An investigation in the role of prevalent economic conditions in the closing down of Woolworths’ chain of stores in England and its possible after effects. Aim The aim of this research is to examine the current economic situation in England and its role in the closure of the Woolworths’. The research also aims to investigate the possible after effects of such a close down and its impact on the economy and employment levels across England. Background Affectionately called ‘Woollies’, the Woolworth chain of stores is a popular name amongst the British consumers.
Woollies mainly caters to the middle range consumers. Amongst its various products, the more famous offerings include the Ladybird range of children’s clothing, Chad Valley toys and the pic’n’mix range of sweets. Woolworths became a major news headline recently for having announced shutting down its 800 odd stores across the country while leaving approximately 26,000 of its employed staff, unemployed. This quite important in terms of current economic conditions. Closing down of such a large group, will have a major impact on the already failing economy.
It wouldn’t be a very far fetched theory to assume that these changes in the global economy have deeply affected the economy of England which in turn is responsible for the closure of many businesses including major ones such as Woolworth’s. In order to investigate this theory further, we need to first understand, the origin of the economic crisis which gave rise to current situation. United Kingdom The economy of the United Kingdom has also been hit by rising oil prices and the credit crisis.
Sir Win Bischoff, chairman of Citigroup, said he believes that house prices in Britain will keep falling for another two years. The Ernst ; Young Item club predicted growth of only 1. 5 percent in 2008, slowing to 1 percent in 2009. They also predicted consumer spending would slow to only 0. 2 percent, and forecast a two-year drop in investment. The Institute of Directors’ quarterly business opinion survey showed business optimism at its lowest level since the survey began in 1996.
Deputy Governor of the Bank of England, John Gieve said inflation would accelerate “well over” 4 percent while economic growth is “slowing fast. ” Bank of England Governor Mervyn King said there may be “an odd quarter or two of negative growth,” following the first quarter of 2009. Gieve said he couldn’t rule out the U. K. economy heading into a recession, adding the economy was “quite a long way” from the end of the slowdown. Nationwide, the UK’s biggest building society, warned the UK could head into a recession after house prices in July fell 8. 1 percent from the previous year.
Housing prices declined by 1. 7 percent in July, double the decline recorded in June. Standard & Poor’s said on July 30, 2008 that 70,000 homeowners were in negative equity and it could rise to 1. 7 million or about one in six homeowners in the UK based on an expected 17 percent decline into 2009. The Bank of England reported that mortgage approvals fell by a record of nearly 70 percent. In Northern Ireland, house sales saw a fall of some 50 per cent according to a survey by the University of Ulster/Bank of Ireland and housing prices fell on average by 4 percent.
British manufacturing activity declined by the most in almost a decade in July, the third consecutive month of declines. The number of companies that went into administration in May-July was 938, an increase of 60 percent compared with the same period in 2007. The number of company liquidations in the second quarter rose to 3,689, a 16 percent increase and the highest quarterly figure in five years. House builders expect the number of houses built in 2008 in England and Wales to be the lowest since 1924. The declines are seen as an indication the United Kingdom has high chance of entering a recession.
Factory production in the UK dropped 0. 5 percent in June when twelve out of 13 categories of factory production fell. The economic output of the UK was reported to have increased by just 0. 2 percent in the second quarter, the joint-slowest pace since 2001. The Office for National Statistics later gave a revised number saying growth in the British economy was at zero, the worst since the second quarter of 1992. The current slowdown has ended 16 years of continuous economic growth, the longest period of economic expansion in Britain since the 19th century.
A report from the National Institute for Economic and Social Research said the economy contracted by 0. 1 percent in the period from May to July and 0. 2 percent from June to August. A voter backlash due to the personal financial effects of the global credit crunch was widely attributed by politicians of the United Kingdom Labour Party, which had been in power since 1997, as the reason their political fortunes took a dramatic downturn through May 2008, with a succession of defeats in by-elections and the London Mayoral election, and the worst opinion poll result in their history.
Political opponents countered this apparent excuse by pointing to the fact that the incumbent Prime Minister Gordon Brown, who had taken office in June 2007 just before the crisis broke, had been the country’s ‘Iron Chancellor’, and had allegedly not ensured the country had sufficient monetary reserves to be able to lower taxes and ease the burden on voters, despite overseeing one of the longest sustained periods of economic growth in the country’s history.
In August 2008 the party also faced calls to impose a windfall tax on the utility companies, who were reaping record profits due to the fuel crisis, perceived as in bad taste given rising food and fuel prices. On 17 September 2008, news emerged that the banking and insurance group HBOS (Halifax Bank of Scotland) was in merger talks with Lloyds TSB about creating a UK retail banking giant worth i?? 30bn. The move received the backing of the British government which stated that it will over-rule any claims from the competition authorities.
According to the Office for National Statistics unemployment claims in August 2008 increased by 32,500 to reach 904,900. The wider Labour Force Survey measure found joblessness rose by 81,000 to 1. 72 million between May and July, the largest increase since 1999. In September 2008, British bank Bradford ; Bingley’s i?? 20billion savings business was acquired by Spanish bank Grupo Santander. While its retail deposit business along with its branch network will be sold to Santander.
The mortgage book, personal loan book, headquarters, treasury assets and its wholesale liabilities will be taken into public ownership. By November 2008, unemployment had risen to over 1. 8 million and is projected to surpass 2 million by Christmas and perhaps even as high as 3 million by 2010. From the 1st of December 2008, the UK Government made the decision to cut VAT from 17. 5% to 15% for 13 months in an attempt to encourage a big spend from UK shoppers before Christmas. On 4 December 2008, the Bank of England cut interest rates from 3% to 2%, which amounts to the lowest level since 1951.