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UK economy to fight deflation until 2012

At a time when the UK government and the Bank of England are trying to prop up a seriously weak UK economy many analysts are now focusing on the threat of deflation which could plunge the UK economy into a depression. Deflation is hitting the headlines more and more and while many people will never have experienced this in their lifetime this is certainly a period in the UK's economic development which people will not forget!

As we have covered on a number of occasions, deflation effectively means a reduction in the cost of goods and services across the UK. Falling income for businesses will lead to cost reductions which will lead to redundancies and a severe reduction in the spending power of the UK consumer. Less spending power means less demand which means falling prices and we get ourselves into a vicious circle and the downward spiral which could lead to a depression in the UK.

The UK authorities have ignored the threat of deflation for some time but even the most upbeat of MPs and economists are starting to take this threat seriously. It is okay trying to mask over the threat of deflation, while tackling the situation behind the scenes, but this does not appear to be the case in UK with a severe lack of funding set to hit a number of fiscal programs in the future.

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