International Trade and Finance: Challenges and Capital Allocation in the UK and US

International trade
finance and investment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Background of financial markets.................................................................................................1
Capital allocation within domestic economy...............................................................................2
Capital allocation within international markets...........................................................................4
Evaluation of the selected economy............................................................................................6
Critical evaluation of the challenges that country is facing due to industrialisation and trade
policies.........................................................................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
International trade could be defined as the purchase and sales of goods and services between
different countries. With the help of it, the nations try to manage and develop their economy.
Apart from this, if a country is willing to attain growth for economy then it will be possible with
the help of international finance and investment (Bhogal and Trivedi, 2019). In order to develop
the international trade with other nations it is very important for all the businesses to be focused
with these two elements. The organisation which is selected for this report is Schroders Plc
which is one of the largest international investment entities of UK. This assignment consist of
information related to financial market and capital allocation in domestic as well as international
economy. Moreover it has analysis key challenges that are faced by the country because of
industrialisation and trade policies.
Background of financial markets
Financial market: It is defined as the market place in which different types of financial
assets are traded like are shares, bonds, debentures, derivatives etc. Main purpose of such
markets is to operate the capitalist economies smoothly so that the trade at domestic and
international level could be carried out easily. There are various types of financial markets such
as stock, forex, derivatives and bond markets. Different functions of financial market include
price determination, fund mobilisation, risk sharing, easy access to the market, reduction in the
transaction cost, liquidity improvement and provision of the information. Apart from this, it is
also focused with formulation of capital so that the economy could be developed. Main objective
of financial market is to provide a place to the investors to invest their money in different types
of securities so that they can earn good returns (Bonfiglioli, Crinò and Gancia, 2019).
Back ground of UK’s financial market: The financial market of UK is very large as the
number of investments that are made by UK’s citizens in different securities is very high. It is
providing a platform to the investors as well as borrowers to trade the securities and get funds.
The financial market of UK holds around 25% of the global private equity market which is a
large percentage. Apart from this, if this percentage is analysed in context of Europe then the
country is holding around 52% of the market. The stock exchange of UK which is LSE (London
Stock Exchange) is one of the largest stock exchanges in United Kingdom and world. The
performance of it is very good since past 300 years which shows that it is very huge. The number
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of individuals who are employed by the financial market of UK is around 50000 individuals. In
United Kingdom the stock brokers, financial advisers and banks are managing the stock and
shares of worth 412 billion. It is huge amount which shows that UK’s financial market is very
large (Cieślik and Goczek, 2018).
Allocation of capital within domestic economy:
Domestic economy of UK: UK’s economy is one of the highly developed market
oriented and social economy. The rank of it on the basis of nominal gross domestic product is
fifth and according to purchasing power parity the rank of it is ninth. It is ranked as the twenty
second largest country having good GDP per capita. In year 2019 US was ranked as the fifth
largest exporter and importer. It shows that the country is highly focused with international trade
so that the economy could be developed. It is one of the most globalised economies and the
countries that are part of it are England, Wales, Northern Ireland and Scotland (Kavussanos and
Visvikis, 2016).
Capital allocation by UK in domestic economy for international trade: Capital
allocation is process of distributing the financial resources of a country to improve the financial
stability of the firm in long run. The decisions related to the allocation of funds are made by the
legal authorities of the country. In UK the legal authorities are allocating funds in different
sectors. The discussion of the allocation is as follows:
 Small domestic business of UK: The legal authorities of UK is allocating funds to the
small businesses that are having capability to attain growth in future. Main purpose of
allocating funds to such businesses is to support them so that they can meet all their
future goals and objectives. At the time of global crisis large entities are not able to carry
out their operational activities in systematic manner and at this time small business can
support the economy. This factor is also focused by the government of UK while
planning to grow the economy. With the help of it, UK is able to find ways to deal with
all the negative situations or the issues that will be leaving adverse impact upon the
economic growth. By allocating funds to the small businesses the legal authorities make
sure all such types of businesses get funds to carry out operations (Small businesses in
UK, 2020). The following chart shows the growth of small businesses in UK:
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