Impact of COVID-19 on the UK’s economy

Covid-19 is a disease that has been present for almost two years. It began in China and then steadily expanded over the entire world. Every other nation suffered financially, economically, and medically as a result of this pandemic. Similar issues were experienced by the UK as a result of three waves of COVID 19 between 2020 and 2021. The Bank of England has assisted the UK in launching a number of programmes to help those in need during the fatal COVID 19 virus outbreak. The functions of the market economy and the UK government's place within it will be covered in this study. Additionally, a basic explanation of the UK business environment's operations will be provided.

Contemporary Business Environment
Student ID:
Course:
Name:
1

Table of Contents
Introduction......................................................................................................................................3
Impact of COVID-19 on the UK’s economy...................................................................................4
Major economic response of the UK’s government-.......................................................................5
Major responses of the Bank of England and their implications to the UK’s economy-................9
Impact of Brexit on the UK’s economy-.......................................................................................11
Recommendations-........................................................................................................................12
Conclusion-....................................................................................................................................13
References......................................................................................................................................14
2

Introduction
The disease of covid 19 has been going on for nearly 2 years now. It originated in China and then
spreaded all over the world slowly. This pandemic made every other country suffer financially,
economically and medically. Similarly, UK also encountered some of problems due to 3 waves
of covid 19 between 2020 and 2021.UK with the help of Bank of England has launched some
schemes in order to provide benefits in the difficult times of deadly virus outbreak of covid 19.
In this report, market economy functions and role of UK government within it will be
discussed. Furthermore, operations of business environment in the UK will be briefly explained.
The major economic response of UK government will also be rigorously explained. Brexit’s
impact on UK government will be thoroughly explained along with responses of Bank of
England and their implication to the UK’s economy.
3

Impact of COVID-19 on the UK’s economy
After covid-19, not only UK but the whole world suffered economic instability. Travelling,
Financial marketing and various industries has been suffered from this economic stability.
Various shops, pubs, restaurants, hotels had to face big losses because of pandemic hit.
Following are some sectors which had an impact because of pandemic hit,
 Clothing Industry- Pandemic hit had a negative impact on clothing or retail industry
worldwide because they were forced to close down for several months due to imposition
of lockdown worldwide. This same situation was being delt with in UK. Retail industry
had to experience a major downfall because of covid-19.
 Food Industry- After pandemic hit, the restaurants were running as usual. But after
imposition of lockdown in UK, all restaurants had to shut down their businesses for
months. This made them suffer and encounter huge losses which ultimately resulted in
fall of GDP and economy. On the other hand, Food retailers like Sainsbury, Morrisons
and Tesco had permissions to be open in UK. Despite being open, there was minimum
supplies from suppliers as there were no manufacturing taking place.
 E-Retail Industry- Because of lockdown, there were no supplies in food retail as well as
clothing industry, this made people rely on online shopping. Amazon.com has
encountered huge profits because of this. People preferred buying groceries, clothes and
all the stuff which was important, online. Sales of Amazon took an upward leap.
Amazon attracted its customers by giving various offers which included extra discounts,
one on one free, discount coupon codes for next purchases and many more.
GDP of UK declined by 9.8% in 2020 in this pandemic hit. This was the deadliest drop in UK
economy in last 5 years. After this decline in GDP, UK started to emerge from ashes in 2021.
Early summer of 2021 GDP started to make a strong come back as people were getting back to
their respective works and started to make their valuable contribution towards the economy
again. But, the danger of covid-19 is not eliminated totally. Delta Virus have been evolving
itself and it becoming more dangerous. Tourism sector, which was the most profitable business
of UK faced a downward leap because of deadly virus of covid 19. All countries cancelled
international travelling due to covid 19. This made tourists not able to explore UK, this made
tourism sector encounter huge losses. After loss of 7.6 million jobs, people were out of money
4

which were almost 24% of UK population. Losing jobs made people broke and money to spend
was not enough. Because of this, UK had a major economic fall it has never ever experienced
before. Impact on different sectors was different and highly uneven.
During the time of September, average growth of economy (GDP-2021) 6.8%. This strong
recovery in 2021 was due to people slowly being back to normal life and started to contribute
towards economy growth.
Major economic response of the UK’s government-
Prime Minister Johnson conducted a meeting with an agenda of corona virus outbreak on 2nd
March, 2020. At that time, England only encountered 39 covid cases. After the cases were
doubling every single day, lockdown policy was implemented on 23rd March, 2020. Shops with
non-essential products were forced to close down and shops with all the essential daily needs like
medical shops and grocery shops were allowed to be open, but the time limit was imposed on
them also. GDP fell al the way by 7% in March 2020 which made people starting to lose their
jobs, shop keepers who used to make tons of profits were not even able to pay rents of their
respective shops. Lockdown was imposed again on 5th November 2020 which was implemented
in entire UK including England and other countries as well. After almost a month, lockdown was
lifted in the month of December 2020. Later, third lockdown was imposed in January 2021 after
realising that covid-19 started to make a comeback with evolved Delta Virus.
5

FIG01-Infection Rate of Covid-19
£18 billion budget was presented on March 2020 with the co-ordination of Bank of England
which was later changed into £30 billion after addition of £12 billion more because of corona
virus outbreak and fall of gross domestic product. 50 points reduction was made in rates of
interests in order to give a support to businesses which were closed down. National Health
Service (NHS) was told that it will be supported and £5 billion was immediately provided as
emergency funds. Universal Credit and Working Tax Credit was provided £7 billion in order
to help household of almost 4 million to maximise their income in the difficult times of
pandemic hit. On March 13 bank rate was also lowered from 0.75% to 0.25% and after 10 days
that is on 23rd March it was again reduced to 0.1% which helped many households who were
suffering to earn regular income. 11th March was the day when Bank of England imposed 3
policies to help UK’s businessmen and salaried individuals. For manage the damage done by
pandemic, health care workers were working on frontline to avoid deaths caused by covid-19.
NHS declared its free service whereas other hospitals also provided heavy discounts on their
bills at the time of discharge. PPE kits were provided by government to general public along
with masks and people were made to follow social distancing rules in order to avoid covid-19.
UK government provided help to eliminate the damage done by pandemic hit in their respective
countries. Employment guarantee was provided to the individuals who lost their jobs because of
covid-19. The Self-Employment Income Support Scheme (SEISS) was launched in order to
6

help self employed professionals and ensured their regular income despite encountering huge
losses in this pandemic hit. Schools were remained closed to ensure the safety of students as their
parents were concerned about their health (Ismail et al.,2020). Later, schools got re-opened with
following the protocol of social distancing. Malls and theaters were also closed down and later
they also got re-opened but under the strict rules of social distancing and followed all the safety
measures in order to avoid the dangerous disease of covid-19. The aged population was provided
extra care as they were at the more danger than other younger age population (Walker et al.,
2020). People who were 60 and above were at more risk than people with the age of 40 and
below. Extra care was provided with more medications and after development of vaccine, aged
people were preferred to get vaccinated first before comparatively younger age group population.
After covid-19, the economy started to gain its peak back and GDP was comparatively higher
because of government supporting the businessmen, salaries and self-employed population.
Students were made to attend schools via video conferences. After recovery, the economy got re-
opened and growth took place immediately after that. After re-opening of economy, all the
unemployed population got their jobs. After public finances got affected and shook the entire
economy, government provided support of £340 billion in the year of 2020-2021 (Rad et
al.,2021). Government has been trying to eliminate every damage done by pandemic hit and
introducing policies to improve economy again. Government debt also got increased from
before. Government debt was 84% of GDP and it has gone up to 100% now.
Employment support scheme which only targeted the age group of 16 to 24 years, which
provided each employee the salary as per the estimated work of 25 hours per week (Williams,
2021). Almost 20,000 unemployed people were given a job during this pandemic hit under this
scheme of employment scheme. Leaves taken by employees due to affection of covid-19 will be
carries forward into next 2 years. Employees were provided Statutory Sick Pay (SSP) which
was provided in case of employee gets sick because of covid-19. Healthcare workers were
provided free of cost health insurance because they were working in the frontline itself for days
and nights for almost a year. The families of those who died because of covid 19 were provided a
compensation. Startup businesses were also provided with some offers. Loans taken to start a
new business in or just before the period of covid had some reliefs on interest rates (Acker et
al.,2020). Environmental issues were also handled by the government by announcing a 3 billion
7

package out of which 1 billion were used to build and renovate school buildings, churches,
hospital buildings and company buildings.
This way, government made efforts to eliminate the damage done by covid 19 and helped their
population who needed them in these hard times of pandemic.
8

Major responses of the Bank of England and their implications to the UK’s
economy-
Bank of England helped UK in many ways to improve the damage done by pandemic hit of
covid 19. Some of them are explained as follows,
 Monetary Policy Committee of Bank of England conducted a voting for making bank
rate of 50 points to 0.25% and all the votes were on the side of this decision (Firrell and
Reinold, 2020). MPC also provided funding to small and medium sized businesses under
new term funding scheme. Low interests’ rates help small and medium sized businesses
and households in these difficult times of pandemic hit. This committee also provided
every employee a job guarantees and confirm wages even if they are unemployed in the
times of covid 19. MPC will offer 5% of four-year funding of participant’s share of
economy over the next 12 months with effect from January 2021. MPC will provide
extra incentives to banks in order to make them charge less interest rates to their
respective customers. Lower interest rates were provided to small businesses and
households on their loans.
 During the first lockdown, banks were allowed to lend money up to an amount of 10%
of the amount they distributed as a loan to other businesses (Bartik et al.,2020). This
scheme provided 100 billion pounds of funding to banks. Bank of England also
supported large businesses in this hard time of pandemic by buying bonds from them for
short term which were unsecured. Along with Bank of Canada, Bank of Japan, Federal
Bank of US and other banks just like Bank of England made a deal to help people to
borrow at lower rates as the dollar rates were too high. This was done to provide an
emergency funding in these hard times of pandemic.
 Government Bonds and Corporate bonds were purchased by Bank of England when
the pandemic hit became more dangerous and was spreading like lightening all over the
UK and even the world (Baranova et al., 2017). 200 billion were invested in bonds which
later became 645 billion pounds. All this huge amount of money was provided by
printing of currency. Extra money was utilized by purchasing the government bonds by
Bank of England and remaining amount was used to buy corporate bonds.
9

This way Bank of England helped economy to get back on track by making banks lend money
at lower rates, lending money to banks, purchasing government bonds and corporate bonds from
the government to help them in these very difficult times of covid 19.
10

Impact of Brexit on the UK’s economy-
Brexit is short for British Exit from European Union which happened on 31st December 2020
which made the impact on UK as well as other European countries as well. The impact on UK is
as follows,
 There were consequences on London, Ireland and Scotland. It damaged the economy of
UK which was also affected due to covid 19 already (Heald and Hodges, 2020). Younger
generation faced unemployment due to this exit from European Union.
 The early effect of Brexit on the economy saw decrease in the total trade with the non-
European countries and also a fall in the biggest exporting partners of the UK in the
market. The international trade of UK with many countries such as Ireland, China and
Germany have seen a decreasing trend due to the situation arising out of Brexit.
 Right in the middle of Brexit, the situation of Coronavirus hit the UK international trade
badly and the condition worsened. The situation of lockdown slowed down the business
and this affected the day-to-day business activities and impacted the overall economy and
growth and development of the organizations (Perez and Olivie, 2020). These activities
resumed with the rate of vaccination in the UK and the organization were put in a tight
condition to make up for the losses and work on the profitability of the businesses.
 The supply in the workforce declined due to Brexit which affected the working of the
organizations negatively and impacted their growth and development (Fuller, 2021). The
issue of employment affected the creativity and innovation of the organization which in
turn, affected their position in the domestic as well as the international market.
 The trade of the precious metal has also declined due to Brexit which has impacted a
significant part of the economy of the United Kingdom.
 The stockpiling in Ireland due to this condition and the trade of live animals affected the
economy as the there was a rise in these trades at the end of the year.
 Germany forecasted to have 3 million less workers by the year of 2030.
 Fall of British pound also affected importing from other countries but helped exporting.
 Big companies like JP Morgan have shifted its clients from UK to other countries due to
its exit from European Union.
11

Recommendations-
Even after various steps taken by UK government and Bank of England to help economy gain
its momentum back, there are some things they left behind. They are as follows,
 UK should have provided a health insurance to all the age groups as the danger of covid
19 was to all, not just aged population (Mayhew and Anand, 2020).
 After deaths of a family member, suppose was the provider of whole family, UK
government must give a job to another member of the same family and provide some
compensation after the death.
 People who lost their jobs because of Brexit, should get a job because there was no fault
of them behind all that or at least compensation for the period they remain unpaid in
order to make their households run without any difficulties.
 Economy after covid 19 and Brexit was down which was UK’s worst performance till
now after the recession of 2007-08-09, this would have avoided if certain measures were
taken by UK government before taking decisions like exiting from European Union in
December 2020.
 In order to fully eliminate covid 19, UK has to do vaccination on the basis of age group
and try to vaccinate all of its population as soon as possible.
 Tourism was also affected and in order to make it get back on track, UK government
must try to eliminate corona virus and vaccinate the whole population as soon as possible
as the tourism industry helps in generation of revenue which will eventually help UK to
grow their economy back.
12

Conclusion-
In this report, market economy functions and role of UK government within has been discussed.
Operations of business environment in the UK has also been briefly explained. The major
economic response of UK government has also been thoroughly explained. Brexit’s impact on
UK government also has been rigorously explained along with responses of Bank of England and
their implication to the UK’s economy. Thus it is concluded that, economy of UK is downgraded
because of covid 19 and UK government has been trying to get it back on track by launching
various schemes. Similarly, Brexit also had some negative impacts on UK, and necessary
measures where taken by UK to eliminate that.
13

References
Acker, K., Bräutigam, D. and Huang, Y., 2020. Debt relief with Chinese characteristics. Acker,
Kevin, Deborah Brautigam, And Yufan Huang.
Baranova, Y., Coen, J., Noss, J. and Lowe, P., 2017. Simulating stress across the financial
system: the resilience of corporate bond markets and the role of investment funds. Bank of
England Financial Stability Paper, (42).
Bartik, A.W., Cullen, Z.B., Glaeser, E.L., Luca, M., Stanton, C.T. and Sunderam, A., 2020. The
targeting and impact of Paycheck Protection Program loans to small businesses (No. w27623).
National Bureau of Economic Research.
Firrell, A. and Reinold, K., 2020. Uncertainty and voting on the Bank of England’s Monetary
Policy Committee.
Fuller, C., 2021. Understanding the impact of Brexit: The case of foreign software corporations
in Scotland and South East England. European Urban and Regional Studies, 28(2), pp.173-191.
Heald, D. and Hodges, R., 2020. The accounting, budgeting and fiscal impact of COVID-19 on
the United Kingdom. Journal of Public Budgeting, Accounting & Financial Management.
Ismail, S.A., Saliba, V., Bernal, J.L., Ramsay, M.E. and Ladhani, S., 2020. SARS-CoV-2
infection and transmission in educational settings: cross-sectional analysis of clusters and
outbreaks in England.
Mayhew, K. and Anand, P., 2020. COVID-19 and the UK labour market. Oxford Review of
Economic Policy, 36(Supplement_1), pp.S215-S224.
Perez, A. and Olivie, I., 2020. The impact of Brexit on aid: EU and global development
assistance under a realist UK scenario. Journal of Contemporary European Research, 16(2).
Rad, A.K., Shamshiri, R.R., Azarm, H., Balasundram, S.K. and Sultan, M., 2021. Effects of the
COVID-19 Pandemic on Food Security and Agriculture in Iran: A
Survey. Sustainability, 13(18), p.10103.
14

Walker, P.G., Whittaker, C., Watson, O.J., Baguelin, M., Winskill, P., Hamlet, A., Djafaara,
B.A., Cucunubá, Z., Mesa, D.O., Green, W. and Thompson, H., 2020. The impact of COVID-19
and strategies for mitigation and suppression in low-and middle-income
countries. Science, 369(6502), pp.413-422.
Williams, C.C., 2021. Impacts of the coronavirus pandemic on Europe's tourism industry:
Addressing tourism enterprises and workers in the undeclared economy. International Journal of
Tourism Research, 23(1), pp.79-88.

15

16

17

18

19