What is wrong with the UK economy and how to fix it Essay

What is wrong with the UK economy and how to fix it - Essay Example ub-prime of the European mortgage market collapsed smashing down the previous housing boom in American economy and it brought about a raffle effect around the world especially the countries which had higher degree of economic connection with the American economy. (Shah 2009) According to the World Economic Outlook, published by International Monetary Fund on 8th October 2008, the world economy was approaching towards a severe economic downturn due to the most severe economic shock since the â€Å"Great Depression† of 1929. Fund anticipated a decline in global growth (basis: purchasing power parity) by 3 percent in 2009. (Shah, 2009) In January 2009, the world economists predicted that among the highly developed nations UK would most adversely be affected by this recession. The grim picture represented in the IMF outlook reveals that the economy of England has been contracting by 2.8 percent which is more than twice of the anticipated rate. (â€Å"UK Will be Hardest Hit by Global Recession†, 28th January 2009) The matter of fact is that for the last decade the growth performance of UK has been centred towards three sectors: housing, finance and public sector. All the other sectors have been contracting during those years of economic upswing. The major employment generating sector in Britain is the service sector (81 percent) and the service sector is dominated by the financial sector. The financial sector contributes  £344 billion each year. The unique combination of efficient institution, least government regulation and agile workforce has made the financial sector of Britain a paradise for international finance. During the last decade the financial market was growing by a booming housing market and speculation. After the global credit crunch it comes to broad daylight that neither saving nor increase in earning has been the cause of growing housing market; rather it was financed by debts. Within the period 1997 to 2007 there was a gargantuan rise in personal