Tag: UK

UK GDP Growth Shrinks in Q4 2012

Posted on by Rhys Williams

http://www.bbc.co.uk/news/business-21193525

The UK economy has shrunk by 0.3% in line with many economists’ predictions. The fall is mainly due to a slowdown in North Sea oil extraction, excluding oil and gas extraction the economy shrank 0.1%. This comes after a previous 0.9% growth in GDP during Q3.

Nick Clegg has blamed a lack of capital investment (investment in infrastructure) by the government as an explanation to why GDP is still lacklustre 5 years after the onset of the global financial crisis (http://www.bbc.co.uk/news/uk-politics-21190108). Increased capital spending would result in a rightward (positive) shift of the long run average cost curve. [...]

Why does the UK Government have such low interest rates on its debt?

Posted on by Rhys Williams

Like the US the UK is facing low interest rates, despite having a high budget deficit and public debt. Why is this?

The UK Government issues its debt in the form of Guilts, currently the interest rate the government has to pay on a year guilt is 0.32%. This is lower even than the base rate, surely investors would be better off just putting their money in a bank account? Well to start with large financial institutions and investors can’t simply put all their money in a bank account, if the bank collapses they will loose all their money (and the government only insures £85,000). [...]