Economic factors include:
Recession: this occurs when profit involved in business become more cautious
- Customers cut back on spending and start to save more
- Manufacturers and sellers cut back on their orders, produce fewer goods and start to cut back In general i.e.
Employ less people
Redundancies
Ripple Effect: is when there is a recession and it starts to ripple in all areas
- High unemployment in all sectors
- Bank and building societies cut back on lending money and then have job losses
- Government cut back, less funding to public sectors i.e. schools, universities and local services
- Less options for school leavers
- Cost of fuel and energy will also rise
Inflation: this occurs when there is a general rise in the prices of goods in the whole country
-causes lack of confidence in spending and creates uncertainty
In the UK, average process are measured by the government measure known as the consumer price index (CPI)
Availability and cost of credit
- The cost of credit borrowing money is the rate of interest. It is expressed as a percentage (%)
- When interest rates fall, this affects a business profits(because it is an additional cost) i.e. if a business is operating close to the breakeven point, this additional cost can be crucial in the downfall of the business
- During a recession there is less availability of business and individuals borrowing money from banks and building societies.
Employment: during a recession there may be:
- High unemployment
- Redundancies
- Cuts in pay per hour for existing employees
- No wage increases for existing employees
- High number of applicant with the essential