Working within the business cycle
A Building Societies Association case study

Page 1: Introduction

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Building societies are an integral part of UK financial services, offering mortgages and savings as their main products. The name 'building society' stems back to the late 1700s when the first society was formed. Small groups of people pooled their savings to buy land and build houses. Today building societies are the greatest direct competitors to banks for personal customers. The Building...
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Page 2: The business cycle

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Economic activity fluctuates over time and follows a general but irregular pattern where periods of strong economic growth are followed by weaker growth or even periods where economic growth falls. This pattern is known as the business cycle and it affects all economies over time. Within the UK the level of economic activity changes depending on factors such as levels of business investment...
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Page 3: Boom

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During a boom, there are high levels of economic growth. A boom has a number of characteristics. Employment levels are high and wages may rise as businesses try to attract employees. Consumer confidence is strong and consumers have a positive outlook on the state of the economy. This then causes an increase in demand as people spend more on goods and services. Businesses tend to increase...
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Page 4: Downturn and recession

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A downturn reflects a slowdown in economic activity as rates of growth fall. This might be triggered by the government acting to try to control inflation or in the case of the latest recession, by disturbance to the world financial markets. As the downturn takes hold it may lead to a recession. Recession can technically be defined as two successive quarters of negative growth. Fewer goods and...
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Page 5: Recovery

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A recovery follows a recession. Recovery is a time when the economy becomes stronger and there is an upturn in the business cycle. More jobs are created and more goods and services are supplied by businesses. Unemployment begins to fall and, very cautiously, consumer spending starts to increase. Recovery can occur for a number of reasons. In order to stimulate economic activity the government...
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Page 6: Conclusion

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According to the Office for National Statistics, the UK came out of recession in the fourth quarter of 2009. However, recovery is slow and could be bumpy. The Bank of England has indicated that it could be 2011 before the UK economy will be back at the point it was before the recession started. Some commentators are also worried that recovery may take place too quickly as this could cause...
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