reducing the confidence
of business. The G20 group constitute of both developed and developing nations act together
to counter the ongoing recession. In 2010, the focus of European Union switched from
private to public sector. The lower tax rate and high government spending result in huge
fiscal deficit and affect policy decision of UK, nations in the euro zone and United State
(Castells 2014). The shift of private debt to a sovereign debt even worsens the situation. The
policy markers found a slow economic growth and systematic crisis badly affecting European
countries. This is how the crisis that set in 2007, has taken a dangerous form in its new phase.

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GLOBAL FINANCIAL CRISIS AND QUANTITATIVE MONETARY EASING
IN UK
Important Sectors of UK economy and their contribution
United Kingdom is one of the developed nations relying highly on the free market
economy. The most dominant sector of the economy is its service sector. The sector alone
contributes to 80 percent of the Gross Domestic Product. Among the service sector the most
important sector is financial services. London is the largest financial centre of the world. The
pharmaceutical industry in UK world’s tenth largest sector and plays an important role in the
UK economy. After services the next important sectors of UK are manufacturing and
agricultural sector. The nation has a comparative advantage in its creative service industry.
The creative service industry growths at an annual rate of 4 percent in contrast to a global
average rate of 3 percent.
Sources of Comparative advantage in UK
The widely spread service sector gives UK a comparative advantage and one tenth of
the services are exported annually. UK holds the position of a global leader for its stock of
marine energy. The other important areas of comparative advantages are Synthetic Biology,
Agro science, advanced technology, regenerative medicine and some other. Under the
purview of global financial crisis, different areas of UK economy are affected and leads to a
change in the dynamics of comparative advantages.