Trouble in the UK Economy 2010
In 2010 there is much less of a chance for the UK economy to recover from negative growth. There may be some kind of economic recovery though. Here are some of the problems that are faced by the UK economy in the year 2010:
Recession
At an average, the basic trend rate of around 2.5% is expected if UK’s economy expands. The 0% growth will also lead to more unemployment. Since the GDP rate is continuously falling from the last 6 consecutive quarters, it can be easily said that the output gap is noteworthy.
This means that firms are still unwilling to hire and thus output is considerably below potential. In this way the recession will continue to a permanent loss of output and thus minimize the productive capacity of UK.
Unemployment
One of the main problem that the UK economy is facing is unemployment because it creates the most social or personal misery. However, the inflation target of the Bank of England is 2%.
There was a relatively quick fall in unemployment 
after the 1992 recession. But this time the fall is likely to be slower to that which was experienced in 1980s where unemployment remained near to 3 million for many years. This time it is the young workers who have been hit hard by unemployment.
Deficit in Budget Balance
There is a continuous rise in the budget deficit and it is towards 100% of GDP. It is thus reducing the deficit too early and could push the economy back towards recession. Let us say, if the plans for spending cuts next year are implemented by Conservatives then the effect of reduced economic activity could also push a fragile economy back into recession.
Extended Borrowing Problem
Because of the necessity of economic growth it becomes difficult to tackle the budget deficit. If the problem of budget deficit is not solved then it will continue to grow and create problems in future. Also the quick increase in debt towards 100% of GDP may have an effect on the UK’s credit rating and thus it make it more costly to borrow and pay the payment of debt interest.
Changes in Demographic Condition
In future, the government public finances will become more difficult because of the unfunded pension deficit and an ageing population.
