Analyzing UK Business Environment: Fiscal, Monetary & Global Factors

This report provides an analysis of the business environment in the United Kingdom, focusing on the impact of fiscal and monetary policies. It defines the business environment, highlighting both micro and macro factors that affect businesses. The report delves into fiscal policy, explaining its role in managing the economy, particularly in relation to inflation and economic growth. It also examines monetary policy, detailing how the Bank of England uses interest rates to control inflation and stimulate economic activity. Furthermore, the report explores regional and global factors influencing UK businesses, offering a comprehensive overview of the economic landscape. It includes an overview of the UK's economic condition, fiscal and monetary policies, public finance, labour market, and the impact of global and regional factors.

INTRODUCTION TO
BUSINESS
ENVIRONMENT

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Fiscal Policy.............................................................................................................................3
monetary policy.......................................................................................................................5
regional factor..........................................................................................................................9
Global factor...........................................................................................................................10
CONCLUSION.............................................................................................................................11
REFERENCES............................................................................................................................12

INTRODUCTION
Business environment can be defined as sum total of all that external and internal
factors that affect business. Macro and Micro both types of factors can impact running
of business. Micro factors that can affect business are suppliers, competitors,
employees and market intermediaries. Macro environmental factors which can affect
and influence business activities are social, economic, technological, environmental and
many more. These factors can lay positive as well as negative impact on working of
business. To adjust in business environment organization needs to follow a flexible
approach, so that it can help them in growing. Present report will lay emphasis on
impact of monetary and Fiscal policy on activities of United Kingdom business
organization. It will also analyze how the develop development in global and regional
aspects shape business activities. Report will also lay emphasis on global and regional
factors affecting the running of business in United Kingdom.
MAIN BODY
Fiscal Policy
A country’s economy can be defined as the huge combination of all tasks which
are being related to production and consumption of goods and services and also the
supply of money is being included in it. The economy is defined as a social domain that
emphasize the practices, discourses, and material expressions associated with the
production, use, and management of resources. Economic agents which perform all
economic activities consists of individual, business, organization or governments.
Economic transactions take place when the groups and parties come together and
agrees to dealing upon the cost of potential goods (Debortoli and Galí, 2017). An
economic condition of country defines about how developed it is. The economic
activities are linked to all task which related to production and consumption of goods. A
market based economy can be defined as that economy in which goods and services
are produced by analysing needs and demands of consumers.
It has been analysed that economy of United Kingdom is being considered as sixth
largest and measurement of this has been done by Gross domestic product. Also it has
been considered as ninth largest when measured by purchasing power and economy of
United Kingdom is taken as twenty second largest when measured in terms of Gross

domestic product per capita. Economy of United Kingdom is 3.3% of GDP of world.
Various changes have been taken place in structure which is economic of United
Kingdom. It has been analysed that changes were really necessary for development of
economy of country. Industrialization has been implemented in region during eighteenth
century which has supported country in growing. All these development has helped
country in becoming pre-dominated economy in Europe. These changes were analysed
during 19th century. Also industrialist has a huge contribution in developing economy in
United Kingdom like for example they brought out major innovations like steam engines,
textile equipment and tool making. Banks and financial institutions were also engaged in
supporting Small and medium sized organizations which supported country in
enhancing their economy. Also in 19the century it was analysed that country provide
assistance to free trade that has helped organization in United Kingdom in expanding
globally (Sims, 2016).
Fiscal Policy can be defined as that policy in which government is engaged in
adjusting levels of spending and tax rates so that they can monitor and lay impact on
influencing economy of nation. This policy is also known as sister strategy to monetary
policy, which is maintained by central bank and affect money supply of nation. This
policy can help country in achieving and reaching out their economic goals and
objectives. Economic phenomena can be controlled by government by making use of
Fiscal policy.
Briefly explain how this policy came out
Fiscal Policy is being given by a famous theorist and British economist who is
known as John Maynard Keynnes. This theory can also be known as Keynesian
economics. In this theory the economist has explained that macroeconomic productivity
level can be influenced by increasing or decreasing levels of tax and spending’s of
public. This impacts in lowering down the rate of inflation. Fiscal policy helps in
increasing rate of employment and maintain a healthy money value. This policy has
most important role in managing economy of country. Fiscal policy can be used by
government in a situation where the rate of inflation is too high and economy needs to
be slowed down. So this the appropriate time to make use of this policy.
Does this policy exist within United Kingdom?

Yes, United Kingdom has taken in account the use of Fiscal policy. The main
objective of United Kingdom fiscal policy is to cut down the rate of inflation and make it
up to 2%. Also they want that country must have a strong economic growth but not a
growth which is related to inflation (Williams, 2016). Fiscal Policy was being used by
United Kingdom because country is facing high risk because structural changes so
inflation can be increased, so in order to overcome this situation government of United
Kingdom has implemented fiscal policy. Fiscal policy will support United Kingdom in
keeping up the balance in Gross domestic product and also the level of unemployment
will be reduced when government is implementing policies like this. Fiscal policy has
also supported country in maintaining sustainable public finances. This policy will help
government in cutting out deficit in budget. Various job opportunities have been created
by this policy.
monetary policy
Monetary policy can be defined as that policy who is engaged in controlling rate of
interest that can be paid on borrowing which is short term. This policy is being run
authority which are monetary in a country. Main aim and objective of adopting this policy
is to cut down rate of inflation so that stability in prices can be maintained by
government. This policy can be implemented by country so that liquidity position in a
nation can be increased. It also enhances the economic growth of country. Liquidity can
also be reduced so that inflation in a nation can be prevented (Furman, 2016).
Does this policy exist in United Kingdom?
United Kingdom is engaged in making use of Monetary policy. Bank of England is
being engage in keeping a pace on monetary policy of United Kingdom. Monetary policy
committee has main objective of balancing inflation rate of country at 2%. If economic
growth is sluggish, then interest rates can be cut, lower interest rates boost economic
growth and help to reduce inflation (Tenreyro and Thwaites, 2016). Independent central
bank can carry out transaction related to monetary policy. It influences demand and
supply of country. This can help in keeping a balance on economy of United Kingdom. It
has been analyzed that in the year 2017, the rate of interest has cut short down to
0.25%. It has also been identified that cut down interest rate may not be work in
liquidity trap.

United Kingdom has been termed as fifth largest in the world. They have Gross
domestic product of $2.81 trillion. This figure has been given out by International
monetary fund. There has been a recent report that Gross domestic product level of
United Kingdom will fall at rank 7. It has also been analysed that India will take over
Britain. They will fall by two places ad Brexit has made pound weaker. In 2019 the
consumer price inflation was measured at 1.5%. It is because the oil prices were falling.
Inflation rate has been increased above the expectations of Bank of England 2% target.
United Kingdom public finance- Public finance can be defined as the role which
government plays in an economy. In this branch of economics, it has bene identified
about the revenue of government and expenditure of government related to public
authorities. Public finance has faced various financial crisis because United Kingdom
economy is going through a deficit state. It has been analysed that government of
United Kingdom has created a debt of £1.78 trillion. The amount of debt ha been
increased; it has been tripled form past few years. It has also been identified that this
year United Kingdom government has shown highest number of consolidated balance
sheet. Consolidated statements consist of various organizations. Financial institutions
have also been included in that.
Debt: In year 2018 it has been analyzed that debt of United Kingdom has shown an
increasing phase. It was noted that country has made a debt of £1.78 trillion. Because
of the debt the economy of United Kingdom is going through various structural changes.
It has been analyzed that debt related to public has been measured at £48 billion. This
figure comprises 4% of Gross domestic product and 8% of United Kingdom tax income
which is related to government (Palley, 2015). The national debt of United Kingdom is
the total quantity of money which is borrowed by the government of United Kingdom.
This is being borrowed by British Treasury and other agencies of government. It has
been confused by budget deficit of government. Public debt can be increased because
of the reason of deficit in budget.
Spending- Recent survey has been done that the total number of United Kingdom
spending of 92918.00 GBP Million. This figure will be reached by them at the end of this
quarter. In budget which was declared for year 2016-2017 the total spending of
government was being noted at £772 billion. Spending’s of government has been

increased from pasts so many years. It has been analyzed that spending in areas like
Ireland, wales and Scotland is higher in comparison to other states. It has also been
analyzed that Scotland is involved in gathering higher amount of tax than the rest of
United Kingdom. Local government has also been engaged in giving grant to school. It
has been analyzed that public spending has been 56% of Gross domestic product. In
defense the 60% of spending was given in defense (Gertler and Karadi, 2015).
Surplus/deficit- It has bene analyzed that United Kingdom has faced high amount
if surplus/deficit in the year 2018. Budget Deficit can be defined as the difference in
cash between the receipts of government and their spending’s. It has been identified
that total revenue in the year 2015-2016 was estimated to be £673 billion whereas the
expenditure of country was noted at £742 billion which means that in that year United
Kingdom has deficit of £69 Billion. In this country needs to implement fiscal and
monetary policy so that they can overcome situation of deficit in country. Deficit in
United Kingdom was major in year 1994 (Hansen, 2018). This was because of the
reason like ERM crisis that occurred in that year. By this the Gross domestic product
reached at 5.7%. But after this deficit has come down and make the economy surplus of
2.3% of GDP. Gross of general government was noted at £ 1821.3 Billion. This was
estimated at the end of year. It was equivalent to 85.2% of Gross domestic product.
United Kingdom policies must emphasize on improving the condition of deficit in
country. This can support nation in growing and maintain their economic growth
(Debortoli and Galí, 2017).
UK labour market (employment/unemployment): It has been analysed that
employment rate United Kingdom was marked at 76.05. It was higher than last year in
which it was estimated at 75.06%. In year 1974 in the months of October and
December, the employment rate was marked at 3.8%. It was also analysed that
economic activity rate of United Kingdom was being estimated at 20.9% which was
lower than last year (Furman, 2016). It was analysed that last year rate of economic
inactivity was 21.0%. There has been increase in employment rate of women. 32.75
million were being employed in United Kingdom and these people were between the
age of 16 to 35. 354000 people were fully employed during the end of first quarter in
2019. 107000 were involved in doing part time jobs. Economic inactivity rate for all

people was estimated at 20.9%. For men it was analysed at 16.45 and for women it was
analysed at 25.3%. Average regular pay was estimated at £503 per week.
Inflation: United Kingdom inflation rate was analysed between 2-2.5%. In August
2017 the rate was estimated at 1.7%. Changes in consumer price inflation came
because of electricity, gas, and various other fuels that modifies energy price cap.
Inflation rate has huge impact on finances related to household. It also depends on
circumstances of individuals (Wu and Xia, 2016). Government can also be benefited as
high rate of inflation can eat away the values which is being related to debt. Individual
who have borrowed fixed rate mortgaged then this can benefit from inflation as it can
reduce their amount of debt.
Interest rate (Current rate of interest): Present interest rate of United Kingdom
has been 0.75%. Also from past many years the rate of interest has been increased.
Bank of England has also given interest rate. It was around 5.5%. Average mortgage
rate in country was noted at 7.5%. At low interest rate, individual can borrow more
amount of money. This increases borrowing power of people. Over the past year’s
interest rate has remained stable. If more spending’s has been done, then it is known as
Buoyant economy. Low rate of interest has led people to lose their jobs (Bodenstein,
Guerrieri and LaBriola, 2019).
In United Kingdom the supply of money is been affected by supply and demand.
Higher money supplies the lower will be the interest rate. Borrowing power of customer
can be increased when rate of interest is lower. More amount of money runs in
economy if the interest rate in country is lower. If the supply of money is low, then it can
increase rate of interest in nation. Market risk can also lay impact on supply and
demand. There are two possible investments for his present money—one offering a 5%
interest rate and the other offering a 6% interest rate.
What impact this can have on business that is on small and medium size
organizations in United Kingdom.
It has been analyzed that Small and medium sized enterprises in United Kingdom
are engaged in paying high rate of interest. It has also been identified that organizations
are finding it difficult to keep a pace with interest rate as fixed rate funding has been
really very difficult to come up by. If the interest rate in country will increase, then it will

be a loss for Small and medium sized organization has banks and other financial
institutions will charge more for loans of business. Low rate of interest and low interest
loans can help nation in raising out economic growth. It can also increase profitability in
region. Also if loans are given at low rate of interest then Small and medium sized
organization abilities increases to pay. Higher rate of interest can reduce the ability to
pay of SME. Also business investment. Can be boosted up if they are providing loans at
low rate of interest. This can support Small and medium sized organization in growing
and achieving their goals and objectives.
What impact could this have on overall economy?
Increase and decrease in interest rate can lay impact on consumer behavior and
psychology. If interest rate is rising, then both business and consumer can cut down
spending’s. By this country can face situation of fall in prices of stock ( Bodea and
Higashijima, 2017). If the interest rate in United Kingdom fall down, then the spending’s
of consumer and business will be increased, this will lead to rise in prices of stock
market. Interest rate can also lay impact on prices of bond. Rise in price of interest rate
can lead to fall in prices of stock market. By keeping a pace over federal fund rates
United Kingdom can keep rate of interest in control. This can allow the economy of
United Kingdom to make better decisions. It can also support economy in growing and
also by this they will not be able to face situation of recession (Kiyotaki and Moore,
2019).
There are various factors which can affect and lead to economic crisis in United
Kingdom. These factor can include high unemployment rate, natural disaster, stock
market bubble, and liberal lending practices. An economic crisis can take place in
United Kingdom when the rate of interest is high, this can lead to decrease in
spending’s of consumers. Supply of money and demand can also be affected by this.
The condition of unemployment can also be appeared if countries are engaged in
outsourcing jobs from other countries. If unemployment in country is because of this
reason, then it is more permanent in nature and this can lead to instability in economy of
United Kingdom.

regional factor
Regional factor: These are those factors that can lay regional impact on
development of global business activities. Like for example geographical consideration
can help business in growing (Bianchi and Ilut, 2017). It is because there might exist a
situation where people who are living in same area have similar taste and preferences,
so business can have engaged in fulfilling needs of large number of consumers. This
can support organizations in United Kingdom in growing. Also owners of business must
be engaged in knowing and having full idea about the location in which they are going to
start business. They must analyze needs and demands of people who are living over
there, so that organizations can create their goodwill in mind of customers. It can also
help business enterprises in setting up their market share (Dosi and et.al., 2015). Other
regional factor that can affect growth of business is to identify that proper amount of
human resource is available at the location in which owner is going to establish their
business. This can support organization in increasing their operational efficiency and
productivity. Also this cans support local organization in expanding their market in global
areas where they have a chance to explore and meet out new opportunities. Also
organization must engage in laying keen emphasis on environmental aspects. They
need to make sure that enterprises have proper strategy for any natural calamity that
can affect business. This will help business organization in growing and achieving their
goals and objectives.
Global factor
Global factor: There are various factors that can shape business activities, this
includes social, economic, political and technological factor. In this organization have to
make use of advancing technology so that they can gain competitive advantage. By
making use of advanced tools and techniques companies in United Kingdom will grow
and also goals and objectives of business can be achieved. Various laws, rules and
regulations can also affect business activities. Like for example if labor rate in any
region increases then this can decrease overall operational profit of business. In this
organization must also be involve in analyzing needs and demands of consumers so
that they can grow (Arestis, 2015). This will help them in building up their brand value
and also it will create positive impact on mind of customers. This aspect can help

companies in creating consumers loyalty. Also other Global factors like sustainability
can also lay impact on working of business. In this all enterprises must make sure that
they are make effective utilization of resources so that future generation do not suffer.
This can help them in proper allocation of resources. Also while expanding to other
country they need to analyze the belief, values and thoughts of consumers, so that
organizations are not engaged in hurting sentiments of customers. This aspect can help
organization in building up their goodwill and by this they will also be able to settle down
their firm in new market. It can help them in increasing their business (Auclert, 2019).
CONCLUSION
From the above study, it has been summarized that Fiscal and monetary policy
have a huge impact on economy of country. These policies have been engaged in
creating employment opportunities for large range of population. It has also supported in
keeping up the balance between economic growth. It has also been analyzed in report
that supply and demand can lay huge impact on economy. Also it has been interpreted
in assignment that the rate of employment in women has been increased. Also there are
various global and regional factors that has affected growth of economy. The inflation
rate of United Kingdom was marked at 2%. It has also been analyzed in presentation
that small and medium sized organization are paying quiet high rate of interest. If rate of
interest given by banks are high then these organizations will not be able to take high
amount of loan which can affect their growth aspects.

REFERENCES
Books and Journals
Arestis, P., 2015. Coordination of fiscal with monetary and financial stability policies can
better cure unemployment. Review of Keynesian Economics. 3(2). pp.233-247.
Bianchi, F. and Ilut, C., 2017. Monetary/fiscal policy mix and agents' beliefs. Review of
economic Dynamics, 26, pp.113-139.
Bodea, C. and Higashijima, M., 2017. Central bank independence and fiscal policy: can
the central bank restrain deficit spending?. British Journal of Political
Science. 47(1). pp.47-70.
Bodenstein, M., Guerrieri, L. and LaBriola, J., 2019. Macroeconomic policy
games. Journal of Monetary Economics. 101. pp.64-81
Kiyotaki, N. and Moore, J., 2019. Liquidity, business cycles, and monetary
policy. Journal of Political Economy.127(6). pp.000-000.
Auclert, A., 2019. Monetary policy and the redistribution channel. American Economic
Review. 109(6). pp.2333-67.
Wu, J.C. and Xia, F.D., 2016. Measuring the macroeconomic impact of monetary policy
at the zero lower bound. Journal of Money, Credit and Banking.48(2-3). pp.253-
291.
Gertler, M. and Karadi, P., 2015. Monetary policy surprises, credit costs, and economic
activity. American Economic Journal: Macroeconomics. 7(1). pp.44-76.