Impact of COVID-19 on UK Economy and Response by Government and Bank of England

This report analyzes the impact of COVID-19 on the UK economy and the response of the government and Bank of England. It covers the measures taken by the government to support the economy, the major responses of Bank of England, and the impacts of Brexit on the UK economy.

Contemporary Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Impact of the COVID-19 on UK economy.................................................................................3
Economic response decided by government of UK and it impacts on UK economy.................5
Analyse the major Response of Bank of England and its implications in UK economy............7
Impacts of Brexit on UK's economy...........................................................................................8
CONCLUSION ............................................................................................................................10
RECOMMENDATION............................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
The term business environment is explained as sum or collection of all external and
internal factors and it engage employees, customers needs, supply and demand and many more.
All of this components impacts on the function and operations of organisation whether in a direct
or indirect manner. In simple terms, business environment factors such as suppliers, owners,
government policy, etc. influence on the company functions and situations. In the present
scenario, pandemic conditions or COVID-19 are the major problems which directly impacts on
goals and objectives of organisation (Bagchi and et. al., 2020). Already, organisation perform
their business lives in a dynamic environment and due to current pandemic conditions the
process to perform business functions is crucial to improve. This report will highlights on the
economic impacts which are raised due to COVID-19 on the UK economy. Government and
central bank response towards the change in economy conditions will also include in the
upcoming report.
MAIN BODY
Impact of the COVID-19 on UK economy
Pandemic conditions shut down all operations and functions of a country and this results
in breakdown of overall country economy because of no business transactions. According to the
current conditions, this is identified that COVID-19 is an infectious disease and this generate
major health issue among all over the globe. In context of UK, lockdown was declared on 23rd of
March 2020. The purpose to shut down all areas is to manage or control the crisis that generate
issue for public.
Within few months approximately in the MAY, economic rate of country was forecasted
with analyse of GDP and this show unsupportive results as it is directly reduced with 30%. This
is because most ventures was closed and some of them which are operating face short sales
problems (Basile and et. al., 2021). Furthermore, after flexibility and less restrictions in
lockdown conditions results towards improvement in economy practices but as compare to
traditional period speed and pattern of balancing economy is uncertain.

Illustration 1: Source(https://www.statista.com/statistics/263613/gross-domestic-
product-gdp-growth-rate-in-the-united-kingdom/)
According to the graph this is understand that UK economy is reduced in the year 2020
and this is because of the unprecedented lockdown conditions. It also results that unprecedented
policy related with pandemic conditions is critical to understand and due to this UK economy is
reduced. Furthermore, to slow down the COVID-19 impact, UK and all other countries induce
shut down policy. Within UK, not even 25% of entire economy could function in pandemic and
this produce only major changes in the products and services (Comunian and England, 2020). In
current period, economic growth was on comparison to past month within same year. This also
results that management consists of all those factors that impacts on economy due to COVID-19.
One of the major challenges related with pandemic conditions is that this put organisation
at risk of collapse and failure. Within UK, organisation face different risk of the bank related
challenges as many organisations stop their business and this creates the bankruptcies conditions
among business. Moreover, most of the restaurants, clubs, pubs, and many more are closed and
also all meetings whether, local or national was cancelled. Also, restrictions stop the supply of
raw-materials, products delivery, etc. and due to this small and medium organisation face
problems to manage their work and operations. Therefore, within country high street shops and
shopping malls face complexity to retain as this is difficult for them to pay their expenses such as
rent, cover operational cost, etc. On the other side, large organisation with retained profits and

large cash flow sustain in market for longer period. Overall results related with business define
GDP is reduced because of decline in sales of economy. Also, change in variant and due to no
effective medicine this is difficult for deal with COVID-19 conditions with right approach
(Contractor and et. al., 2020). Subsequently, it is said that overall economy of UK is impacted
because organisations are at close stage, employees loss their job, deduction in workforce salary
and many more perspectives directly reduce the country economy.
Economic response decided by government of UK and it impacts on UK economy
The government of UK decided various steps and induce new measures in order to
respond towards COVID-19. The main goal of government to support local individuals is
addition in public services, availability of finance at low tax, etc. are the steps adopt by
government in order to allow organisation for retain in complex market conditions. In simple
terms, government response is a method to boost morale of authorities for operate their business
in complex conditions also. Some of the measures adopted by government of UK with its
implications among economy are mention as follow:
 Scheme of furlough- UK government implement the series of wide range measures and
all of them are focused towards the uplift of country economy. This scheme was
introduced in the March for sake the benefits of employers and employees. According to
this scheme employers are able to make contract with HMRC and it grants them to
cover almost 80% of wages. This results management is able to retain skilled workforce
instead of dismissing them from job. The lockdown regulations left huge population
unemployed and this results that it is not possible for persons to manage their work.
Therefore, the main focus of government is to clear all monetary factors for reach at
normal stage in minimum time-period. It also implement those sections through which
management measures furlough recovery steps through watch all figures in an
appropriate and close manner (Cowling, Liu and Conway, 2021). Furthermore, another
reason to determine the steps with a close approach is to fight against the coronavirus
recession. Employer also contribute and engaged in the furlough scheme because this
minimise the unemployment level within the UK.
 Bank Loan- UK government enable the business or ventures for gain or raise the
financial resources in a quick manner. In the outbreak of Covid-19 period this is
identified that government authorities focused towards offer or provide financial

resources to organisation in an easy manner. This scheme is beneficial for those
enterprises which are losing their market share because of the disrupted cash flow. In
addition to the UK economy, this scheme is beneficial for manage the work in an
organised manner. The main intention of response is to interrupt all those aspects which
might raise long term aspects related with future employability. Example- This support
young individuals to engage in the job opportunities that create enable persons to
perform task in the wide variety of roles (Crick, 2018). The main intention of bank loan
is to focus on job creation for those business or persons who support in improvement of
company.
 Eat out to help out scheme- This government measures is used to support the
organisation after the end of shutdown period in order to reopen the business. The
primary goal of this scheme is to support hospitality organisation of country. This boost
the demand of food and also protect the food related jobs. On the other side, government
provide the approximately 50% off on the cost of food which are high in demand and
also eaten at a wide level. This scheme benefit both the organisation and customers
because a large section of individuals is focused towards obtaining benefits related with
the eat out to help out scheme. Also, the policy is designed to enhance the economy of
UK so this come with all those factors that boost demand of food and beverage in the
market. On the other side, footfall related with individuals is increased and this generate
recreational practices for persons to enhance demand of food in an easy manner. With
contrary, dining out management ensure that almost in geographical area number of
visitor gain the benefits related with service industry. As per policy dining out
objectives are complex to achieve because of the restrictions that bound individuals to
enjoy and consume food in the restaurants. On the other side, a large section of
individual claim that various outlets of UK are supported for stand again with this
scheme.
 Scheme of Self-employment- According to this measure, the government of UK
formulate aim for provide the income related protection right to population of UK
(Darling and Venkitachalam, 2020). This scheme include all those eligible individuals
which provide cash grant to the persons over their last three years of qualifying
practices. This results scheme make approximate results that worth around 80% of their

income. Moreover, the economy is developed so with some accurate and estimated
prediction government is focused to provide support to the furloughed workforce and
also to self-employed individuals. Moreover, the scheme related with trade practices of
business considered towards sale and buy of products in the pandemic conditions. In
addition to this scheme impacts on both sole trader as well as on individual who are
engaged in operations and functions of company. This also define that management is
focused towards the arrangement of all those sections that is required for self-isolation
(Eikhof,, 2020).
According to the above mention measure that are taken by government this is understand that
huge efforts are induced for improve the economic situation of UK through overcome from all
those issue that are related with Covid-19 conditions.
Analyse the major Response of Bank of England and its implications in UK economy
With induce and implement the right decisions Bank of England respond towards the
complex situations which are raised in period of COVID-19. The first step adopted by Bank of
England for overcome the crisis is to support and save employment among the country in order
to support the economy of country. For this management offer various measures and package to
the firms for add individuals among diversified jobs. Along with this to balance the long term
damage management of Bank of England support UK economy by responding towards
challenges of Economy. Some of them are mention as follow:
Minimise the interest rate- Interest rate refer to the amount which is charged by the
lender from the borrower and this manage the percentage of principle. This also raise loan and
interest rate of UK as it acts the reference for deal with all financial products. In the context of
special monetary policy committee related with Bank of England cut the interest rate with almost
0.1%. Moreover, within current pandemic conditions lower interest rate reflect low rate loans for
both business and house related purpose (Gaganis, Pasiouras and Voulgari, 2019). Similarly,
bank of England also respond towards the long term related funds challenges through making
and building the financial society which charge only approximate 0.1% interest rate. This policy
results that circular flow of income is increased because bank authorities provide back end
support to small and medium enterprise. It also results that lower interest rate allow the
individuals for borrow money to make large purchase. This also results that population pay less
interest than it provide more amount for spend throughout the economy. In addition to this, lower

interest rate results in increase of unemployment among business and this helps for make
expenses related with lower prices that make regular turns among economy.
Minimise of service charges for bank- Service charged refers to an expected fees or
amount and this is charged by central bank in return of offering and providing their services.
Moreover, sometimes fee is deducted because of change in network or also due to different
reasons. Bank of England also charge low service rate and this aids individuals for fulfil both
purpose whether, they are related with expenditure or investment (Han, Song and Yao, 2018).
Therefore, it is analysed as positive impacts of bank respond towards pandemic conditions. But,
with offer of lowering interest rate some different problems are also raised such as change in
inflation rate, probability of high liquidity traps, etc. and this work as negative impact of
economy on the growth of organisation. In simple terms, with less service rate the rate of
economic growth is also reduced.
Impacts of Brexit on UK's economy
BREXIT
The decision of Brexit is taken by government before the period of COVID-19 and according to
this, United Kingdom left the European Union in the year 2020 because it effects the economy of
country. Some of the certain impacts related with Brexit are mention as follow:
 Auto-mobile industry- It is identified as backbone of the country which support
economy of country. United Kingdom economy is widely captured by the manufacturing
and selling of auto-mobile. This also results that pace of growth after Brexit is reduced
because now small and medium organisation face challenges related with import and
export of products and services.
 Transportation difficulties- Brexit generate footsteps related with export and import of
the products among UK with a bad approach. Moreover, trade factors and relationship
among European Union and country become difficult because of disagreements related
with Brexit (Izzeldin and et. al., 2021).
 Supply Chain- Due to change in supply chain of United Kingdom the business
authorities face different problems. It is because change in cost of production results
towards the firms that impact on product cost. Also, the organisation profits is decreased
among the nations because this create loss within long term.

 GDP- Gross domestic product after the dissolutions related with trade agreement this is
identified Brexit also impacts on growth rate of the country. This is because organisation
functions and operations are shrinking on constant basis.
 End of trade deals- In the current scenario, as such there is no trade between United
Kingdom and European Union. Therefore, the business operations of UK work with the
several tariffs and restrictions and it create problems for management to manage
operations.
Upcoming impact of Brexit on UK economy
Brexit also impact on the company operations and functions in the upcoming future. This
also define about all discussed steps and the upcoming events which are mention as below:
 GDP- Professional or expert of UK define that NO TRADE DEAL formulates various
challenges and this will shrink the economy of country approximately 10% in the
upcoming two to three years (Khajeheian, Friedrichsen and Mödinger, 2018). This results
destructive conditions for the country because now individual not able to perform work
with low cost.
 UNEMPLOYMENT- If the market conditions are same in upcoming future than this
results in unemployment because a large section of job activities relates with European
Union of business. On the other side, decrease in GDP growth rate enable business for
minimise their workforce.
 NO TRADE NEGOTIATIONS- With break trade negotiations among the European
Union this is understand that in upcoming conditions authorities allow or make flexible
trade policies to recover from economy challenges.
 CURRENCY- According to the present conditions, the economy of country is decreasing
and this results value of United Kingdom currency is minimising. Moreover, value of
other nation also change preference of investor because of restricted business
environment.
 FINANCE- Investor also consider as crucial part of the country economy and because of
Brexit decisions there is a change in their perspectives to add amount in different project.
Furthermore, investments are part of organisation so no individuals is focused towards
add of their amount in recession period (Liu, 2021).

CONCLUSION
From the basis of above report this is concluded that pandemic conditions specifically,
COVID-19 directly impacts on the overall economy of country. Due to change in circumstances
of economic this is identified that social disruptions related with COVID-19 pandemic impact on
the overall UK economy by impacting on circular flow of income, collapsing and unemployment
of organisation. On the other side, shutdown policy results in block movement of products and
services and it breach constant flow of financial resources. Similarly, to minimise the challenges
related with Coronavirus government respond towards numerous situations through decide
Furlough scheme, offering low interest rate bank loan and many more scheme for improve the
economy of country. In the parallel way, bank of England also respond against pandemic
conditions to ensure that market conditions are sustained after the open of lockdown. Initiatives
such as decrease in service charges, interest rate, etc. aids the Bank of England authorities for
perform their work with those approaches that are effective to deal with COVID-19.
RECOMMENDATION
Some recommendation which is useful for manage the future occurrence of UK economy
are mention as follow:
 To Control Spread of Covid-19 Transmission- The spread of community transmission
generate a large pool of challenges for the government to stop and control cases of
Covid-19. Community spread of Covid-19 generate long term problems because this is
difficult for health department to stop the chain as there is no vaccination exists to deal
with the problems in initial period. In addition to this, government implement policy of
social distancing, stop restrictions of unessential travel, etc. to maintain safety in global
environment.
 To identify and make safe vaccine- One of the major recommendations related with
health of country individuals and also economy is to ensure that government make
contract with medical houses or manufactures to deliver safe and effective vaccines in
minimum time-period. Similarly, the amount of vaccine also delivered in bulk to
provide access to large number of individuals.
 Empower the individuals- in order to manage the future challenges and occurrence
related with pandemic conditions this is suggested to government of UK that they

empower the local individuals for adopt those steps that keep them safe in complex
conditions.

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