Impact of Covid-19 on Demand and Supply in Retail Sector of UK

This report examines the impact of Covid-19 on the demand and supply in the retail sector of the UK. It discusses the factors that determine the positive and negative shifts in consumer demand and the response of retail supply. It also explores the UK government's policies to influence consumer retail spending and revive the economy.

ECONOMICS FOR
BUISNESS

EXECUTIVE SUMMARY
Economic of business is related to study of organisation, environmental issue, financial
condition or market demand and supply of products and services. This report has included
information, facts and figure related to impact of Covid-19 on demand and supply in retail sector
of United Kingdom. It has also included key information related to the way firm operating in
retail sector have cope up with situation or circumstances in order to promote and sustain
business operation for longer time frame. Further it was seen that the government has a major
important role in the reviving the economy after the pandemic. For this the government of UK
has taken many different steps in order to protect retail spending of consumers. This included
many different steps like the retail subsidies, use of stimulus packages, industry specific
measures and many others.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
Various factors that determined positive and negative shift in consumers demand for retail
good and services and the response of retail supply on market..................................................4
TASK 2............................................................................................................................................9
UK governmental and economic policies which assist in influencing consumer retail spending
in UK...........................................................................................................................................9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business economics is the field of applied economics that helps to determine the outer
environment which are faces by the company. So there are different theories which are applied
by the business in order to determine the internal and external factor that affect the financial
performance of the company. In the same way, current study will help to determine different
factor hat shift the consumer demand supply and demand curve for retail goods in order to
response the retail supply on market. Further the study will provide the list of government
policies which will aid to reduce the retail spending and helps to recover the economy of the
country as well.
TASK 1
Various factors that determined positive and negative shift in consumers demand for retail good
and services and the response of retail supply on market
Law of demand and supply are major economic theories that are used to understand the
way shift in positive and negative in consumer demand and supply and response of retail supply
on market. Retail is one of the growing industries of United Kingdom as there are several large
organisations named as Tesco, ASDA and Sainsbury that offer varieties of products and services
to attract customers. Law of demand stated that while other factors remain constant, quantity
demand and price are inversely related that means with increase in price, demand of products and
services decreased. Price is most common factors that influence consumer decision to select
specific products or services in order to satisfy their respective needs. On the other hand, law o
supply state that quantity supplied is directly related to price where all other factors remain
constant i.e, quantity supplied increased with increase in price. As suppliers tries to earn more
profit margin by offering more products or services at time when they received high value at the
same time limit supply in case of low price. Covid-19 is one of the pandemic situations that have
negatively and positively impact demand and supply curves in retail sector of United Kingdom.
So, in short entire industry have to suffered due to uncertain events therefore several factors that
lead to fluctuation in demand and supply curve can be illustrated as follows:
Local demand factors: Due to Covid-19, people are less likely to spend money on non essential
items or products as they have less income or unsecure about their job. Local demand have
tremendously decrease due to reason of Covid-19 as they are less preferring to have outside

products to satisfy their needs. So, there taste, preferences and beliefs have lead to reduction in
local demand and shift of demand curve downward. Thus supply market in order to cope up with
situation or decrease demand have tried to supply more and more product at lower prices so that
they can earn more profitability and market share.

It can be illustrated from the above graphical representation that retail sector is facing
reduction in local demand of products and services. Due to less employment opportunities,
sources of income and rise in price of products due to limited material thus with changes in
increase in price, customers demand have decreased. So, D1 have reduced to D2.
Income effect and shift employment: Coronavirus have contributed in increasing
unemployment rate and closure of several enterprises in retail sector. United Kingdom is
suffering from economic slowdown thus it also resulted in reduction of disposable income of
people that are living in society (Krugman and Wells, 2017). As a result, there is shift in demand
curve due to both reason that is less employment opportunities and reduction in average
disposable income of people. Therefore, suppliers or organisations that are operating in retail
industry have tried to bring economic of scale or optimum utilisation of resources so that
maximum value can be delivered to end customers within minimum cost.
B
C
S1
D2
D1
C
S1
D1
D2
B

The following graph illustrated that demand curve have moved or shift from D1 to D2 as
income of people have reduced that resulted in less demand of several products and services for
satisfaction of their respective requirements. In the above graph, supply of products remained
same due to lockdown or less available of resources to satisfy needs of customers.
Complementary or substitute products: Complementary are goods or products that are
consumed together by individuals like car and petrol so demand of complementary products
decreases with increase in price of products. Whereas substitute products, are goods that helps in
satisfying common wants or can be substitute or used in place of each others. Availability of
complementary and substitute products have also impact or shift in demand and supply curve and
response of supply market on retail sector. Like rise in price of Bread has resulted in decrease in
demand of butters at the same time increase in price of high quality products have resulted in
increased in demand of similar products that are available at lower price i.e, coffee and tea. Thus
below graph has be made to illustrated the same changes or shift in demand and supply graph of
retail sector of United Kingdom.
S
Q2 Q1
P1
1
P2

It can be understood from above graph that demand and supply curve meet at P1
(Price) of Q1 (quantity demanded) in respect to availability and price of both
complementary or substitute products and services.
UK population and demographical factors: It can be stated that its is also one of economical
factors that lead to change in demand and supply curve. Demographical factor include age,
gender, race, education level and marital status or population or number of people that are living
in particular society. There are number of migrates that have return back to United Kingdom due
to loss of their employment opportunities because of impact of covid-19. Whereas there is not
much changes or impact on demographical factors due to pandemic situation of coronavirus that
impact each and every sector.
C
D1
D2
Q1Q2
B
S1

So, the graph illustrate that overall demand have decreased whereas quantified supplied is equal
or constant. Therefore, to enhance demand of products and service, organisation have tried to
make use of several promotional strategies, reduce price of products and take steps to ensure
health and safety of people. So, that there are motivated and influenced to be part of organisation
for satisfaction of their respective requirements and needs (COVID-19 and the retail sector:
impact and policy responses, 2019).
TASK 2
UK governmental and economic policies which assist in influencing consumer retail spending in
UK
The current situation of pandemic has lead to may harsh and decreasing impact over the
retail sector of UK. The major reason for this is that because of the COVID 19 the spending
power of consumers has decreased to a great extent. The major reason for this is that there was
an economic shutdown as a preventive measure of pandemic and this affected the working to a
great extent. Further the people were also in fear that if they will go outside and buy things then
there are high chances that they will get infected with the virus. Thus, because of this many of
the people has avoided to go and shop and this has reduced their spending power. In addition to
this the flow of money was also very weak in the economy as there were many businesses being
shut down and many businesses were in loss. Hence, due to this slowdown in the flow of money
and availability of money the spending power of consumer decreased especially in the retail
sectors.
For managing this extreme situation the government of UK need to be very quick in
making the strategies for the development of the economy after the harsh impact of the
pandemic. Thus, for this the government of UK has taken many steps and made many strategies
for reviving the economy from loss of consumer retail spending and to increase the consumer
spending are as follows-
Industry specific measures- these are the measures which the government of the country
has taken in order to manage the retail spending by the consumers. This is essential as the retail
industry is one of the biggest industries within the economy of UK and if this will go in loss then
it means the country is in very bad position. Thus, for this the government of UK is trying to
revive the spending of consumer in retail. For this government has come up with ‘bounce- back’

plan for the consumer and retail industry and had announced help in order to support the business
which has been impacted by the COVID 19. For this the Export Minister has outlines measures
to boosting the export and increases the exports for the British retail companies and do trade
overseas (Bounce-back plans launched for consumer and retail industry, 2020). Furthermore the
government of UK has also launched a new Consumer Retail Export Academy which will be
providing knowledge and skills and information to the business in order to increase the exports
of the company. Thus, this will result in increase in the international trade and with the local
consumer will also start spending in the retail. In addition to this the E-commerce business will
also be promoted so that the consumer can have what they need at their doorstep only. Thus, this
will also assist in increasing the spending of consumer in the retail and other related industries as
well.
Stimulus package- this is another major strategy being implemented by the government
in order to control the situation of pandemic. For this the government of UK has created many
different types of stimulus packages in order to help people and families which have been
suffered from the pandemic. For this an urgent ‘family stimulus’ package was created along with
the job support scheme (Stimulus package for UK’s poorest families vital, report says, 2020).
This scheme was provided in order to stop many of the families and their children to fall below
the poverty line. This family stimulus will assist the family in having at least the food for their
children and themselves and can also be referred to as the economic stimulus as this will assist
the person in dealing with their economic condition. Further along with this stimulus another
scheme of ‘job support scheme’ was also implemented in which the government tried to save the
job of many people by providing them job somewhere else. This was assistive as the people were
not unemployed and this saved the country and economy of UK from unemployment. In relation
to the package another major measure undertaken is the VAT that is the value added tax over the
food and takeaway food; non- alcoholic drinks have been reduced from 20 % to 5 % from 16
July 2020 to 12 January 2021. This is done in order to decrease the prices of the food products at
the restaurant and hotels so that more of the consumer will come and spend money there. In
addition to this another major strategy announced is a scheme of ‘Eat out to Help out’ wherein
the 50 % discount (up to maximum of £10 per person) will be provided to attract consumer in
hotel on some specific days (The government’s post- COVID 19 stimulus package, 2020).

Retail subsidies- this is another important measure by the government of UK in order to
assist the economy and the retail spending of consumer to increase after the COVID 19 impacts.
Under this scheme the government of UK has announced many measures for increasing the
export of goods and services in order to assist economy to revive. Along with this the
government of UK has also come up with many different types of subsidies and grants which
will be provided to the retail companies to revive from the business in order to develop
themselves. Further in addition to the retail industry as well the hospitality industry is also
entitled for a grant of £25000 from the local council of hospitality sector. Further this grant is
easily available to the companies but the only requirement is that the business must be in UK and
must have a rateable value under £15000 as on 11 March 2020. Further is the rateable value is
under £15000 then the amount of grant will be £10000. In contrast to this if the rateable value is
above £15000 and below £51000 then the grant for which the company is eligible is £25000
(Coronavirus grants for retail, hospitality and leisure businesses, 2020).
Poverty programs: After COVID-19, it is analysed that there is drastic change in the
overall economy of the country. Such that the entire world face the problem of sudden lockdown
for 3 to 4 months. That is why, that was the tough time face by the people and especially
retailers. Therefore, it is stated that most of the people have to left their job and this increase
unemployment which in turn result the poverty as well. Hence, there is a need to make changes
in the policy by the government in order to reduce the poverty. It is so because middle class
people do affect a lot due to COVID-19, but on the other side high class businessman do not face
tough problems (COVID-19 to push up UK poverty level, 2020). Hence for UK government three
priorities are set such that manage health emergency, recover the economy and get people back
to productive work as soon as possible.
Hence, it is analysed that in Britain, there are lot of strategic option implemented by the
government in order to reduce the impact of poverty from country. Such that instruct retailers to
make sure that offered products are at low price and easily affordable. On the other side, there
are some outlets opened which in turn offer job opportunities to most of the people and improve
the economy of the country as well. Hence, due to COVID-19, there is highly impact on the local
labour market and talent acquisition and this in turn affect the results in opposite manner as well.

CONCLUSION
By summing up above report it has been concluded that after COVID-19, the demand of
the retail business decreases and this in turn affect the overall economy in opposite manner.
Moreover, it is also analysed there are some factors which affect the overall demand of the retail
in opposite manner such that UK population and demographics, income effect and shift in
employment, complementary or substitute goods and UK local demand factors. On the other
side, it is also concluded that there are many policies implemented by the government in order to
minimize the issue and recover the economy of the country as well that helps to increase the
spending of consumers. Such that government transfers, retail subsidiaries, stimulus packages,
industry specific measures which in turn improve the results and recover the economy as well.

REFERENCES
Books and Journals
Krugman, P. and Wells, R., 2017. Economics . Schäffer-Poeschel.
Online
Bounce-back plans launched for consumer and retail industry.2020. [Online]. Available
Through:<https://www.gov.uk/government/news/bounce-back-plans-launched-for-
consumer-and-retail-industry>.
Coronavirus grants for retail, hospitality and leisure businesses. 2020. [Online]. Available
Through:<https://www.merton.gov.uk/business-and-consumers/business-rates/grants-
for-retail-hospitality-and-leisure-businesses>.
Stimulus package for UK’s poorest families vital, report says. 2020. [Online]. Available through:
<https://www.theguardian.com/society/2020/oct/26/stimulus-package-for-uks-poorest-
families-vital-report-says>
The government’s post- COVID 19 stimulus package. 2020. [Online]. Available
Through:<https://www.instituteforgovernment.org.uk/explainers/governments-post-
covid-19-stimulus-package>.
COVID-19 and the retail sector: impact and policy responses. 2019. [Online] Available
Through: <http://www.oecd.org/coronavirus/policy-responses/covid-19-and-the-retail-
sector-impact-and-policy-responses-371d7599/>.
COVID-19 to push up UK poverty level. 2020. [Online]. Available Through:
<https://newseu.cgtn.com/news/2020-04-09/COVID-19-is-pushing-up-poverty-levels-
according-to-aid-expert-Pv1VXlqcKc/index.html>