Impact of Monetary and Fiscal Policies on Business Activities in the UK

This presentation discusses the impact of monetary and fiscal policies on business activities in the UK. It explores how these policies affect the economy, the objectives of these policies, and their influence on businesses. Additionally, it analyzes the development in global and regional aspects and how they shape business activities. The presentation focuses on the case of Tesco, the leading brand in the UK retail industry.

Business Environment

INTRODUCTION
 Business Environment is defined as the factors including internal and external, which affects the business.
 Both factors influence each other that affect the organisation and these external and internal factors work
together to accomplish the business objective.
 For example external factors like political condition, economic condition of the country and internal factors
like organisational culture both affect the company.
 Tesco is the leading brand name in the UK in the retail and supermarket industry which grows faster, it
operates largest range of groceries stores and supermarket in UK.
 Organisation suffers from the fiscal and monetary policies which affects its development in UK and in
Global market. Further it discusses the regional and global developments reflect the business activities.

Impact of the monetary and fiscal policies on the business
activities in UK.
 UK has the largest economy in the world which is on sixth place globally. It exhibits
wide range of trading all around the world.
 As it possess the strong economy just because of its good policies in terms of the
monetary and fiscal terms.
 UK has the stability in their government after Brexit as the EU has suffered a lot.
Discusses on the impact of such governmental policies.
 These policies helps to regulate the country’s economy and it easier the survival of
the people.
 People improves their living standard, their businesses and thinks innovatively.

Cont..
Monetary Policy
 These policies conclude the interest charges and cash flow in the country, its uses and their supply of
money which helps the country to achieve their objective in economy senses.
 This monetary policy is handled by the Bank of England which circulates the money and make decision
on the interest charges since 1997.
 Objective of this monetary policy in UK is to keep the inflation stable and lower. In this way the Bank
try to keep the economy growth stable.
 If there is stability in the economic condition of the country, it supports the country to target for large
economy.
 2% inflation is targeted by the government. Setting the interest rates, it is about the rising in the
inflation rate if the inflation rate is higher than the interest rates also higher.

Cont..
Fiscal Policy
 Fiscal Policy is about the changing tax amount and government spending
which directly influence the level of economic activities of the country.
 Fiscal policy affect the levels of the government borrowings.
 It is not frequently used while government uses it to moderate the economic
condition.
 There are lots of political difficulties to change the rates of the tax, it just
reduce the inflation pressures.
 The government have to leave the economic management to monetary policy
and the Bank of England.

Objectives of Monetary and Fiscal Policies
 Low inflation
 Strong economy
 Lower the unemployment
 Maintain sustainable public finance.

Cont..
 Changes in the fiscal and monetary policies affect the businesses. These policies directly
affect the business and their operations. As the monetary policy impact the supply of
money, perform the role for regulating the inflation rate, cash reserve ratios, and bank
requirements. Fiscal policies which refers to collection of the revenue and spend by the
government. As explained it affects the taxation rates throughout the economy. So there is
deep impact on the businesses of these policies. It creates the competition among the
organisations mainly in supermarkets or airport operators which leads to the monopolies
in these industries. Competition policies try to keep the fair decisions in the market and
which open the unfair activities are not considered by the market competitors.

Cont..
 So the Tesco supermarket chain affected by this. it has tried to cooperate or merging the
operations in businesses senses with other organisations. Also it franchises the super market in
the market, so in this situation it creates thee monopoly in the market.
 As there are different market structures which has to be followed by the company like the perfect
competition, monopolistic competition, monopoly, oligopoly, etc. In the perfect competition there
are many suppliers and number of consumers. In monopolistic competition, there is only one
supplier is present to supply the raw material while there are other suppliers are present. So
basically it depends on the cost of the product. In monopoly, the price set by the supplier it is
fixed. In perfect competition, the prices of the products are average in market.

Cont..
 So Tesco set the prices as lower as they can afford the productivity costs. So that Tesco is monopolistic
competition in UK. In stepping to the market Tesco have to meet the standard criteria that has set by the
government like the quality of the product, and prices which are according to the financial condition of the
consumers. The perfect competition in market, is about the perfect demand and supply. In which the
previously accepted the norms by the government should be accepted by the organisation. Quality of the
products, and prices are competitively lower than the others in the market, it becomes successful in this
criteria.
 Development of the supermarket in the market is very easier when they have opened the local stores which
help them to increase their reach towards people. It creates the space for more suppliers and they must be cost
efficient and good quality of products which are according to market and match the criteria for the target
segment.

Cont..
 For example there is interconnectivity between he global economies which leads to the recession all over
the world. Also there is the effect of the shortage in the supplies of the raw material which should be cost
efficient, and those businesses which relies on the import of the goods from other countries. International
exposure had influences the market to be diversified and intensified due to the market demand (Sims,
2016). Tesco had a great advantage of the international exposure they provide the goods or groceries at
minimum cost and quality products. As they have their own productivity range they have profit in it. As
they have no expenditure for importing the raw materials
 Tesco has competitive advantages form these policies as they have invested to increase their local and
supermarket store in UK for generating more revenue. So the government implies less taxation o them as
they provide the products at affordable prices to their consumers

Cont..
 People get help from the government which lowers the taxes on the food products and so
consumers have increases the credibility. These policies possesses great impact on the
country’s economic condition, it stabilises the economy to enhance their growth. It creates
more options in the market for the small businesses. As people can utilise their talent and
innovative ideas which again help the people to raise their standards. Tesco have the profit
from these policies as the country relies on these policies, company can get more profits by
the implementation of the monetary and fiscal policy as they create new franchises, new
suppliers and new consumer (Afonso, Jalles and Kazemi, 2019). Company have the profit to
enter into the global market. This helps in business expansion for the Tesco.

Analyse how development in global and regional aspects
shape business activities.
Different countries of the world are connecting with each other for their own purposes like they want to enhance
their reach towards world. So in this way the people connected to each other for businesses purposes.
Development in Global Aspects
 Globalisation leads the businesses to increase and enter into the global market which again help the country for
increasing their economy. As it has three main aspects which are political, socio-cultural, economic. So all
these factors affects the businesses at global level in which socio- cultural factors influence the countries to
exchange their culture, tradition, languages, fashion, food etc. Social and cultural changes affects the business
of the particular country. It increases the demands in the public for other things which may not available in
their country, so they have import from other countries. Political factors of the country affects the condition of
the country in many senses like they have to follow the rules and regulations in the country.

Cont..
 If there are changes in the political conditions like Brexit in UK and EU countries, people may suffer from this, as
there is changes in government policies and structures. They applies new rules and legislation in their country which
has over all affect, mainly it influences the business activities. As the government changes, the companies have to
follow the new policies and procedures. They have to pay the duties on the import and export of the good. It may
leads to lower their profits. Economic changes, this is mainly concerned because it is the backbone of the country
which affects the GDP growth as well.
 So in fluctuation in the economy people have survived from many downfalls like there may be recession period, the
people of the country may suffer from unemployment. International Monetary fund as given four aspect of global
development which are trade and transactions, capital and investments, migration of people, dissemination of
people. All these aspects had huge impact on the country. As the businesses have to suffer in trading the goods and
transactions will be affected like change in currency.

Cont..
 Organisation may have their own business plans like they invest in the global market to generate high
revenues. Migration of people also affect the condition of the country, people moved from one place t
another in search of the jobs or finding new ways for income or many other reasons. It leads to
unhealthy issues in terms of the mental condition of the people, stress, and also there financial
condition becomes bad. So the companies have also negative or positive effect of the economic
factors, as they can have potential market in positive sense while they may loss their stability in
market in negative aspect.
 So the business have the great impact of the development of the globalisation, they may suffer from
the changes in their consumers demand, economic conditions also affect their businesses. Changes in
governmental policies leads them to slower their business activities, as they have to adopt many
policies rules and regulations for the smooth flow of the business.

Cont..
Development in regional aspects
 UK has survived from many changes during these years, regional development affects the
economy of the country. As there are lots of changes adopted in UK which affect their
public, local vendors, organisations and political conditions. The regional development is
affected by different factors like social –economic and environmental factors. These socio
economic factors mainly human resources, financial conditions, infrastructure
developments and many more things affect the condition of the country and influence the
regional development.
 Also people have innovative ideas of businesses, people adopt technology transformation
which easier their lives. As the advancement in technology, it leads to changes the
management system of the government. It imposed great impact on the people mentality.

Cont..
 Business ahs very positive effect of these socio-economic factors like more highly skilled
employees in the organisation, innovative ideas, and problem solving attitude in the worker
of the organisation proved helpful for the expansion of the business.
 Regional growth includes several strategies in terms of the business, commercial services
and funding programs. All these things help the country to get the success in establishing the
good economic condition in the UK. As the UK’s separation from the European Union
promoted the government to make new policies which is favour of the productivity growth.
So these policies can help the country to get recovery from the financial crises as well. They
have so much liberty in their market and also working to make it more flexible after Brexit.

Cont..
 It is the best business environment for the investments and global expansion purposes. Import and
export is equal to 62.5 percent of the GDP. So they have opened the market for all. As they have
average applied tariff rate is 2.0 percent. In some parts the UK has removed the tax duties on trade,
also they reduces the produce specific regulations and they don’t support some barriers in trading
like smooth import export, higher the profits etc.
 Companies in the country have many benefits from their changes in politics, technical and socio-
economic factors. Businesses are expanding with increased productivity at lower cost. The people
are satisfied now because of the end of the financial crises. Country is adopting new culture so it
changes the demand of the consumers in market. People like the innovative and quality products.
Tesco has great benefits of the changes and development in the UK.

Cont..
 . They have chances for expansion of their business as they have freed the tax duties in import and
export it enables them to trade at big level. As the company recruits the employees it will bring some
advancement as they have new organisational culture and their business structure will be affected, also
the innovation in the technology increases the productivity. They have highly skilled employees in their
company which have proper knowledge of the market and conditions.
 They know the demand of the consumers. So that they can plan according to them which brings more
potential buyers in their local stores as well as supermarkets. Hey adopt the regional culture so that they
can attract more customers.
 To become the globally first largest supermarket ranges, they can collaborate with the local vendors and
they can hand shake with new suppliers which again help them form the costing.

Cont..
 As they provide raw material at good prices. This brings latest trend to b followed in the company they will
use the digital online marketing strategies as they promote their business online with providing good
discounts. As they have local market knowledge like they know about the SME’s so that they can tie with
them. People adopts new culture so that company can brought up trends for festival, like they provide the
occasional stuff, home decor etc, this will impact their business.
 But there may have some challenges and issues in adopting new structure in the business due to the external
environmental changes like they may e unable to fulfil the requirement of the consumers, also it will impose
the losses in inventory as they have out of stock products or excess of products. So they have to bring the
technology advancements according to the world, like they have uses the updated database online, cloud
computing, data about their workers online which maintains the consistency of the organisation.

CONCLUSION
 According to the study about the impact of the fiscal and monetary policies on the
business organisation in UK, which helps the country to become stable in economic
sense.
 It may affect the businesses as the changes in policies and taxes amount, the growth of
business is slower down.
 But many positive effect are there like it provides aid to the consumer so it help the
business to maintain the stability.
 Fiscal and monetary policies are adopted by the government to maintain their economy
so that people have less burden of such policies and legal laws.
 Businesses have to assign and agree with these policies in terms to regulate their firm.
Tesco follows the governmental rules and regulations, it makes their survival very easier.

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