World Financial Crisis
World financial crisis which has its provenance form the US sub prime bubble burst has crippled not only the world’s largest economy but has jolted the crest of global financial system. All those entities and enterprises who were one way or the other related to mortgage fiasco has bore the brunt of this global shock, as a result the economies are tumbling, list for the emergency rescue plans are on the rise and the likes of IMF and world bank are struggling to get hold of the faltering situation. In this hour of turbulence and bewilderment, states around the world are pondering to rectify the major policy snags to cleanse the system of the follies and preposterous trajectory that it gained in craving for precarious profits.
The United Kingdom in an attempt to attenuate the rising tide of the economic crisis and guard British entities form the devastation of this tsunami, is acting to contain the fall out by proposing bills of fundamental change in the way the system operates. As this has been the UK and US who had been the chief architect of the global financial system, having today’s Banking as its corner stone, the proponents of Capitalism and free market’ are struggling and reversing their own established principles by extremes interventions and takeovers. Though this system brought with it sea change in the way today’s world operates, it exposed the fissures it created within itself due to the unbridled lust its operators marshaled to extract all from none.
Policies being put forth by the UK Government
In this respect the vision put forth by the Leadership of United Kingdom shows the thoughtful and somber approach the legion of policymakers are considering to put an end to this turmoil which stands undoubtedly second to The Great Depression in terms of its severity and devastation. It is rightfully being proposed that the world today needs greater transparency in ways the system operates; it requires integrity and responsibility in decision making. Thus there needs to be an overhaul in the functioning of international Financial Institutions whose sagacious approach in foreseeing the growing tide and a preemptive move to stall the system form slide, could have averted if not mitigated the blow that economies around the world are experiencing.
The pace and process of this transformation is important as the right steps taken in haste brings with them the shadows of aftermaths and repercussion that might be unforeseeable in the beginning but more painful when fully exposed. On the other hand the nature of today’s crisis would have been different had Greenspan acted in a timely manner!
The UK government on October announced that it was taking an emphatic policy decision in support of the ailing Banking sector to reinforce it until the financial storm mitigates, for this purpose the Government has come up with 50 Billion Sterling package to back the qualified entities form diluting into financial quick sand, the procedure for this rescue resembles greatly to what the US government is doing i.e in return for cleansing their bad books it would hold their shares (Balakrishnan, 2008). The main driving force for such a move across both the sides of Atlantic is to secure the interest of tax payers by shielding their deposits and shares.
Apart form this the Bank of England has synchronized its moves to coordinate with the gait of the rest of world in order to boost level of liquidity in the Financial market, scarcity of which has rendered the whole engine chocked, in this respect 200 Billion Pounds are being made available through a special incentive Package, a scheme to keep financial entities float (Mason,2008). All these actions are meant to revamp the lost market confidence which has lead the Inter-Bank lending dried up. The Government has also lead to offer eligible institutions a covenant over their short and medium term debts which had been issued for their debt refinancing and meeting operational requirements.
Mr. Gordon Brown has also stressed in this respect a more collaborative, integrated and consolidated approach world wide, first to stabilize the highly turbulent system form spilling more disaster and then to strengthen it on new foundations.
This financial turmoil has shaken the roots of world economies, engulfing in its tide the Giants like the Lehman, Lynch, Mae and Mac and about to knock out the colossus of the size of GM and Ford (Mason,2008). Thus it’s not just the Financial Sector or the industries related to it, its tentacles are nailing down every thing that is coming in its way. Some industries are hurt more then others, but one of such entities which is increasingly bearing the brunt of this nose diving milieu is Tourism.
In most of UK, this industry is financed by the Banks who lend, the situation has worsened on two fronts, First the lenders have grown overly conscious and scary even for such moves like travel, they are more or less in a fight for their own struggle, the struggle for survival. Secondly due to surging inflation, layoffs and squeezed finances, the income disposable for such luxury have either vanished, evaporated or locked into vaults, thus this consciousness has suddenly screwed the shine form this lively business.
PEST Analysis: The Tourism Industry
Thus it’s the Tourism industry which is the focus of PEST analysis in this write-up.
Economic boom of the past years instilled in Tourism and Leisure industry unprecedented growth, it showed a remarkable growth which was a direct result of the accumulation of wealth and mounting budget surpluses that lead families and individuals to avail as much of such opportunities as possible apart form immersing into other luxuries.
The Magnitude of the size of this industry could be estimated form the fact that it generated to the volume of $6000 Billion worth of economic activity, contributing near to 11% of the total Global GDP, employing more then 9% of people in one way or the other and contributing to more then 12% of export (Mason,2008). Thus the stimulus this business packs in it is enormous in size and its impact is enormous (Uchitelle, 2007).
In United Kingdom, this industry shares a massive chunk in national economy, that explodes to 90 Billion Pounds while contributing millions of jobs. Thus for a country like this which has got enough stakes tied up, Tourism ceases to exists as a leisure rather its more a serious business
This is the most decisive factor that is rather ruining this industry to a sheer halt. It is more of dependent on the incoming traffic of tourists form around the world. As discussed above that there are two factors impacting it, first the lack of credit facility form banks and second the sinking disposable income on part of general population who instead of spending, wants to keep reserves for yet-to-come Katrina of Recession that is being prognosticated with clearer signs. Thus the prophesy of Dooms Day is keeping both the Lenders and Borrowers in disbelief and suspicion, which is ultimately hurting all the facets of this industry (Uchitelle, 2007). Unless this confidence is restored both on Domestic and Foreign front, it won’t be able to regain its lost glory.
Although the fall in fuel prices should have put a positive impact, but the momentum its surge created by touching the ceiling of $147 has created an avalanche of events that is still having Dominos effect, its like a snow ball that has fallen form a cliff and is sliding and ruining every thing that is coming in its way while gaining size and momentum (Balakrishnan, 2008). This ball of financial meltdown now resembles a behemoth which is striding on its own and making its way, how it would slow down lest stops’ has already cost Trillions of Dollars, yet the solution remains a big question and unsolved in any unforeseeable future. For this industry to get on its feet again, a number of prerequisites are required to be erected and healed first, off course the first being the Banking Industry and second being Confidence
Political: This factor, though stands secondary to economics which is the engine of this industry, still plays a major role. Politics including rules and regulations are not effected by the economy rather it’s the challenge posed by the environment of today’s world those are hindering rather then contributing in its enhancement. The Global War on Terror is the single most incisive factor that is transforming the borders of this world, making them more vulnerable and likewise inaccessible by even those who are true to their intentions.
Thus in the faltered financial system there exists dearth of confidence, and the wary political system breeds distrust. The regions where this war is being fought, or those which are believed to be infested, their citizens have become the center of scrutiny and vigilance, which has not only baulked the potential tourists but in return made them leery too, thus losing them to other regions.
Technology: This has played and is playing a positive role in curtailing the impediments being faced by this industry. Better, cheaper and diverse mode of Transportation has enhanced the mobility, choice and accessibility by people around the world. Its not only the expansion of Heathrow that marks this need magnify, airports across the world are under massive transformational stages to cater to growing needs of travelers.
Inspite of the exorbitant losses on part of Airlines, they have rebounded and shown resilience to the upheavals that fractured them down to their bones. And this empire of technology does not confines to just Air travels, the Mag-Lev trains, Instant access to information making up the most optimized travel plans and attractions has enriched the tourists with wealth of information at their finger tips.
Thus the advancement in technology that is primarily customer oriented (giving them choice to select and reject at their behest) has raised the bars for competition thus making this industry more competitive and efficient
Social: UK stands among those few countries of Europe that has been able to integrate its emigrant population in the most harmonized way. It boasts of being the most culturally diversified island that has been able to assimilate and give various hues and colors a perfect blend, this is the factor that makes it among the most welcoming and sought after destination from races across the world.
The Education Sector, UK Universities which has a fancy share in country’s national income and is the most yearned place for students, no doubt having its roots into centuries old system gives it an esteemed status. Though the flow of students has dipped because of the Political and Economic determinants, still UK has been able to attract the share lost by US due to their restrictive and hyper-selective policies.
In course of time, lifestyle of British has changed immensely. Decades ago, the once sober and to an extant introvert nation now floods out into Europe and other continents, rightly conspicuous on the eves of Soccer matches which are played on foreign soils. Thus its not only the tourists which are highly sought after, the whole nation itself has become more of out goers.
World Political affairs that are quite frequently aired on various channels have instilled in general population a fear factor towards certain parts of world thus making them inaccessible, setting the tourism aside even people reject to take offers for jobs and other contracts from these regions.
With the current financial turmoil in sight, the Tourism Industry across the world has to bear the tough times and if the Gloom and Doom scenario of Global Recession becomes a reality’ then the fate of this Billion Dollar industry is likely to meet the providence of the Lehmans and Lynch. The steps taken by the Government of United Kingdom no doubt are a shot to cushion the economy form the ever-rising tide of Atlantic, is yielding little or no effect. Let us hope for this industry and for hundreds of others carrying livelihood of millions to not only survive but stand against this Global Storm.
Uchitelle, Louis. (2007). Crash Course: Just What’s Driving the Crisis in Emerging Markets?. Available: http://www.nytimes.com/library/financial/index-global-fin-crisis.html. Last accessed 24 Nov 2008.
Glyde, Joanna . (2008). News at IDS – Southern Voices on the Impact of the Financial Crisis. Available: http://www.ids.ac.uk/go/financial-crisis-impact. Last accessed 24 November 2008.
Balakrishnan, Angela. (2008). Financial crisis: action taken by central banks and governments. Available: http://www.guardian.co.uk/business/2008/oct/13/creditcrunch-marketturmoil1. Last accessed 23 Nov 2008.
Foreign & Commonwealth Office. (2008). UK response to the global financial crisis. Available: http://ukinchina.fco.gov.uk/en/working-with-china/economic-policy/global-crisis. Last accessed 23 Nov 2008.
Mason, Rowena. (2008). Financial Crisis: Kaupthing blames collapse on British Government.
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