Long Term Economic Prospects in UK Economy

Long Term Economic Prospects in
UK Economy with Reference to
Brexit and Covid-19

Literature Review
Economic growth is the increasing production of goods and services in a particular period using
scarce economic resources such as labor, land, capital, and entrepreneurship. Proper utilization of
the resources produces economic benefits for the economy and the people of that economy. In a
growth economy, the business organizations do well and create job opportunities which
ultimately increase the growth of the economy (Morita, Takatsuka, and Yamamoto, 2015).
Government policy, the attractiveness of markets to investors both local and international,
international trade, and exchange rate are the indicators of improving the economic condition of
a country. The UK is one of the largest economies in the world and the country is attractive to
foreign investors. The country is technologically developed and human capital is skilled enough
to work in the advanced technological environment. The business organizations are investing in
the UK, FDI is increasing after the pandemic through FDI has been reduced after Brexit and
during a pandemic. Government policies like fiscal policy and monetary policy have also
impacted the economic growth of the UK during the pandemic (Morita, Takatsuka, and
Yamamoto, 2015). The economy will expand surprisingly in the long term as business activities
are expanding after the pandemic situation. Economic resources like labor are providing training
to be skilled in line with the requirement of technologies and changing business environment.
The labor is hired from different cultural backgrounds of the world which increases workplace
diversity within the organization and this diversity leads to innovation of technologies and
techniques (Lavery, Quaglia, and Dannreuther, 2018). UK government’s policies are
expansionary and in favor of the business organizations which increase aggregate demand in the
market and improve the growth of the business. Employment opportunities create demand and
demand increases economic growth for a longer period. International trade and balance of
payment are related where UK exports technological products and capital inflows are higher than
capital outflows. The favorable flows of products and capital create a surplus balance of payment
which improves the exchange rate and makes foreign products cheaper in the UK market (Liu,
2015). The financial market in the UK is strong enough and the companies can raise funds easily
whenever the companies need money for business operations at the low cost of capital. For
sustainable business operations and sustainability of the environment, the government imposes
laws and reduces the tax rate on income which impels the business organizations for expanding
business. Thus the UK economy is growing gradually though in 2008 the country confronted a

big frustration in history but immediately the country has recovered its economy through an
expansionary policy of the government. The government provided support for the development
of human capital through training programs and also provides incentives for technological
advancement (Mudra, 2021). Furthermore, the country is naturally developed as the geographical
location has enriched the country with the beauty of nature. Tourists make travel in the country
which increases the inflows of the fund and increases aggregate demand for goods and services.
The government provides adequate support for the development of geographical beauty and
makes the country attractive to foreigners. The government makes policies considering climate
change and prioritizes the environmental issues while taking policies. The government policies
are sustainable which ensures the safety of the social community as well as the development of
business performances (Lavery, Quaglia, and Dannreuther, 2018). Foreign companies like
TATA, Toyota invest in UK which increases the FDI as well as creates employment
opportunities. In the future, the economy is expected to be more attractive for business
organizations as government policies are in favor of business organizations. Since technologies
are improved, the communication and transportation system is improved to ensure proper
transformation of information to intended users and delivery of products easily. Thus the
facilities attract business organizations to make an investment in the UK and this improves the
UK’s economy on large scale (Owen and Walter, 2017). This growth and improvement of the
economy are for a longer period where the growth will be expected to be continued.
EU is an economic union of some European countries that got tariff-free transaction facilities
while trading among them. The UK is one of the countries but the country has exited from the
union which is known as Brexit which has large-scale impacts on the UK economy. While the
UK was a member of the EU the country could trade without tariff and as the country is
technologically attractive, other member countries invested in the UK (Rosamond, 2018). But
after the Brexit free movement of factors of production and trade of goods and services has been
restricted which has reduced trade with other EU members. FDI has been decreased drastically
after the Brexit and European companies have divested their fund which has increased capital
outflows which have impacted the balance of payment and exchange rate against the dollar.
After Brexit funds have been decreased in the market and the government has expanded the
monetary policy to increase the supply of money for the business organization (Lavery, Quaglia,
and Dannreuther, 2018). The expansion of monetary policy has increased the supply of money