EUROPEAN ECNOMIC AND MONETARY UNION

European Economic and Monetary Union

Financial Crisis UK

Introduction

Without doubt, the UK has been badly hit by the global financial crisis. There was a massive outcome of the worldwide financial crisis on the United Kingdom's financial and banking sector. There have been instances of large government bailouts including the nationalization of Northern Rock and the takeover of HBOS by Lloyds TSB as a rescue measure. The banking sector in the UK, comprising corporate, personal, and retail banking services, is spread throughout the country. The government has introduced a new policy framework for banking markets in the UK, which includes increasing transparency in banking supervision, delivering effective competition scrutiny, and eliminating regulatory distortions. A new banking act came into force in early 2009 to avoid financial distortions in the economy (Kothari, 2010).

Before the credit crunch, the British economy was enjoying robust growth on the back of solid fundamentals. As is the case with most developed economies, the service sector has an increasingly important role to play. The UK registered fluctuating GDP growth during 2004-10, with the highest growth rate of 3.1% recorded in 2004. The global financial crisis impacted the country in 2008, when GDP growth went down to 2.7%. In the last quarter of 2008, the economy entered recession, which intensified in 2009 as the economy contracted by 4.9%. During this time, the state stepped in to nationalize ailing banks, indicating a shift in policy direction. Moreover, a rise in government borrowing has increased its debt, which is one of the highest among the EU nations. Lower levels of industrial output have also led to massive job losses and the country has its worst unemployment rate in 12 years (Markus, 2009).

Discussion

In the first three months of 2012, the UK's economy contracted and second quarter growth was in danger due to increasing worries about the euro's survival. By June 2012, ratings agency Egan-Jones had cut the credit rating for the United Kingdom to AA-minus with a negative outlook from AA. (Markus, 2009).

The coalition government in the UK agreed to delay the introduction of the Bribery Act in February 2011 after alleged lobbying by businesses. The Bribery Act is expected to revise the antiquated anti-corruption laws in the country, although it could now be diluted or suspended indefinitely. The buckling of the government under pressure from businesses is a cause for serious concern. According to Transparency International's (TI's) Corruption Perception Index, the UK ranks in 20th position with a score of 7.6. These scores are on a scale of 0 to 10, with 0 indicating highly corrupt and 10 indicating highly clean. The fallout to the delay in the implementation of the Bribery Act has been swift. The anti-corruption arm of the Organisation for Economic Co-operation and Development (OECD) has warned that the companies of the UK could be put on an export "blacklist" if there is further delay. Furthermore, anti-corruption campaigners are thinking of resorting to a judicial review if there are efforts to dilute the legislation (Kothari, ...