Impact of Brexit and COVID-19 on the Food Industry in the UK

Economics for business
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Executive Summary
UK has a market oriented economy and government only intervenes in the market for the
purpose of social welfare or to restore the equilibrium in the market caused due to factors which
are beyond control of market forces. 2020 saw combined impact of two such forces on economy
which were namely, Brexit and COVID-19. Like other industries, it influenced food industry of
UK as well and forced it to behave in other than normal methods of operations. This report has
been developed keeping the economic principles of demand and supply and their impact on food
industry. Further, principles of market failure has also been discussed and policies adopted by
government to improve the situation has been mentioned. It was observed that combined forces
of Brexit and COVID-19 forced demand and supply to take different courses which left industry
unable to restore the equilibrium on its own. Also, many challenges and weaknesses in the
industry come to the light, which highlighted the infrastructural weaknesses in the industry.
Government thus, had to intervene not only with a purpose of maintaining short-term equilibrium
but to make infrastructure of the industry resilient of handling any future challenge on its own.
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Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Task 1...............................................................................................................................................4
Supply economic theory..............................................................................................................4
Demand economic theory...........................................................................................................6
Market equilibrium.....................................................................................................................8
Shortage and surplus.................................................................................................................11
Task 2 ............................................................................................................................................12
Market failure............................................................................................................................12
Policies adopted by government to address market failure......................................................13
Conclusion ....................................................................................................................................14
References......................................................................................................................................16
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Introduction
Study of economics involve study of procurement and distribution of scarce resources.
Under micro-environmental setting, demand and supply forces interact in an industry to
determine equilibrium price and equilibrium quantity. Market equilibrium gets disturbed by
internal and external factors which are either managed by market forces on its own or require
governmental intervention as the last resort. This report aims to explore market interactions in
the food industry of UK and the impacting factors undertaken are Brexit and COVID-19. These
factors render market unable to restore balance and required intervention of government to
manage social situation.
Task 1
Supply economic theory
As per Krugman and Wells, supply side of market forces is concerned with producers
who produces a commodity and are ready to supply those commodities on a specific price in the
market. Under normal market conditions, sellers are willing to supply more commodities at a
higher price, which reflects the positive relationship between price and quantity supplied. This
behaviour is shown in a supply curve which is graphical representation of the relationship and
has an upward slope.
Movement along supply curve
Illustration 1: Movement along Supply Curve, 2021
Source: Tutor2u.net
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