is government funding good or bad?

The banking sector is arguably the most helped sector in the UK economy, most people blame the recession on the banking sector as they had to many “bad debts”.

The banking sector struggled because people was struggling to pat back debts and mortgage repayments, which dramatically increased the bad debts that the company had and so made them lose money and their profit margins was under threat. In 2008 and the business lost around £10 billion.

The government decided to help HBOS by buying up a lot of their shares to fund the business and to replace the bad debts they had, HBOS accepted from the government £11.5 billion this was just to keep the bank running and to pay of the bad debts.

The government also made peoples savings safe inside the bank, this kept the money inside the bank because people wasn’t taking their money out and leaving the business without bad cash flow problems.

Another sector the government has helped keep alive is the car industry, even though this has been done indirectly, the government has helped it a lot. They have helped the car industry by the scrappage scheme, this is where a car which is 10 or more years old is traded in and you can buy a brand new car with £2000 off the original price.

This has caused a lot of people trading in their old cars for new cars and so have been helping the car industry by getting rid of their stock pile of vehicles and turning it into cash for the business.

The reason why the government has helped the car industry is because they are struggling and so are cutting down their capacity utilisation, this could mean either more people losing hours, or that people are being laid off, this could cost the government more in the long run as more people are claiming benefits, and people are earning less which means that there is less tax being paid.

Another sector that has been helped out by the government is the service sector , this has been helped by the government dropping VAT rates from 17.4% to 15% this encourage people to spend more as things would be cheaper, and so demand goes up as a consequence of this, this means that the companies earn higher profits and sell more goods and so they can afford to keep running and not go out of business.

Also this could increase the profit margins of the business this is because they could not pass the savings onto the customer and so they could keep the difference increasing their profit margins.

One reason why the all this was a good idea for the government to do is because it saves people going out of work and could create more work for other people. This benefits everyone in the country as more people are in work and so are not claiming of the government and more people are paying taxes which means altogether the government could be better off.

A reason why all this could be a bad idea is that can the government actually afford all these investments? The government are already very high in debt roughly around £175bn so can we keep investing in these companies that would go bankrupt if we didn’t help them.

I think altogether it is a good idea because it helps us get out of the recession faster it creates more jobs and it helps everything along in the long run and so for me it is the best option.

Who has benefited from the recession???

The recession has cause problems for most company's with people like Woolworths going out of business, and other big companies losing a lot of money, but for some companies is has been the most profitable time of the business cycle for them.

I am going to speak about a business that has done very well in the recession, and a business that the recession has been a threat to and a hard time.

Primark, this business has had an increase of profits of 8% to £252 million this is pretty good in a boom, but in a recession this is amazing, but how have they achieved these increased profits?

Primark is a cheap retailer, because they are cheap and people have less disposable income, more people look for cheapness and less at quality, this is basically Primark.

They have achieved sales of £1.1 billion, this is because they are cheap and people are not bothered about different brands on clothes, but there profit margins are under pressure, this is because of the exchange rate from the sterling to the dollar, because much of Primarks clothing is sourced in dollars, this has means they get less clothing for their money, because the pound is weaker.

Even though Primark shows its low prices and tries to get the lowest costs on their products possible, but what has been sacrificed to achieve these low, low costs.

One thing is the quality of the product, as much of Primarks clothing could be seen as "tacky" and "cheap", this could turn out bad for the company very soon as we are coming out of the recession, this means for the business that people might go towards other better quality products because of their increase in disposable income and will probably stay away from stores like Primark.

Another thing could be there ethical views. In 2005 Ethical Consumer Magazine as the least ethical of the main clothing stalls in the UK. This is because there was allegations that children in India was actually making there clothes, this would of dropped there sales in clothes because people did not like Primark's ethical rules, this could stop repeat business and lose a lot of their profit.

A business that hasn't done well in the recession is Land rover, they have only made £55 million in the last 3 months of 2009 but the quarter before they made a loss of £60 million, this is due to the recession and people not being able to afford the big cars expensive cars they sell.

To cut costs they had cut there week down to 4 days so they was only producing cars from Monday to Thursday, also they will cut some night shifts so they are not wasting money by paying workers to produce a minimum amount of work.