UK Economic System and Business Impact

This assignment examines the evolving UK economic system over the past seven years. It explores how changes in government priorities, interest rates, and taxation have influenced businesses, particularly highlighting the shift towards financial sector support rather than manufacturing. The analysis also considers the role of the Bank of England in providing financial support for economic development and anticipates future business expectations.

Business Economics
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MICRO AND MACRO ECONOMIC THEORY AND ITS IMPACT...........................................3
CHANGES IN UK ECONOMY AND ITS IMPACT.....................................................................4
EXPECTATIONS FROM CENTRAL BANK OF ENGLAND.....................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
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INTRODUCTION
In current market scenario the business economic aspects are considered as one of
critical aspect that can influence the overall development opportunities. In addition to this, there
are number of issues and challenges that are associated with the economic factors so it is
essential for businesses to consider it as significant element. It plays key role in strategies design,
growth, expansion and management (Baye, 2010). Current study focuses on macro and micro
economic theory and its impact on the UK economic system. It will also provide information
about the changes in economic aspects that have taken placed in last seven years. Along with
this, it will also consider the businesses expectations from Central Bank of England to overcome
issues.
MICRO AND MACRO ECONOMIC THEORY AND ITS IMPACT
Macro economic is considered as branch of economic analysis that provides a
learning about the behavioural aspects in context to diverse economic units. It has been identified
that the Theory of prices is a macro economic theory that covers number of factors in regard to
economy such as inflation, deflation and reflation. Any kind of changes in theory of prices may
influence the overall development of UK economic system (Ceccherini-Nelli and Priebe, 2007).
This is because the changes in inflation rates and deflation rates impacts the perception of people
in regard to prices. For example, during advancement in inflation rates the group prefer goods
and services at low cost in order to manage income level (Galliers and Leidner, 2014). It also
forces businesses to decrease the cost of products and services which affects taxation and other
economic development in negative manner.
On the other side, micro economics is referred as economic analysis that provides
learning about economic behaviour of individual unit. It allows organisations to study any
specific economic factor and then analyse it with other units. It is significant to consider laws
and principles of micro economics because it influences overall economic development. In this
respect, the theory of product pricing affects the working of entities and economic elements. It
covers theory of consumer behaviour and theory of production and cost (Lee, 2014). In addition
to this, the changes in consumer behaviour affects overall development in diverse manner. For
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example, the customers are not attracted towards retail sector and they are not spending more on
purchase of retail products. It means the businesses are facing key issue in regard to failure
aspects, it also influences the overall development of UK economic system (Nordhaus, 2010).
This is because the failure of firms affects income level, taxation, etc. Cost of production is also
one of critical factor that impacts the overall development of economic system. For instance, the
businesses are focusing on low cost production processes, it increases the profit margin ratio of
organisations. Improvement in profit margin ratio of companies is beneficial for advancement in
economic factors.
It has been identified that there are number of various key issues has been occurred
due to rapid changes in micro and macro economic theories because it focuses diverse
development activities (UK economic forecast. 2016). Micro and macro economic factors must
be considered in appropriate manner so that goals can business can have impressive level of
success. Production units working can also be influenced by the changes in micro and macro
elements. Organisations must focus on micro and macro theories because it provides various
opportunities in the market. Better profit can be attained that will influence economic
development (Bold and Vega, 2013).
CHANGES IN UK ECONOMY AND ITS IMPACT
It has been identified that in recent years the economic aspects in UK has changed in
diverse manner. It has also impacted the overall working of business entities, so it is essential for
management to consider changes as critical aspects. In 21st century the number of changes has
referred in context to economic structure. These kinds of transformation in the structure has
influence the operational activities of business organisations. As per the structured study, the
organisations are focusing on norms and regulations in regard to economy which are set out by
government (Cardoza and Fornés, 2011). It has been noticed that in the starting of 18th century
the pricing and market structure was considered as one of critical aspect in UK economy. UK
was also considered as one of the most potential and largest economy in the international market.
In recent years the free flow of products and services has promoted effectively and it has
influenced the work culture of businesses (Dowling, 2009).
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Moreover, in last seven years the government has focused on improvement of
economic system through advancement in rate of interest and taxes. These kinds of changes in
UK economy has forced organisations to ensure about activities that saves their taxes and
provide better profit (Hoover, 2009). However, the increase in rate of interest and taxes has
influenced overall UK economy in positive manner. It has boosted the financial strength of UK
government. It has been witnessed that the key objective behind increasing tax and interest rates
was to spend more amount of money in enhancement of public services in the country.
Other than this, economic structure has also changed by increased focus on financial
sector. It means the number of economic policies has been designed in order to provide support
to financial institutions rather than manufacturing sector. It has been identified that these kinds of
changes in UK economy has influenced overall development in positive manner (Nordhaus,
2010). With a free flow of products and services the business firms has analysed number of
opportunities in the market that provides better growth and development. In addition to this, the
advancement in tax rates and rate of interest has decreased the profit margin ratio of entities but
provided a strength to UK economic system. It has also been noticed that the UK economic
system has also faced the recession conditions that has influenced overall working of entities
(Dale, 2010). It clearly reflects that the rapid changes in economic aspects affects the overall
development. Moreover, in last seven years the UK government has established number of
policies to strengthen the economic conditions. It has also helped in overcome issues like
recession, etc.
EXPECTATIONS FROM CENTRAL BANK OF ENGLAND
As per the structured study, there are number of expectations that businesses demand
from Central Bank of England. It has been witnessed that the organisations expect that Central
bank will provide innovative ways to improve cash management so that entities can have better
opportunities in the market. It is also one of key expectation that the Repo Rate must be low
because the decrease in Repo Rate influences the working of businesses in diverse manner
(Nordhaus, 2010). For example, the company is looking forward to expand business and they
require financial support from commercial banks. In this situation if Repo Rate is high then
organisation have to pay high interest on bank loans. It may affect the overall growth
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opportunities of business in negative manner. It means the Central Bank of England needs to cut
down the Repo Rate.
Moreover, the entities also expect that the Central Bank to decrease the tax rates
because it also decreases the profit margin ratio of firm. Decrease in tax rate may also affect the
income level of government in negative manner. But the reduction in Repo Rate and interest rate
is beneficial for government as well as businesses (Dowling, 2009). This is because the
modifications in rate of interest will motivate businesses to invest more in the nation and lead
economic system to further developments. These kinds of changes by Central Bank of England
also improves the income level of people and enhance economic aspects.
Other than this, the financial institutions also expects that the new policies will be
established to improve opportunities. Companies also demand that the Central Bank will focus
on equity market as it provides a sustainable opportunities for the growth. Innovative investment
plans need to be designed so that the businesses can have better developments (Cardoza and
Fornés, 2011). In order to ensure about the risk, lowering interest rates is not very help in
stimulation economic growth. It means the Central Bank of England requires effective
development of policies and strategies that ensure about the risk. It is also one of expectation that
the Central Bank of England will provide various financial support to the organisations in order
to manage commercial lending, checking, insurance and many more.
CONCLUSION
As per the above study, it can be concluded that the business economic plays a key
role in overall development of UK economy. It has been identified that the issues and challenges
regarding economic aspects need to be consider in appropriate manner because it impacts
businesses in significant way. Micro and Macro economic theory also influences the growth
opportunities in diverse manner. In the support of this, it can also be concluded that in the past
seven years the UK economic system has changed in diverse manner. Government has started
focused on improvement of economic aspects that helps financial sector rather than
manufacturing industry. Interest rate and taxes has also increased in recent years that has
influenced overall development. Moreover, the businesses expect that the Central Bank of
England provides a financial support to economic development.
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REFERENCES
Books and Journals
Baye, M., 2010. Managerial economics & business strategy. Boston: Irwin/McGraw-Hill.
Bold, F.X. and Vega, C., 2003. Micro E ects of Macro Announcements: Real-Time Priceff
Discovery in Foreign Exchange. American Economic Review. 93. pp. 38–62.
Cardoza, G. and Fornés, G., 2011. International co-operation of Ibero-American countries in
business administration and economics research: Presence in high-impact journals.
European Business Review. 23(1). pp.7-22.
Ceccherini-Nelli, A. and Priebe, S., 2007. Economic factors – an analysis of historical trends.
International Journal of Social Economics. 34(11). pp.788 – 810
Dowling, E., 2009. Schaum's Outline of Mathematical Methods for Business and Economics.
McGraw Hill Professional.
Galliers, R. D. and Leidner, D. E. (Eds.). 2014. Strategic information management: challenges
and strategies in managing information systems. Routledge.
Hoover, S., 2009. BERA: Business and Economics Research Advisor. Reference Reviews. 23(5).
pp.27 – 28.
Lee, N., 2014. What holds back high-growth firms? Evidence from UK SMEs.Small Business
Economics.43(1). pp.183-195.
Nordhaus, W. D., 2010. Economic aspects of global warming in a post-Copenhagen
environment. Proceedings of the National Academy of Sciences. 107(26). Pp.11721-11726.
Online
Dale, V., 2010. What is Economics and Business Economics. [Online]. Available through: <
http://www.ru.nl/economics/@776702/pagina/ >. [Accessed on 5 April, 2016].
UK economic forecast. 2016 [Online]. Available through: Available through:
<http://www.focus-economics.com/countries/united-kingdom>. [Accessed on 5 April,
2016].
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