Contemporary Business Environment

This report analyses the impact of COVID-19 lockdown on the UK economy, major economic responses of the UK government and Bank of England, and the likely impacts of Brexit on the UK economy. It also provides recommendations for improvement and enhancement of the responses and economy.

Contemporary
Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Explain the main impacts of lockdown on the UK's economy...............................................3
Major Economic Responses of the UK’s Government and their Implications......................4
Major Responses of the Bank of England and Their Implications to the UK’s Economy.....6
What are the likely impacts of Brexit on the UK's economy.................................................7
CONCLUSION................................................................................................................................9
RECOMMENDATIONS.................................................................................................................9
REFERENCES..............................................................................................................................10
1

Executive Summary
The purpose of the report is to analyse about the impact that has been made by the pandemic on
the economy of UK. Along with that the report will discuss the responses of the government of
UK towards the pandemic and its implications as well. The report will also discuss the responses
of Bank of England towards the economy and its implications along with the impact of Brexit on
the economy of UK.
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INTRODUCTION
The pandemic of COVID 19 has severely impacted the economy of the countries. Due to
the lockdown restrictions, the companies have to stop their business and the supply chain
management of the companies also get disturbed. People were panicking and government has to
made some schemes in response to the pandemic. The implications of those schemes as well as
the response of general people were concerning factors. In context to Bank of England, it is the
world’s eighth oldest banks also known as the central bank of UK (Turulja and Bajgoric., 2019).
The bank was established in the year 1694 in order to act as English Government bank. The
banks is still the major Banker of government of UK. In this report, the impact of COVID 19 on
the economy of UK is provided along with major economic responses of government of UK
towards the pandemic and the economy of the country. The report also covers the responses of
Bank Of England and its implications on the economy of the country along with the implications
of Brexit on the economy. At the end of the report, some recommendations are provided which
will help the in improvement and enhancement of the responses as well as the economy of the
country.
MAIN BODY
Explain the main impacts of lockdown on the UK's economy
The government of UK declared the lockdown in March, 2020 so that the impact which
the pandemic have made on the people can be reduced to some extent. The typical lockdown
begin from the month of March, 2020 in which the economic activity which used to be
undertaken in the country was also stopped (Konovalova and et. al., 2018). The impact which
the COVID-19 pandemic has made on the people and also to the economy is huge because of
which the GDP of country declined by 9.8% in 2020. This was the major drop which was
recorded after the 1948 and this was being shown in the month of April where the GDP of the
country was declined by 25% which was just after one month of lockdown (Coronavirus:
Economic Impact, 2021). With the cases in the country was also increased where much of the
economic activity was stopped to happen. The lockdown which was for the longer duration and
begin in the month of May, 2020 in which the economic activity was reduced by 30%.
According to Office of National Statistics, in the week of April in which the business around
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23% were closed or were stopped working because of the closure of business and the impact
which has been created by the COVID-19 pandemic (COVID-19 in the United Kingdom, 2021).
Around 60% of the revenue was stopped happening in the economy of UK but after the recovery
from COVID-19 pandemic. There was increase in the COVID-19 cases and because of which
further lockdown was made in which the economic activity which has to be conducted started
falling again(Berlingieri and D’Cruz, 2021).
Economic outlook for the rest of 2021-
The economy has started making recovery in the year 2021 but it was slowed down in the
month of May again because of the coming of Delta variant which became the most persistent
factor because of the disruption of global supply chain which has led to shortage of supply chain.
The Inflation in the year 2021 was increased which was recorded the most highest rate of
Inflation (Hanaysha., 2018). The per capita income of people have been reduced because of the
job loss and the unemployment rise. The purchasing power of people have been reduced because
of the less income which they are having and no jobs. The business has been collapsed because
of the pandemic has they are also not having nay earning so that they can do the trading with
their suppliers. Many businesses have been closed due to this pandemic which has created
shortage in the supply of products in the market.
Major Economic Responses of the UK’s Government and their Implications
 Bounce Bank Loans: the major sector which the company is targeting with the help of this
scheme is business and enterprise, central finance and treasury. According to the scheme,
the businesses who are in need of smaller loans specially after pandemic or due to the
adverse impact of pandemic can take the loan in between the amount of £2,000 and £50,000.
according the the rules of the scheme the loan must be repaid within 6 years. For the first 12
months the re-payer does not have to pay anything and the interest amount of their loan will
be paid by government (Santoro and et. al., 2019). The government will provide bounce
back loan scheme to businesses in order to provide them benefit of pay as you grow scheme
so that they ca pay back the amount as they have growth and as their cash flows again come
in to track. The scheme is closed down on 31st March 2021 for new applicants. The aim of
the scheme is to provide support to the small and medium business in specially after the
break down of COVID 19. this is a 100% government backed guarantee loans as if in case
the re-payer business fails to pay back the loan amount or declare themselves bankrupt then
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the bank can take up the loan amount from the government. In order to avail the benefit of
the scheme it is important for the businesses to have turnover of £50,000 or more. It will
assure the government that the business will be able to repay the loan amount with interest.
 Eat Out Help Out Scheme: it was a scheme sponsored by the government of UK which
states that on the Monday and Wednesdays, the restaurant which are providing food to their
customers 50% of the bill will be paid by the government. The aim of the government is to
provide support to food businesses who have severely faced down turn as a major effect of
the pandemic. It is important for the government to encourage people to start eating again in
these restaurants as the government is going to pay half of the bill. The limit up to which the
government will pay will be $10 per head (Zhou and et. al., 2021). It will encourage people
as well as the businesses to come back to their normal lives and tracks. It is important for the
government to provide support to food sectors and as per the scheme the total claim made
during the time period of 3 to 31st August was £849 million from across 78116 outlets and
after the rejection of certain claims the government paid £840 million to the businesses. The
average claim made per cover was £5.24. at the time when the government announced the
scheme the treasury assumption was £500 but the actual claim exceed those limits and the
main aim of the government was also fulfilled as the customer demand was boosted in
august due to the eat out help out scheme.however after the time period of the scheme, their
was a decrease in the demand again at the time of mid September due to the restrictions
which was levied again.
 Job Retention Scheme: It is one of the most common scheme used by the countries in order
to retain the employment of employees. In total the scheme has supported across 50 million
jobs. With the help of reduction in labour cost the government the surge in unemployment
and as also supported the income of employees as well as the reduced their working time.
The government has supported the financial hardships of employees as well as the
employers. The economic recovery was one of the major aim of the government behind the
scheme as businesses have faced severe downturn due to the pandemic and are struggling for
growth and survival (Ying and et. al., 2018). One of the crucial aspect ob retention scheme is
that the employee will be able to retain their contract with the employees even if the work is
suspended. It is important for the government to look after the jobs of employees as well as
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the growth of employers and it is an essential responsibility to make sure that bot the
responsibilities is fulfilled with the help of schemes.
 Kickstart Scheme: The scheme is to provide six months of employment to the candidates
aged between 16 to 24 who are currently claiming Universal credit and are at risk of long
term employment. it is important for the government to make sure that their is less number
of unemployment people with capabilities in the economy or in the country. The scheme
helps young generation in enrolling in a six months scheme where they work in a office
where they can showcase their talent and abilities and the employer will make sure that they
are learning the workings and if they like the performance of certain employees then they
will be able to retain those employees for a long term employment (Wikhamn and et. al.,
2018). Up until six months the employment salary provided to the employees will be
reimbursed by the government which is beneficial for both employer and employee. The
kick start scheme has actually attracted a lo of employers and has also helped tremendously
the youth of the country in getting a long term employment on the basis of their skills and
capabilities. The employers were able to get effective assets in the form of human resource
which can help them in their growth. It has helps the government in dealing with the
problem of increasing unemployment and has also helped the government in making sure
that the youth of the country is on the right track ad are not wasting their skills and
capabilities.
Major Responses of the Bank of England and Their Implications to the UK’s Economy
Reduced Interest Rate: Bank rate is considered to the the official UK interest rate in which the
Bank of England made a cut of 0.1% in order to reduce the interest rates of the amounts specially
after the pandemic and its adverse impact on the workings and profitability of the companies.
With effect from 19th March 2020 , the interest rates were lower down in order to provide
cheaper loans to businesses and households who are struggling to survive in the market. Funding
are being provided to the banks which will help them in lending more money and will make sure
that the money is reaching to the customers and businesses at cheaper rates (Chiguvi, Madondo
and Tadu., 2019). The banks are offering additional lending to specially small and medium
enterprises in order to make sure that they are having enough liquidity which can help them in
keeping there workings going on. With the help of this scheme the government is helping out
large companies by providing them cash and corporate loans at cheaper rates. It is important for
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the Bank of England to provide support to industries in order to have stability in the economy as
well as in the market.
Sustenance of Government Bonds: after the pandemic and the instability in the economy the
condition of government bonds deteriorated. In response to the condition, the bank of England’s
Monetary Policy Committee unanimously voted to extend the asset purchase facility. Through
the scheme the Bank Of England holds corporate and government bank bonds worth 200 billion
which was taken to the total off 645 billion . The initiative was funded by printing more money
and the extra money was used to buy UK government bonds (Wójcik, 2020). It is a debt issued
by the government of UK . The governor of Bank of England had to see permission of chancellor
in order to extend asset purchase facility. The funding of the purchase of Government bonds was
done with the help of extra money printed which helped the government as the bank in saving
the economy of UK from falling.
What are the likely impacts of Brexit on the UK's economy
Brexit is the withdraw of UK from the European Union which was made in the year 2016 which
has made the changes in the relationship of UK with the European Union which has made the
direct impact on the trading between the countries.
Immediate impact of Brexit on UK economy
The impact of Brexit on the economy of UK is huge and the impact which will be made by this
separation is going to make an impact for the longer period of time and this is because of the
trading which has been made it impossible to conduct the activities. There are different trade
barriers because of which the businesses and the authorities of UK cannot make any changes in it
but have to suffer towards the losses which they are going to tackle(Domanski, 2019). The
productivity in businesses can have larger effects on the economic consequences after making a
leave from European Union. But the Brexit have made the opening of changing the migration
policies, the regulations and trade arrangements with the other non European Union countries.
Government have to make the analysis for this thing in which it becomes very important for the
authorities to make the assumption about the future changes. The Brexit have made an impact on
employment opportunities for the younger youth of the country UK because of which the people
in UK are facing the difficult times to get the employment in UK and those are tackling with the
difficult times who are good in skills and knowledge.
Future impact of Brexit on UK economy
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There are number of studies which have been made on the longer impact of Brexit on the UK
output. In the future time which the studies have shown is that the Brexit is likely to make a huge
impact on the UK economy and because now UK is not the part of European Union so the
country is likely to make growth in the coming years which is estimated to be around
2030(Tabachnikova and Vinokurova, 2019). According to the report which was produced by
Economist for Free Trade the Brexit will be providing the significant growth and boost to the
economy of UK in which the national income would be at least of 4 % (Understanding the
Economic Impact of Brexit, 2021). But it is of no doubt that the Brexit have made an impact on
the trade with different countries because of which it will have to face the restrictions to the UK
businesses. Comparing to the other countries in which the foreign direct investment is high but if
made a comparison with UK then it is low but the impact which Brexit will make on the future
Foreign direct investment will be low.
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CONCLUSION
From the above report it is concluded that in order to provide support to the economy of the
country it is important for the government to take major steps which can help them in making
sure that the SME and other sectors of the industry are again working in order to have growth
and profitability. The central bank of the country also plays a major role in the working of the
economy. They can provide stability in the market as well as in the economy with the help of the
schemes and grants they provide to the businesses. There are several implications as well which
is needed to be faced by the company as well as the government and the central bank responsible
for those schemes. The impact of Brexit on the economy of the country just before the
consequences of pandemic is also provided above.
RECOMMENDATIONS
It is recommended to the government to make sure that they are providing more schemes for
travel and leisure industry so that they can also have some growth. The worst situation which is
faced by the segment of industry is travel industry. With the imposition of lockdown and with
the fear of virus spread people are not at all travelling unless it is urgent (Gaines and
Kasztelnik., 2021). The travel industry requires urgent support from the government so that they
can at least survive in the market. If the government can provide some grants or subsidies to this
sector it will be extremely beneficial and will also help the government from the perspective of
economy.
Another recommendation which can help the government is to make sure that the businesses are
using the grants taken in effective manner and are showing visible results. The government
should promote a healthy working environment also provide support to companies through
which they can manage and make their supply chain management effective again. The
distribution channel as well as the supply chain management of the companies have been
affected majorly and a major focus must be put on these segments so that the workings of the
company effective and efficient (Singh and Gaur., 2018.). It will also help the company in
making their products available to the potential or needy customers of the company. It is
important for the companies to create an effective model which can help them in long run and
will also support them if something like pandemic again occurs.
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REFERENCES
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Wikhamn and et. al., 2018. Innovation in Swedish hotels. International Journal of
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Wójcik, E., 2020. Generational Values and Generational Confrontations: Ethical Challenges in
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Ying and et. al., 2018. Digital enablement of blockchain: Evidence from HNA
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ONLINE
Coronavirus: Economic Impact, 2021 [online] Available
through:<https://commonslibrary.parliament.uk/research-briefings/cbp-8866/
>.
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COVID-19 in the United Kingdom
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through:<https://www.mckinsey.com/industries/public-and-social-sector/our-insights/
covid-19-in-the-united-kingdom-assessing-jobs-at-risk-and-the-impact-on-people-and-
places>.
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