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Recession Watch : Unemployment

In similar fashion to the UK base rate cycle, the ever increasing rate of unemployment in the UK will continue to give negative vibes even after the UK economy has turned. We saw a significant lag between the economic downturn we are currently enduring and an increase in unemployment and it will be the same when the economy starts to improve - with unemployment is set to rise for some time to come.

Many people are also sceptical that a number of businesses in the UK are using the recession as an "excuse" to significantly reduce costs making businesses leaner and meaner for the eventual upturn. This is probably an unfair accusation to hurl at the UK business sector as a whole although there is no doubt that some operations will still look to cut costs even when the economy shows definitive signs of a turnaround.

As a consequence of rising unemployment it will be some time before the UK government is able to increase tax income streams in order to pay off the national debt. However, the turnaround in business tax income will be far sharper than that seen from the workforce. Worryingly, this does not change the fact that over the next four or five years we will see significant increases in both personal and business taxation to try and pay down UK debt which could potentially top £3 trillion.

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