Background
In the late 20th and early 21st century over a period of 7 years,
UK banks doubled the amount of lending in the economy creat-
ing huge amounts of credit in the form of loans causing house
prices to rise. This fuelled an increase in demand-pull inflation
of just over 5%. Eventually these debts were unpayable by the
people who took out large mortgage loans which led to the fi-
nancial crisis. The financial crisis led to a 26.2% decrease in
house prices in just under two years.
UK GDP fell by 1.5% in the last three months of 2008. Following
the recession, bank confidence has hit an all-time low as banks
refused to lend money which contributed in causing the econo-
my to shrink. It became harder for businesses to expand as ap-
plying for loans became much harder.
United Kingdom economic growth averaged 2.4% from 1956
until 2018, but reached a record low of -5.9% in the first quar-
ter of 2009. Government statistics carried out by the TUC re-
veals that the current speed of recovery is considerably slower
than the economic bounce back that followed the UK’s previous
eight worst recessions dating back to 1830. The Office for Na-
tional Statistics showed that the economy grew by 0.7% in the
last quarter of 2015.
In the five years since the global recession began in 2009, the
UK’s total rate of growth has been just 6.1%. Set against the five
year periods that followed each of the eight worst recessions in
Britain since 1830, this is the slowest recovery on record. The
rate at which GDP rose after the recessions of the 1970s and
1980s was 11.4% and 15.5% respectively. Recovery from the
Causes and Impacts of the
2008/2009 Recession
Kareem Eissa
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