Tharshan D2 What is a Recession? In my opinion, a recession is a business cycle contraction, a general slowdown in economic activity over a period of time.

During recessions, many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes, business profits and inflation all fall during recessions; while bankruptcies and the unemployment rate rise. Recessions are generally believed to be caused by a widespread drop in spending. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation. UK Recession I believe that, in 2008 when the United Kingdom suddenly entered a recession brought about by the global financial crisis. Beginning with the collapse of Northern Rock, which was taken into public ownership in February 2008, other banks had to be partly nationalised. The Royal Bank of Scotland Group, which at its peak was the second largest bank in the UK and the fifth largest in the world by market capitalisation, was effectively nationalised on 13 October 2008. This recession has seen unemployment rise substantially, from just over 1,600,000 in January 2008 to nearly 2,500,000 in October 2009 In my opinion, The UK economy had been one of the strongest EU economies in terms of inflation, interest rates and unemployment, all of which remained relatively low until the 2008-09 recessions. Unemployment has since reached a peak of just under 2.5 million (7.8%), the highest level since early 1990s although this rate remains far lower than many other European nations. Impacts Large Businesses As sales revenues and profits decline, the manufacturer will cut back on hiring new employees or freeze hiring staff entirely. In an effort to cut costs and improve the bottom line, the manufacturer may stop buying new equipment, Limit research and development and stop new product rollouts. Expenditures for marketing and advertising may also be reduced. These cost-cutting efforts will

Tharshan impact other businesses, both big and small, which provide the goods and services used by the big manufacturer. Stocks and Dividends The manufacturer's stock price may decline. Dividends also slump, or even disappear entirely. Shareholders may become upset. They and the board of directors may call for a new CEO or an entirely new senior management team. The manufacturer's advertising agency may be dumped and a new agency hired. The internal advertising and marketing departments may also face a personnel shakeup. When the manufacturer's stock falls and the dividends decline or stop, institutional investors who hold that stock may sell and reinvest the proceeds into better-performing stocks. This will further depress the company's stock price. Tesco have been affected by the recession in many ways, their stocks and dividends have dropped with some shareholders being discontinued and not receiving their shares, this happening will anger the shareholders and this may lead to protests, shareholders leaving etc. Tescos stock will then fall and will cause some dividends to stop and shareholders may sell and reinvest. Credit and Bankruptcy The customers of the company that owe it money may pay slowly, late, partially or not at all. Then, with reduced revenues, the affected company will pay its own bills more slowly, late, or in smaller increments than the original credit agreement required. Late or delinquent payments will reduce the valuation of the corporation's debt, bonds and ability to obtain financing. The company's ability to service its debt may also be impaired, eventuating in defaults on bonds and other debt, further damaging the firm's credit rating and preventing further borrowing. Debt will have to be restructured and/or refinanced, meaning new terms will have to be agreed upon by creditors. If the company's debts cannot be serviced and cannot be repaid as agreed upon in the lending contract, then bankruptcy may ensue. The company will then be protected from its creditors as it undergoes reorganization, or it may go out of business completely Tesco have to pay sponsors and pay companies for products, so as the recession kicks in less customers are going to be spending as usual so profits will slump down, causing Tesco losing out on money

Tharshan and then paying off debtors slowly in sums or at a later date, if this happens that Tesco cannot pay one of their debtors off, this will have a catastrophic affect on Tesco, other companies will not want to deal with Tesco or have any sort of connection. Employee Lay-offs and Benefit Reductions The business may cut employees, and more work will have to be done by fewer people. Productivity per employee may increase, but morale may suffer as hours become longer, work becomes harder, wage increases are stopped and fear of further layoffs persists. As the recession increases in severity and length, management and labour may meet and agree to mutual concessions, both to save the company and to save jobs. The concessions may include wage reductions and reduced benefits. If the company is a manufacturer, it may be forced to close plants and discontinue poorly performing brands. Because of the recession Tesco have to let employees go, making them redundant, the reason why Tesco have to let go of employees is because so Tesco can spend less money on employees and by having less staff doing more jobs would save more money and gain more production. This is a risk for Tesco doing this because putting more productivity on one employee may decrease his morale and he may even quit their job which will lead to more trouble for Tesco. As Tesco decrease some employees wages, those staff may not put the effort in to their job and may not give Tesco the image they want to give out. If the recession for Tesco gets worse they would have to close down other Tesco stores and this would lead to less profit and then losing sales and customers. Cuts to Quality of Goods and Services Secondary aspects of the goods and services produced by the recession-impacted manufacturer may also suffer. In an attempt to further cut costs to improve its bottom line, the company may compromise the quality, and thus the desirability, of its products. This may manifest itself in a variety of ways and is a common reaction of many big businesses in a steep recession. For example, Airlines may lower maintenance standards. They may install more seats per plane, further cramping the already squeezed-in passenger. Routes to marginally profitable or moneylosing destinations may be cut, inconveniencing customers and damaging the economies of the cancelled destinations.

Tharshan Giant food purveyors may offer fewer products, for the same price, in the same size package in which the larger amount was previously sold. Quality may also be reduced. Coffee, for example, may be cut with lesser-quality beans, compromising flavour and driving away cost-conscious consumers with little brand loyalty who have noticed the change. As the recession kicks in at Tesco, Tesco try to save as much money as they can and this can lead to cuts of quality of their goods and services. Cuts to their goods can be such as Tesco for example not buying bulks of Kelloggs cereal, but instead of making and selling more Tesco Value brand Cereal instead, so less money is put in, more luxuries will be taken away and more Tesco value products will come in to stores. Food would be less quality and not farm grow etc. Customer who spots the less quality in their products may be angered and may switch to Tescos rivals. Reduced Consumer Access As firms are impacted by the recession spend less money on advertising and marketing, big advertising agencies which make millions of dollars per year will feel the squeeze. In turn, the decline in advertising expenditures will whittle away at the bottom lines of giant media companies in every division, be it print, broadcast or online. Tesco will feel to save money they would have spend less money on advertising, on newspapers, magazines, TV etc. Cutting advertising budgets will affect Tesco as a whole, losing customers etc. Also cutting out on marketing so if Tesco get affected bad by the recession, they will lose out on marketing new great products and more quality products would be lost. Cutting budgeting for these two departments would have a catastrophic affect to the customer fan base. A Recession's Impact on Small Businesses The impact of a recession on small businesses is similar to large businesses. Without major cash reserves and large capital assets as collateral, however, and with more difficulty securing additional financing in trying economic times, smaller businesses may have a harder time surviving a recession. Bankruptcies among smaller businesses may therefore occur at a higher rate than among larger firms The bankruptcy or dissolution of a small business that serves a community - a franchised convenience store, for example - can

Tharshan create hardships not only for the small business owners, but for residents of the neighbourhood. In the wake of such bankruptcies or dissolutions, the entrepreneurial spirit which inspired someone to go into such a business may take a hit, discouraging, at least for a while, any risky business ventures. Too many bankruptcies may also discourage banks, venture capitalists and other lenders from making loans for start-ups until the economy turns around.