The term recession can be defined as a period of general decline in business activity. During a term of nationwide recession, a reduction in production, selling and purchasing will be observed, along with a boost in general unemployment. Sometimes a recession will have a direct effect on a particular industry or geographical area. Based on previous terms of recession, an economic downturn brings the end of extended periods of inflation and can mean a reduction in product prices. The people most affected by recession are the employees that lose their jobs when businesses need to cut their expenditure.
The latest period of worldwide recession has had an enormous affect on the economy of the United Kingdom and during the month of December, 2008, the construction industry saw its biggest decline ever. The biggest looser was in house construction; although the sub-sectors of commercial construction and civil engineering were also hit hard during that same time period. The culmination of that decline was the Bank of England significantly cutting interest rates to decrease borrowing costs to a 314 year low.
Along with the decline in housing construction, the housing market has also experienced a slump. According to the Halifax bank, house prices fell by 16.2% in 2008, the biggest yearly decline since it first started keeping records in 1983. The benefit of this has meant that buying a home has become more affordable. However, obtaining a mortgage has become more difficult for a lot of people. The Bank of England confirmed that the number of approved mortgages fell to a nine-year low of 27,000 in November 2008.
Simply put, the last few years of economic recession has had a huge affect on the construction industry, more than many other industries. To simplify the business jargon, the construction industry has seen a reduction in the demand for new constructions. House prices have fallen because of the same reason; that being diminished demand, leading to property owners having to cut their asking prices to entice buyers.
Continuing competitiveness is vital in the existing economic situation, for businesses in every sector. However, businesses but also be conscious of any possible future turnaround in the economic conditions so that they are able to gain a competitive edge in their respective markets.
To put everything into perspective, the fact that the sustainability of the construction industry is at risk in times of recession is no secret; and there will always be continuing employment, or more specifically, unemployment problems, as is the nature of the construction industry. The only way to help overcome these problems will be to expand. Having more assets and financial resources means that a business has more economic sustainability when fiscal downturns ensue.
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