Impact of Lockdown on UK Economy and Economic Responses of Government and Bank of England

This report analyses the impact of lockdown on the UK economy and the economic responses of the government and Bank of England. It covers the circular flow of income, major economic responses of the UK government, analysing the major response of Bank of England, identifying the likely impacts of Brexit in UK economy.

Business Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
Circular flow of income:..............................................................................................................4
What are the major economic response of UK's government and their impact on circular flow
of income in the nation. ..............................................................................................................5
Analysing the major response of Bank of England on UK flow of income................................8
Identifying the likely impacts of Brexit in UK economy............................................................9
Recommendations:.....................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment affects the operations of the company on the large scale and this
includes various stakeholders, customers, suppliers and other government authorities and much
more. The present report is based on identifying the impact so the lock down on the efficient
working of the economy on the large scale. Further, the major economic response of the UK
government on the circular flow of on income on various people living in the UK will also be
analysed under this report. Moreover, response of bank of England on certain changes that are
prevailing in the UK economy due to the current pandemic will also be covered under this report.
Lastly, various impact of the Brexit on the UK people and its economy relating to the flow of
various goods and services will also be discussed in detail.
MAIN BODY.
Circular flow of income:
This is type of model that is been used to represent the flow of goods and services in the
economy between various economic agents (Agwu , 2018). Further, impact of Covid is seen that
the people with the low income group are more affected through this. Moreover, this could be
explained through the following points that are explained as below:
Unemployment:
Due to the pandemic there were cases of high level of unemployment in the country as
there were fewer opportunities available in the market. Also, the UK unemployment rate was
found at 4.8% from January 2021 to March 2021. Further, it was seen that people that were
affected more by Covid-19 were youth that worked mainly in pubs, restaurants, entertainment to
earn the basic amenities of life and to improve the standard of living (Akpoviroro and Owotutu, ,
2018). Also, it was seen that during the pandemic there was lot of economic inactivity as a result
of which source of income generation were very less and people were finding difficulties in
earning and as such very fewer options were available in the market.
Collapsing of businesses:
Due to Covid-19 it was seen that all the business had been suffered badly as flow of
income was very minimum and hence success of the new business were also uncertain due to
which people resist in investing in new projects with limited income. Further, it was seen that old
working business were also temporarily closed as revenue generation was less than amount of

expenses (Nashiruddin , 2019). Also, it was seen that there were major impacts on the small
business that were dealing mainly in personal services, retail, arts and entertainment etc.
However, the firms that have more cash in hand were likely to work well as expenses could be
met accordingly. Also, due to pandemic there were cases that business were not getting the
required resources from various suppliers as there were restrictions on trade and thus most of the
manufacturing units were also closed down that lead to greater negative impact on the overall
UK economy.
Increasing national debt:
It was seen that UK economy was facing the problem of budget deficit where the total
expenses exceed the revenue earned during the specific period. Further, UK government was
facing problems of fiscal imbalance as more of spending was done than it was taking through
taxes (Farole and et.al., 2017). Thus, it can be said that people were not having money to earn
the necessities of life and hence to fulfil such needs they were applying for more loans thus
increasing the overall debt in the country. Hence, the government was not able to handle
challenges of increasing poverty and death ratio in the country that was caused due to lack of
money, food and shelter for many underprivileged group of society and daily wage earners that
does not have other option of survival. Also, with the increase in the national debt in 2019 the
GDP of the country was also reduced to the great extent.
What are the major economic response of UK's government and their impact on circular flow of
income in the nation.
Governmental bodies in any nation or region are accountable to take and make strategic
decisions that may affect economic growth in positive manner (Hynes and et. al., 2020). UK's
government in the context of Lockdown or pandemic, may take strategic action in term of
utilizing and implementing those terms that affect economy and individual person who are
suffering from corona virus. They efforts to implement certain thing and these are considered as
factors such as :
Bounce bank loans-
United Kingdom's government in regard to negative impact of pandemic has taken
strategic decisions and actions in term of Bounce Bank loan, which play vital role in growth and
well-being of economy (Mitha, 2020). This scheme is designed or established to enable ventures
and entrepreneurs to access finance more effectively and rapidly during major pandemic

outbreak. With the help of this scheme, governmental bodies may give excellent response to
extensive economic break caused by pandemic that adverse impact or outcome is lock-down, due
to which whole world is suffering, especially needy or poor people who are unable to survive
and live a normal life before and after COVID-19 their suffering get worse. After considering the
entire disruption, UK' s government take initiative to create varied of measures just to aid
businesses in order to make them capable to survive the loss in cash flow, profits margin and
productivity as well as sales. The main motive of this scheme is to support the business world to
grow and continue the flow of income, which may help to enhance the economic standard and
allow progressing continually (Lea, 2020). It is an essential part of wider package of high
authority support for United Kingdom organizations and workers that permit them to lender to
cater more than six years term loan from 2 thousand British pounds by 25% of a venture
turnover.
Eat out help out scheme-
It is another scheme for which high authority is accountable and take concern of residents
as well as ventures needs. According to this scheme, 50% discount has been offered on all food
items and non-alcoholic drinks on every Monday, Tuesday and Wednesday. Also, there is no
minimum spend or voucher for this scheme and this was mainly launched so that food crisis due
to the pandemic could be overcome easily among the UK people (Erasmus and et.al., 2017).
Also, all those establishments that have applied for this scheme might later claim for
reimbursement from the government. Further, this scheme was also launched for supporting the
businesses so that they can be reopened after the Covid 19. Also, through launch of this scheme,
customer demand was boosted especially in the hospitality sector in UK.
Job retention scheme (JRS) -
This was the scheme that was launched so that job sector could be supported to great
extent by the government (
Coronavirus Job Retention Scheme, 2021). Also, it was seen that this
scheme supported about 50 million jobs through reducing the financial hardship and labour costs
of various firms. Also, this scheme has helped in supporting workers' income through cutting
down the initial working hours. The intended period for this scheme was during 1 march 2020
and 31 may 2020 but it was extended during the period (Liguori and Pittz , 2020). Further all
those organizations that are registered in PAYE payroll scheme irrespective of size or sector can
enjoy the benefits of this scheme. Through this scheme the government ensures that COVID

does not stop the ongoing operations of the company so that economy could be run in smooth
and efficient manner.
Kickstart Scheme:
United kingdom has been badly hit with Covid 19 and to uplift the economy in positive
manner the government has launch this scheme where any individual who wish to start up a new
business within the country could easily apply to avid the risk of unemployment for longer
period (
How the Kickstart Scheme works, 2021) Also, all the employers of all sizes could apply
for the funding that would allow to cover the setup costs and develop various employability
skills. This benefit of this scheme could be done either applying it directly or through any
gateway that will make the funds available within the five working days. Further, through this
scheme the employers would be able to get right candidates for the job so that business could be
grown to large extent and economy could be boosted with the impacts of the pandemic.
Impact on circular flow of income-
This term is defined as one of those factors that put direct impact on flow of products,
economic stability, growth and services and more. Above schemes as UK's government
implications may put positive impact on circular flow of income in term of enabling individuals
to purchase products and run their ventures in effective and productive manner. They take
initiative to enhance the loving standard of local people and may give them power to survive
during pandemic that put adverse impact on whole world. It may affect positively and enhance
living standard of citizens who are dealing with major throwback and impact of pandemic. UK's
government schemes allow people to fulfil their needs in term of working with a company that
may take pleasure of bank loan scheme (Ghauri, Strange and Cooke , 2021). Also, it is seen that
through all these initiatives that are taken by the UK government the flow of income would be
increased as more jobs would be created that will be helpful in creating employment
opportunities for individuals that were earlier jobless. Further, the spending of the people would
also be minimized through Eat out help scheme and thus savings would be increased that will
allow people to think of more creative ideas to invest in better options that will be helpful in
development.
Further, such economic response motivated UK people to overcome the challenges of the
pandemic through continuous support from the government that also allowed global growth in
the recent years to the UK as financial stability was maintained. Also, this scheme helped in

overall development of the country as various policies were made for so that negative economic
impact could be reduced in much better manner.
Analysing the major response of Bank of England on UK flow of income.
The major response that Bank of England has taken on circular flow of income was that it
was able to manage the economic shock very well. Further, the bank introduced various policies
to overcome the challenges that the country had faced due to the Covid 19. Moreover, the bank
had reduced the bank interest rate so that borrowing of the people could be managed to the great
extent (Hudakova and et.al., 2018). Also, bank rate will help support all the small businesses and
build consumer confidence so that they are able to live life in more sustainable manner. Further,
Bank of England had provided additional incentives so that economy would be able to run
properly. Also, this bank was active during the times when national debt was increased on the
large level. Hence, it aimed at offering the long term loans to big companies so that more
lending could be initiated in the country. Thus, this process is done through offering cash or
corporate debt. Furthermore, it has also provided additional support to those banks that would
help in lending funds to medium and small size enterprises.
Also, it BOE main motive during the time of Covid was to ensure that all the regulatory
actions maintains the financial stability of the country along with developing policies that will
ensure the safety and soundness of the firms in the long run. Some actions that were taken by this
firm in detail are as follows:
 The bank has focused on ensuring that all the customers during the times of COVID are
treated fairly so that there is no misconduct in the activities. Moreover, there are strict
norms that there should be no excuses on following such rules.
 Monetary policy of the bank is focused in improving the investment in the country
through lowering down the interest rates so that economy would be s grown in better
ways in the near future (World Bank, 2017).
 Also, the bank is been facilitating the demand of goods and services in the country
through initiating changes in the working patterns and use of bests technology and cyber
reliance and also through reducing the service charges on availing various bank facilities.
 Further, the BOE has supported is monitoring large amount of data such as collecting
total numbers of journey in train, internet searches, restaurant booking etc. so that
functioning of the economy could be analysed in detail.

 BOE is also actively engaged in helping customers do more of digital transactions so that
social distancing could be maintained and less number of people visit the bank for
conducting any type of business transactions.
Thus, such implications that are done by the bank will lead to increase in flow of income
in the country as people will be able to readily avail various services that has lead to decline in
the financial, economic and health crisis with the growing number of cases in the country (Al-
Surmi , Cao and Duan , 2020). Thus, government was able to reduce stress among the various
people due to certain extent as various efforts were made to perform things in proper manner.
Identifying the likely impacts of Brexit in UK economy.
Brexit is refers to the decision that is made by the UK government to leave the European
union. Also, certain changes in the legal framework of the Brexit has affected the operations of
the business and created certain problem for the decision makers. Moreover, now there are
certain trade and tariff restrictions that would not allow UK companies to export goods easily
from one country to another. Also, it is seen that major immediate impacts of the Brexit along
with future impacts are mostly on the financial sector of the country and some negative impacts
are as follows:
Supply chain: It has lead to increase in various costs and delay in the supply chain as
exports and imports of various goods would be now difficult process. Hence, the firm would face
problems of getting raw materials at lower costs and there are chances that goods are not made
timely available that might affect the supply chain of the economy.
Custom tariff: This factor might also cause negative impact on the UK economy as due to
this new reform the companies need to fulfil certain documents that is complex and lengthy
process and payment of goods would be done on the basis of various taxes such as excise duties,
VAT, custom duties etc (Bedi , 2019).
Workforce: It is also seen that with upcoming of such new reforms in the UK the impact
on the employment would be marginal but those companies that are established in areas of
European union and are working with and for UK provisions would be largely impacted by the
changes that are occurring due that government (Shtal and et.al., 2018)
Regulation: It consists of various things that includes labelling, product standards, safety
and standard the company is currently working on. Further, various companies need to decide
whether they are ready to operate both in UK or EU markets and comply and follow either of the

laws or transfer their registration in either one of the country. Earlier, when goods were
transported easily from one place to another without certain restrictions now the system has been
changed because of this reform and thus goods could be exported through the involvement of
third party that is quite time-consuming and costly process for the country like UK (Brotspies
and Weinstein , 2019).
Economic issue: This factor has largely impacted the business as UK companies now
have to explore new markets to export certain goods that takes lot of time. Also, due to this
reform many companies have been shut down and recovery of these is very difficult process.
Further, acquisition of the new companies might be risky as there are chances that companies
not operate well in the home country (Faghih and et.al., 2018).
However, in spite of some negative impacts there are also positive influences of the new
reforms such as there are various opportunities for the growth for all the emerging markets such
as china, Brazil that would make all the British products cheaper in international markets. Thus,
it would allow people to consume variety of goods at various prices.
Recommendations:
 It is known that business environment is not stable for longer period in any country and
thus there are always certain changes that the country need to face from time to time.
Also, it is seen that UK had been able to overcome certain challenges in positive manner
but it is recommended that the country need to make certain policies on the trade in
advance so that any form of restrictions does the least impact on the working of the
business.
 Also, it is to be suggested to the government that better formal polices and early alert
frameworks need to be made in conducting the business operations is smooth manner so
that in time of outbreak situations of shutdown or closure does not happen to small firms
(Almabekova, Kuzmich and Antosik, 2018).
 Further, additional resources need to be gathered in stock beforehand so that dependency
level would be less on other factors so that bests of the measures could be taken on time.
Also, government should create more of the awareness programmes so that the UK
people are prepared to handle all the future problems in more coordinated and
cooperation manner. Such awareness programmes could be conducted through the help of

the external agency or third party that will allow even the underprivileged sections of the
society to understand in better manner.
CONCLUSION.
From the above report it can be concluded that any certain change in the business could
affect the business both in positive and negative manner. Further, such changes need to be
addressed by the businesses in well-mannered so that certain risk could be avoided in effective
manner. Also, the report had analysed the concept of circular flow of income due to the current
pandemic that affected the lifestyle and standard of living of various people. Further, the study
analysed economic response of the UK government in overcoming such challenges among
various people. Moreover, the decisions and response of the bank of England on the current
pandemic situation along with certain implications on UK people had also been covered under
this report. Furthermore, certain impacts of new Brexit reforms in the UK such as on the trade
and living along with certain recommendations had also been discussed in detail.

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