Analysis Of The Article The On Liquidation Of Sahaviriya...

The article is centred around the liquidation of Sahaviriya Steel Industries’ UK subsidiary, which may threaten a total of 2200 jobs. With the government refusing to offer financial support to the loss-making steel plant, it is important to find out whether or not this case is part of a larger macroeconomic issue threatening the United Kingdom and what the best course of action to take is. The plant’s shutdown is characterized by â€Å"the soaring price of the pound against other currencies, which made its exports expensive† as well as low business confidence, generated from UK’s failure to compete with China’s â€Å"low-cost imports†. Thus, UK’s high exchange rate and low business confidence will result in a decrease in exports and investment, leading to falling aggregate demand - UK’s total demand for its output at a range of price levels in a specific period of time from all consumers, domestic or foreign. From the diagram above, we see a leftward shift in aggregate demand from AD to AD1, leading to a fall in the overall price level from P0 to P1 and a fall in national output from Y0 to Y1. To produce at this lower level of output, fewer factors of production including labour are needed, leading to an increase in the level of unemployment in UK. This article’s situation is one proof of the many job slashes that are to come. The next important step is to determine whether this unemployment is cyclical and due to the periodic nature of the business cycle or structural, meaning