Government Economic Policies and their Impact on Business Environment

This report discusses the various economic policies implemented by the government to manage the country's economy. It covers general economic concerns, such as Brexit and tax reforms, as well as the impact of government policies on the business environment. The report also explores monetary policy, fiscal policy, and the role of the capital market in raising funds. Overall, it provides insights into how these policies affect the economy and business operations.

PROJECT ASSESSMENT
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Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1: General economic concern......................................................................................................3
3: Monetary policy.......................................................................................................................5
4: Fiscal policy.............................................................................................................................6
4: About capital market..............................................................................................................8
CONCLUSION................................................................................................................................9
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INTRODUCTION
Government of country use economic principles and policies to run their country’s
economy in better way For this purpose they use various policies and instrument which help in
maintain sustainability in business environment as well as help in growth of country. This report
includes how government use labours policies, how they distributed income, use of monetary
policy which is a instrument of central bank for pertaining control of the availability cost and
money credit with the help of monetary measure to achieve specific goals. Government also use
fiscal policy which use their taxation, public debt, budget methods to control the cash outflow of
the economy. Fiscal policy is used for mobilization of resource and control supply of credits.
This report also define about use of capital market and its instruments for issuing primary and
secondary securities in market to raise funds of investors. All these policies and financial market
are developed for run successful money cycle and provides allocation of scares resource in
effective manner through which government able to attend their goals of economy development.
MAIN BODY
1: General economic concern
i. Introduction to general economic concern
Economic concerns simply refer to the issues which affect the actual growth of an
economy within United Kingdom. Existence of Brexit has led to the uncertainty as well as new
tax reforms are introduced for the different countries of European Union which let down the
profitability margin of the large company exist within United Kingdom. It lead to negative
implications like fall in the wages, living standard of people and lead to increase in burden
associated with government debt. Local residents have to suffer a lot as earlier they used to
experience the leverage associated with free trade agreement. Similarly, other uncertainty can
directly decline the foreign direct investment and affect the supply chain that exports the services
to Europe. Significant efforts need to be made by the authorities of UK in order to upgrade its
condition and work for the concerns that can decline overall economy (Capón‐García and et. al.,
2013).
ii. Government policies and their impact on the business environment
The policies of UK government cover all the aspects which are associated with
employment relation, environment and welfare of overall society. Implication of desirable
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policies helps in successfully maintaining the economic growth which supports the performance
of business in order to produce sustainable product as well as services. The Government support
various innovations that come up with environment friendly products or services. Existence of
various programs like Environmental Technology Verification supports the launch of new
venture to which desirable amount of funding is provided which turn maintains the circulation of
funds within the economy (Brammer, Hoejmose and Marchant, 2012).
iii. Labour market and their impact on the business environment
The flexibility or rigidity of labour market reflects the employment issue in terms of
wages offered to worker, easy hire and fire of employees, existence of union labour, duration of
probation period and so on. The main characteristics of the flexible labour market include low
minimum wages which does not impede the recruitment or employee termination. Within United
Kingdom flexible market needs to favour labour rights as it lower down the unemployment rate
and simultaneously enhances the productivity of labour. Better labour market can only be
charged on the basis of relationship shared between the employee and employer which give birth
to the healthy economy (Wynarczyk and et. al., 2016).
iv. Income distribution and their impact on the business environment
Income distribution is a vital part that needs to be extremely focused by the local
authorities in order for the overall growth and development of society. Lack of attention on such
aspect can bridge the gap between rich and poor due to which it rich will become richer and poor
will become poorer. Within United Kingdom efforts should be taken to avoid the unequal
distribution of income which will let down disposable income of the population and can affect
the GDP rate of economy. Government make sure to launch certain laws like minimum wage
rate and it needs to be implemented by the multinational companies in order to promote equal
distribution of income. The manager of various companies should follow the minimum wage rate
and effectively design their income policies in order to boost up the overall performance
successfully (Bagchi and Svejnar, 2015).
v. Employment and their impact on the business environment
UK is one of the countries that promote employment opportunity due to the existence of
wide number of domestic as well as international companies. This offer wide job offer for the
local residents which improve their living standard and provide diverse number of purchasing
options for the society. Recruitment is not restricted to a confined country which means the
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company hire employees from other emerging countries as well at minimum remuneration. Thus,
it is the desirable way to promote diverse workforce and take the country in new direction
(Temminck, Mearns andFruhen, 2015).
3: Monetary policy
Introduction to monetary policy
Monetary policy refers to the policy majorly opted by the country’s monetary authorities which
mainly controls the interest rate which is payable only for very short term borrowings. It has also
been identified that it generally targets the inflation rate as well as the interest rate in order to
make sure price stability. It consists of the procedure of announcing, drafting as well as
implementing all plan of actions which is mainly taken by central bank, or other monetary
authority which controls the overall quantity of the money within the economy & channels with
the help of which new money can be supplied. Apart from this, goal of the monetary policy is to
provide contribution for maintaining the stability of GDP, to attain as well as maintain low
unemployment rate and to conduct only predictable exchange rates with different nations. It has
been identified that monetary policy mainly referred to being expansionary or contractionary.
Monetary policy techniques and tools consist of open market operations, bank reserve
requirements, direct lending to the financial institutions, unconventional urgency lending
programs as well as managing market expectations.
Supply and demand forces of money
Supply & demand refers to the relationship among the buyers as well as sellers which is
commonly adopted as measure for determining price at the financial market place. The forces for
the supply as well as demand communicate to influence an equilibrium price among the buyers
&sellers in which the overall quantity of demand is equals to the overall quantity of supply. It
has been analysed that the law of demand says that, if each and every elements remain
equals, higher the price of a commodity, less or minimum people make the demand for
the good. In simple words, higher the price of a good lowers the demand. This as a result
reduces the buying process of individuals related to the specific product and forces them
to purchase other products.
Implication of various aspects of the demand for money.
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Demand for money is basically termed as the function of prices as well as income. In this,
it can be said that if the demand for the income increase or rises than it will also increase the
demand for the money. This clearly depicts that directly proportional relationship in between
demand and income. As per the inventory model, demand for holding money completely relies
upon the frequency that is getting paid with it. It also includes the cost of depositing money into
the bank.
4: Fiscal policy
i. Introduction of fiscal policy
It generally means charging the level of taxation and spending of the government of UK
so that economic growth can be influenced. Fiscal policy used by the UK govt. are of two types
1St is expansionary fiscal policy which is to stimulate aggregate demand and boasting the
economy, company is charged less taxation so that they are motivated to do more investments
and spending of govt. also increases resulted in increase in the borrowing of the country. 2nd
option is deflationary fiscal policy which is dine to control aggregate demand in this tax is
increased and spending by govt. is reduced or hold, it decreases the borrowing of govt. from
public. The company need to make use of opportunity when thrown to them and should be aware
about when the economy is promoting business. Fiscal policy directly affects the company or
business environment as it is related to investment and taxation in the UK economy.
ii. Taxation and its macroeconomics effect.
Taxation is a charge levied by the govt. on individuals and businesses. Taxation is the revenue
for the government, more the tax more will be the income for government. But at the same time
more tax will demotivate the company to do business as the revenue will decrease and it will
result in less profit. Taxation is increased by government to control aggregate demand also, so if
they want to promote any business they will charge less tax on it and if they want to demote any
business, more taxation will be levied. In UK the company gets motivation as government try to
give tax benefit to the companies so that more and more corporation can set up in UK. It affect
the economy as it directly impact the financial decisions of any firm and companies in UK need
to take taxation into consideration before forming policy and should be aware about the changes
which can be exercised in future (Angelopoulos, Malley and Philippopoulos, 2012).
Social security contribution, pension and benefits
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Social security is mainly seen as the pension scheme which provides additional benefits
to the individual like the ongoing regular based pension payments. Social security contribution is
almost 24% of the employees’ basic salary that has been contributed towards for the security of
the individual. In this total percentile almost 12% has been contributed by the employees for
their self security motive for the near future in the name of provident fund whereas the left over
12% has been contributed by the employers’ side. The proportion contributed by the employer is
later on divided into several sub sections such as pension account, provident fund account and
insurance scheme. It has been later analysed that there have been range of pension schemes
which are developed by the government with the motive of the social security of the people. For
this, government has also placed range of norms that are mandatory required to be followed by
the employers as well as employees. By developing this, government wants to ensure that the
working people who have contributed in the GDP growth of the nation would get social security
at the time when they would not be able to work anymore.
Public expenditure deficits
This is termed as the situation in which expenditure of government are higher than the
revenue which is being generated by them several sources such as taxation and others. This
revenue is generated from the public in order to the increase monetary strength of the nation. The
generated amount is later used by the government for the welfare of the society only. Here, it has
also been analysed that the monetary value developed by government also supports the nation in
keeping themselves strong in any of the issue that might be faced by them in the near future.
Sustainability of public debt
Public debt is basically seen as the instruments with which public policies are distributed
to the optimally over the period of time. It can be further said that with the usage of public
indebtedness, public goods provision can be disassociated from overall taxation process that
must be funded for temporary basis.
Public dept has already seen as the major concern within the society. This has been due to
the recession which has ultimately crossed higher level of peacetime. With the passing doubt
have been emerged for the government in the European area specifically Portugal, Italy, Ireland,
Spain and Greece with the motive triggering rise in sovereign debt yields. Here, it has been
analysed that public dept sustainability highly rely upon intertemporal budget constraint of
government. In simple words it can be said that a nation’s public debt could be seen as
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sustainable only when its governmental budget limitation can meet up without affecting fiscal
and monetary policies of the nation.
It has been later analysed that the core concept of stable monetary policy is very
important as it provides proper level of knowledge to the governmental authorities about the
issues or the barriers that they might face in the near future in term of debts. Sustainable public
debts simply support government in keeping themselves away from the public issues that might
affect their monetary security in the near future.
4: About capital market
i. Capital market
The term capital market refers to the institutional arrangements for facilitating the
borrowing and lending of long term funds. It is a part of financial market and sub part of
financial structure of every economy, especially developing countries. Capital market is a market
which provides facilities of praise of long term funds by trading of shares, bonds, debenture and
long term securities. In other words it can be defined as a market for raising and advancing
money capital for investment purpose.
Capital market has dived into two parts, primary market and secondary market. Primary
market where new issue are distributed and in secondary market investors deals with existing
securities. Capital market is essential as it work for the linkage between investors and savers ad
government us its factors for managing their money supply (Dang, Huynh, Nguyen, and
Nguyen, 2017).
ii. Primary capital market
It is the part of capital market. primary market is the market which represent the new
issue market in which securities, share, debentures, that have never been issued are offer to
investors. Both the new organizations and existing ones can able to raise capital on the new issue
market. The main aim of this market is to facilitate their transfer of funds from willing investors
to the entrepreneur sitting up growth or modernization. Primary market provides facilities’ of
public and private placements. It is useful for organizations to raise their funds,. Manipulation of
price is smaller so it will helpful in investment even for small industries. Primary market also
useful for channelize the savings of individuals and others into investment. New issue market
directs the flow of savings into long term investment it is of paramount importance for the
economy growth and industrial development for countries. Primary market is helpful in
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developing of growth and provides facilities’ and funds to financial instituting and motivates
them to expand their business in world economy (Upreti and Adams, 2015).
iii. Secondary capital market:
It also known s stock exchange it is one important constituent of capital market. Stock
exchange is an organized market for the purchase and sale of industrial an financial security. It is
convenient place where trading in securities is conducted in systematic manner as per the certain
rules and regulations. In this market investors easily convert tor trade securities without the risk
of loss as compare to primary market. Secondary market is a market where savers can buy and
dispose of securities as and when they like. The main function of secondary market is to provide
liquidity to securities. So that organization can easily fulfil their financial resource demand.
Secondary market factors are important t for maintain the cash flow of financial system of
country. These are useful for encouragement of investment a saving for investors(Ma, W., Zhao,
Ke and Chen, 2020).
iv. Crowd funding
It is a method of raising funds by using small amount of fiancé from the capital of large
numbers of personals. Crowd funding s the best way for small and medium enterprises owners
these methods help them to increase their financial source in order to run their business
enterprise. It will useful for economic growth also as small entrepreneurs help in giving
contributions to GDP and it will directly help in increment growth as well as per capital income
of personals of country. It is the fat way to collect source finance with low rate of risk (Bradford,
2014).
v. Crypto currencies
With the changes of time and technologies new innovations in industrial market comes to
provides facilities, crypto currencies is part of these innovations. It can be defined as digital
assets which are used as medium of exchange at digital platform. In these personals transactions
related with digital currencies are recorded in ledgers by using high cryptography security. Block
chains are used for this mechanism to ensure the integrity of transactional data. It is used for
providing safety and securities to investor and cut throat the role of mediators during the trade
procedure. Crypto currencies proved confidentially to the investor and securities related to long
term will be easily by using this mechanism of trading (Gilad and et.at.2017).
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CONCLUSION
From the above analysis it has been identified that in order to achieve the objective of
economic growth and development government use economic policies to formulate strong
capital structures, planning of industries regulations. They apply monetary, fiscal land
labour policies which help in removing economic inequalities, increase the level of living
standard by providing subsidies and facilities of financial assistance, low bank and tax rate,
trading and granting loan for short time period at lower interest rate. Government also use
capital market through which they can raise the living standard of medium as well as high
class personals by providing facilities of long term securities trading and funds transfer. All
these policies help in improving and enhancing growth of country.
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