Impact of Monetary and Fiscal Policies on Business Activities in UK

Business Environment
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TABLE OF CONTENTS
1. INTRODUCTION 1
2. Impact of the monetary and fiscal policies
on the business activities in UK
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3. Asses the development in global and
regional aspects shape business activities
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4. CONCLUSION 9
5.REFERENCES 10
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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. In
this report, discusses about monetary and fiscal policies in UK influence the Tesco. Also it
concludes the global and regional aspects development affects the business activities. As
the UK has stability in the economy of the country and adopting new cultural and social
things in their country.
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. Monetary and Fiscal policies are defined in financial ways which
includes different criteria implements on the charges for thee development of the country
by people. As these charges imposes on the people in the form of taxes, which have to pay
by the population exist in the country (Wood, Coe and Wrigley, 2016).
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 (Gonen, and et.al., 2017). 2% inflation is
targeted by the government. Setting the interest rates, it is about the rising in the inflation
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rate if the inflation rate is higher than the interest rates also higher. As the interest rates
rises, it reduces the demand of the consumers and prevents the economy which is
expanding too fast. If the economic growth in down, then there is cut off in the interest
rates , so the lower interest rates help too increase in the economic growth which leads too
reduction of the inflation rate. In some exceptional conditions, the Bank of England applies
the unconventional monetary policies. For example, in period of 2009 to 2017 there was
unstable condition in the economy of the UK then the government lowers the interest rates.
Hence they pursued the quantitative easing- a policy which includes the bonds of
government and increment in the cash flow or money supply (Nguyen and et.al., 2017).
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. But automatic
stabilisers of fiscal play an important role to fix the economy which is moderating
economic cycle when there was the recession in UK. Government automatically receives
the lower revenue in form of tax and spends a large amount the unemployment benefits.
Same as monetary policies the government have to adopt the expansionary fiscal policy in
exceptional conditions. For example, government in UK have to lower the rate of VAT
which again stimulate economic activities when there was the recession in 2009. It has
deep effect on the GDP about 10% borrowing to rise it (Prajogo, 2016). This level of the
borrowing the public which helped to provide a new energy to regulate the economy. As
the political cost is high to the government borrowing level. So there was the labour
government lost the 2010 election. So the government promised to follow the conservative
winning which is austerity policies and government spending. In period of the recession,
government spending increased and lower the taxes. It leads to the disposable income of
the people after lowering the taxes. This helps to higher the economic growth and
decreases the unemployment (Kljucnikov and et.al., 2016).
Objective
Low inflation
Strong economy
Lower the unemployment
Maintain sustainable public finance.
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