Evaluating the Contemporary Business Environment

This report evaluates the impact of COVID-19 on the UK's economy, the government's economic response, the Bank of England's measures, and the impact of Brexit on the UK's economy. It discusses the economic implications of these events and offers recommendations. The subject is contemporary business environment, and the course code, name, and college/university are not mentioned.

Evaluating the Contemporary
Business Environment

Table of Contents
Introduction .....................................................................................................................................1
Main Body ......................................................................................................................................1
Discuss the main economic impact of the COVID 19 on the UK's economy........................1
Explain the main economic response of the UK's government and also their economic
implications............................................................................................................................2
Examine the major responses of the Bank of England and their implications to the UK’s
economy.................................................................................................................................4
Discuss the impacts of Brexit on the UK’s economy.............................................................6
Recommendations..................................................................................................................7
Conclusion .....................................................................................................................................8
References .......................................................................................................................................9

Introduction
Economic impact analysis is one of the essential analysis taken into consideration in
order to determine or evaluate the effect of specific event on the overall economy. Overall
growth and development of the economy helps in the growth of the country, but the current covid
19 pandemic has directly impacted the profitability and functioning of many business
organisation which automatically lead to impacting the economy (Amuda, 2020). This report
highlights the detailed description of the various economic impact of COVID 19 on the UK's
economy along with the major economic response of the UK government and their economic
implications. In addition to this various essential response of the Bank of England along with
their implication to the UK's economy is also highlighted in this report. Furthermore this report
also highlights the impacts of Brexit on the UK's economy.
Main Body
Discuss the main economic impact of the COVID 19 on the UK's economy
The economic impact of the COVID 19 pandemic has largely impacted the UK's
economy in comparison to the international countries mainly (Impact of Covid-19 and Brexit for
the UK economy, 2020). It is analysed that the economy is of the UK is still considered to be
below 9.7 per cent that is lower than its pre pandemic level. The rise in the covid 19 cases around
the globe has directly impacted the growth and development of the economy also it has directly
influenced the functioning and profitability of the business also. With increasing case the
countries were forced to put the lock-down in the country and restrict can on travelling. This has
largely impacted the travel and tourism which are the main source of income for the UK country
(Anand Han, 2020). In case of UK the monthly gross domestic product of the country was
around 6.3 in december 2020 but it has gone by 1.2 in comparison to november. From the
current GDP figures it is analysed that UK GDP is still going down. In addition to this there was
large impact on the accommodation, food and services, wholesaler, retail, motor trades due to the
various trading and travelling restrictions imposed on by the government and also due to the
lockdown. Each industry were largely impacted due to the rise n the covid 19 cases, rise in the
covid 19 has created an large economic shock on the UK's economy. It is analysed that the
labour market of the UK has also been largely impacted due to the current COVID 19 pandemic.
During 2021 there was rise in the number of unemployment in the country by almost 5% and
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also in the 2020 around 31% suitable jobs in the country were downsized, due to the downfall in
the GDP many business faced losses and were forced top shut down. It has largely impacted the
growth and development of the economy (Aristeidis and Elias, 2018).
Explain the main economic response of the UK's government and also their economic
implications
The economic impacts of the novel coronavirus on United Kingdom has been majorly
disruptive affecting almost all sectors of economic system largely. Much beyond health and
human loss, the pandemic has triggered severe economic crisis around the nation. The pandemic
has reportedly affected almost all the sectors of UK economy by disrupting the global supply
chain, weaker demand for imports, drastic fall in international tourism and many more areas.
While considering the employment levels of the country, number of unemployed people have
increased dramatically. The country has seen a critical economic contraction in first three months
of lock down in the year 2020. With growing number of covid cases in UK, it was necessary for
the government to execute lock down around whole nation in almost all sectors other than
hospitals and medical sectors (Bhaduri, 2019). All the economic activities reduced to its
minimum levels which resulted in massive fall in the revenues with low level GDP. All this
contributed in the downfall of whole economic system. The UK government being the apex body
of country played major role in recovering economy effectively with the measures it took in
response to impact of covid-19. There were fiscal responses from the end of UK’s government
which are discussed underneath in accordance with economy:
 Tax and spending measures where taken to help out those families and households who
have been majorly affected by way of additional funding for the NHS, charities and
public service organisations etc.
 Banks have also been incentivised in order to cater the needs of credit for business and
households to bridge the gap which has been created because of economic disruptions.
 The UK government also took actions to support the businesses in the country such as
paid leaves for the sickness, property tax holidays, direct grant of loans for the small
firms in order to improve employee satisfaction as well as employee retention (Dean and
Suhartanto, 2019).
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 The UK government has given its 100% to provide help and strength to those vulnerable
sectors which have been harshly hit by the pandemic by providing them better pay or
salary. This was majorly done to improve the motivation to work efficiently.
 The government has also decided to provide additional incentives for banks so that they
can support the major SME's so that, contractions can be effectively tackled in times of
economic downturns (Dennisonand Geddes, 2018).
There were different measures taken by the government in response to Covid-19 are mentioned
below:
 Reduction in bank rates: One of the major response of UK Govenment was to reduce
the bank rates steeply. These loans also helped the small and medium scale business for
the purpose of survival. of This was done to help businesses as well as the consumer to
tackle the difficult time of financial scarcity. With the reduced bank rates, the availability
of finance improved which made it easy for the general public to access it.
 Treating customers fairly: In response to covid-19, UK government made it sure that all
the banks are treating all its customers fairly without any discrepancies coming in
between. They closely monitored that all the banks are following the guidelines without
any excuses. This was basically done to provide equal opportunity to customers who are
in the need of finances to cope up with difficult situation of economic downfall because
of covid-19.
 Employment related measures: UK government also came up with job retention
schemes to help those employer who failed to maintain their workforce because of the
outbreak of covid-19. This not only helped the employer to get their employees back and
start their business functioning but it also helped the eligible candidates who were
jobless. Coming up with such schemes will also increase the employment levels which
have fell down during pandemic (Gupta, Wielandand Turban, 2019).
 Resilience in financial system: UK government has been focussing on building a
resilient financial system to focus on financial stability in the country in order to fight
with the disruptions caused by the Covid-19. They want to assure the public that they are
in a strong financial position to help out them by providing financial supporting in a more
easier way.
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 Financial support : The UK government also came up with 'Self Employment Income
Support Scheme' for those businesses who were actively trading before the pandemic but
faced hindrances in the demand and supply after covid-19. It was also stated in this
scheme that a specific amount will also be given in order execute the business practices
(Hickman and Silva, 2018).
Economic implications
The whole UK economy have been majorly affected by the severe economic shock
because of the outbreak of covid-19.With all the major steps taken by the government in order to
get the country's economic system back on track, the economy of UK has been opened gradually.
There are numerous policies that have been announced by the government along with the Bank
Of England with a aim to support consumers, businesses and workers. For this purpose, UK
government was majorly aiming at strong recovery and in accordance with that all effective
measures have been taken by the government for a considerable GDP growth. The
implementation of all policies and schemes can help the country in mitigating negative
economic impacts in order to deal with recession situation in an efficient manner. All these
policies have been implemented as when the economy will recover, recovery of tax receipts will
also occur (Kirton and Maclaren, 2018). Therefore, the spending on household and business
which has been done to support will directly fall. All these measure taken intends to keep the
business organizations on track and as many as people economically employed. This will
ultimately support businesses, workers and the general public to tackle as well as reduce the
chances of economic uncertainty.
Examine the major responses of the Bank of England and their implications to the UK’s
economy.
The Bank of England is one the well established central bank of the UK and also the
model on which the many of the modern central banks are based effectively. It was established in
1694 considered to be the eighth oldest bank of UK (Bank of England measures to respond to the
economic shock from Covid-19, 2020). The Bank of England plays an essential role in extending
help to business and households across UK to effectively carry out their activity and also manage
through the economic shock. Various policy were implemented by the bank in order to offer
required support to the UK business and households during the economic disruption that is
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directly associated with the Covid 19. The increasing spread of the Covid 19 has lead to the risky
asset and commodity price has fallen and also the government bond yields reached all time lows
leading to directly impacting the growth and development of the global economy as well as UK
growth (Liddleand Shutt, 2019). The Bank of England has plays an major role in offering support
and trying to reduce the impact of current pandemic. Some of the measure taken by the Bank of
England to reduce the impact of global pandemic and also its implication to the UK's economy
are mentioned below:
Reducing the interest rate by 0.1%: The bank of interest has taken a major initiative to
reduce their interest rate by 0.1% on 19 march 2020. The bank rate is considered to the UK's
official interest rate also the most essential interest rate in the UK acting as a references for all
sorts of other financial products. The lower interest rate allowed the businesses and households
to get loan at relatively cheaper rates leading to reduce the cost faced by the business
organisation and the households across the UK. Additionally with support of the monetary policy
committee the Bank of England also introduce the new term funding scheme with extra
incentives for small and medium sized enterprises funded by the issuance of the central bank
reserves. The reduction in the bank rate lead to extending great support the small business and
consumers at difficult time (Maamariand Saheb, 2018).
Helped other banks to expand lending: Another initiative taken by the Bank of England
in order to support UK's economy at the time of global pandemic is the effectively offering help
to other banks to expand lending. The bank has lessen the amount of financial capital needed by
the banks and societies to set against their lending to businesses and households across UK. In
2020 the banks decided not to pay any dividends to their major shareholders. During the global
pandemic covid 19, the policy of expand lending set by the banks helped around 190 billion
banks lending which is more than 13 times more than the normal lending allowing them to
enhance their performance in the marketplace and achieve their desired targets and goals
(Rajaobelina, 2018).
Helping businesses to pay their employees and suppliers: Another initiative taken by the
Bank of England is supporting the small and medium sized business to pay off their employees
and suppliers. The Bank of England has closely worked with the government bodies in order to
offered support to the large businesses through offering them cash so as to cover their corporate
debt. Offering support to the business helped then to to keep paying wages to their employees
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and suppliers. The Bank of England also focused on the objective that the supporting large
business with the fund required will automatically lead to supporting small and medium sized
business organisation.
Discuss the impacts of Brexit on the UK’s economy
The Brexit is the withdrawal of the UK from the European union, leading to directly
influencing the relationship among the two effectively (The UK economy after Brexit, 2021). The
result of Brexit has directly impacted the factors like GDP growth, trade volumes, inflation,
households spending and event the employment rate also. It has also lead to directly impacting
the trade directly and indirectly, some of the impact of Brexit on the UK economy are mentioned
below:
Current impacts of Brexit on the UK's economy
The separation of the UK from the European union has created large impact on the
economy of the UK, it has lead to creating wide scale impact on the business across the industrial
spectrum. It has also lead to creating direct impact on the UK's economic growth and
development also. The manufacturing of automotive, transport tools, chemical products and
textiles including the services such as the finance and communication are most essential sector
which are set to be directly exposed to the Brexit. According to the National statistics, there is
huge reduction in the goods and services that were exported to the EU nations by the UK
considered to be around 40.7% and the import of goods and services is around 28.8%. The brexit
has lead UK companies to lose the unbound access to the European Union leading the exporters
to have costly tariffs on the goods and services. The new declaration of the import and export has
lead to costing around 7.5 billion to the UK companies (Syam and et. al., 2018). In addition to
this the number of employers of EU working in the UK has reduced since 2016, the problem of
employees shortage is faced drastically. As per the national farm unions around 70,000 to 80,000
seasonal workers are required in the UK farms. The Brexit has directly impacted the GDP
growth of the UK, after the Brexit 2016 the GDP growth has come down to around 1.6%. as per
the survey around 24% of the investors has claimed Brexit to be a major risk factor. The Brexit
in the current market has directly impacted the technical progress in the UK and also impacting
the labor productivity leading to the slow down in the foreign direct investment of the country.
Future impact of Brexit on UK's Economy
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With the continue impact of the Brexit on the UK economy, it is analysed that the there is
long term impact of the Brexit on the UK and European Union. As per the UK government it is
analysed that the growth of the economy will decline by 6.7% due to the impact of the Brexit in
the coming 15 years adversely. Also it is anticipated that there is will be decline in the workforce
of around 3 million by 2030. With incresaing impact of the Brexit on the UK economy, majority
of the banks have stated that they are effectively ready for the Brexit through implementing new
terms of trade leading to reducing the impact of the European union, and reducing the impact of
European on the operations leading to enhance their overall performance and operational
activity. Additionally it is also analysed that the Brexit will bring about 7% growth in the UK
economy (Vickers and Khorana, 2018).
Recommendations
From the above discussion in order to effectively deal with the current situation of Covid
19 and Brexit, some of recommendations that can be considered by the government bodies and
the Bank leading to enhance overall economy are mentioned below:
 It is recommended that the more focus should be given on implementing various welfare
schemes like employment support scheme by the UK government. This will helps in
creating more employment opportunity at the global pandemic like covid 19.
 Small and medium sized business largely contribute to the growth and development of
the UK economy, so it is recommended that UK government should support these
business through offering financial needs and other requirement also the business that
potential to largely contribute to the growth of the economy.
 In order to have positive impact of the Brexit, it is recommended that the UK
government should focus on their foreign direct investment as this will help in enhancing
the economy through rising the capital (Foster and Stagl, 2018).
 It is also recommended that the UK government should focus on enhancing or improving
the health care sectors, as during the global pandemic this will help in maintaining safety
and security of the citizens and also handler the increasing cases effectively leading to
enhance the overall development of the economy.
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Conclusion
From the above report it has been concluded that rise in the COVID 19 has directly
influenced the performance and profitability of the majority of business organisation and also
impacting the economy across the globe. It is analysed that covid 19 has directly impacted the
UK's economy as the lock-down and shutting of tourism and hospitality industry which are the
major source of income for the economy. It is also analysed that various measures were taken by
the government such as related to tax and spendings to deal with the issues. It is also analysed
that bank of England plays an major role in the enhancement of the UK economy through
offering various schemes for the small medium enterprises. Also the Brexit is also directly
impacting the profitability and performance of the economy as analysed in this report.
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References
Books and Journals
Amuda, Y.J., 2020. impact of coronavirus on small and medium enterprises (smes): Towards
postcovid-19 economic recovery in Nigeria. Academy of Strategic Management
Journal, 19(6), pp.1-11.
An, M.A. and Han, S.L., 2020. Effects of experiential motivation and customer engagement on
customer value creation: Analysis of psychological process in the experience-based
retail environment. Journal of Business Research, 120, pp.389-397.
Aristeidis, S. and Elias, K., 2018. Empirical analysis of market reactions to the UK’s referendum
results–How strong will Brexit be?. Journal of International Financial Markets,
Institutions and Money, 53, pp.263-286.
Bhaduri, R.M., 2019. Leveraging culture and leadership in crisis management. European Journal
of Training and Development.
Dean, D. and Suhartanto, D., 2019. The formation of visitor behavioral intention to creative
tourism: the role of push–Pull motivation. Asia Pacific Journal of Tourism
Research, 24(5). pp.393-403.
Dennison, J. and Geddes, A., 2018. Brexit and the perils of ‘Europeanised’migration. Journal of
European Public Policy, 25(8), pp.1137-1153.
Foster, G. and Stagl, S., 2018. Design, implementation, and evaluation of an inverted (flipped)
classroom model economics for sustainable education course. Journal of Cleaner
Production, 183, pp.1323-1336.
Gupta, V. K., Wieland, A. M. and Turban, D. B., 2019. Gender characterizations in
entrepreneurship: A multi‐level investigation of sex‐role stereotypes about high‐growth,
commercial, and social entrepreneurs. Journal of Small Business Management, 57(1).
pp.131-153.
Hickman, C.R. and Silva, M.A., 2018. Creating excellence: Managing corporate culture,
strategy, and change in the new age. Routledge.
Kirton, J.J. and Maclaren, V.W., 2018. Linking trade, environment, and social cohesion: NAFTA
experiences, global challenges. Routledge.
Liddle, J. and Shutt, J. eds., 2019. The North East After Brexit: Impact and Policy. Emerald
Group Publishing.
Maamari, B. E. and Saheb, A., 2018. How organizational culture and leadership style affect
employees’ performance of genders. International Journal of Organizational Analysis.
Rajaobelina, L., 2018. The impact of customer experience on relationship quality with travel
agencies in a multichannel environment. Journal of Travel Research, 57(2). pp.206-217.
Syam, A. and et. al., 2018. Determinants of entrepreneurship motivation for students at
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Entrepreneurship Education, 21(2). pp.1-12.
Vickers, B. and Khorana, S., 2018. Navigating uncertainty: towards a post-Brexit trade and
development agenda (Vol. 97). Commonwealth Secretariat.
Online
Impact of Covid-19 and Brexit for the UK economy, 2020 [Online] Available through;
https://www.tuc.org.uk/research-analysis/reports/impact-covid-19-and-brexit-uk-economy
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The UK economy after Brexit, 2021 [Online] Available through;
https://voxeu.org/article/immigration-and-uk-economy-after-brexit
Bank of England measures to respond to the economic shock from Covid-19, 2020 [Online]
Available through; https://www.bankofengland.co.uk/news/2020/march/boe-measures-to-
respond-to-the-economic-shock-from-covid-19
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