Impact of COVID-19 and Brexit on UK's Economy

This report discusses the impact of COVID-19 on UK's economy, measures taken by the government, major response of England Banks with its implication on circular flow of income in UK and impact of Brexit in the economy of UK. It covers the major economic responses by the UK's government and their effects on circular flow of income in UK. The report also discusses how Brexit has affected the UK's economy.

Contemporary business
environment

Table of Contents
INTRODUCTION ............................................................................................................................3
Major impact of COVID 19 on the economy of UK.....................................................................3
Major economic responses by the UK's government and their effects on circular flow of income
in UK.............................................................................................................................................4
Responses of the England Banks and their implication ...............................................................6
How Brexit affect the UK's economy............................................................................................8
CONCLUSION .................................................................................................................................9
REFERENCES.................................................................................................................................11

INTRODUCTION
The term business environment is embrace all those components that has ability to affect
operational activities of a business. It is the collection of all events, conditions and influences that
surround and impact an organisation. The economy of all nations get impacted adversely due to
the COVID 19. It influence the national economy in a negative manner. Due to this, many people
lost their jobs and many companies had to shut their business. Almost people came under the
poverty line and become dependent on the government services. The COVID 19 also affect
individual's lives. This pandemic situation had effect the business adversely internally or
externally (Bagchi and et. al., 2020). This report will cover the effect of COVID 19 on UK's
economy, measures taken by the government to maintain business, major response of England
Banks with its implication on circular flow of income in UK and impact of Brexit in the economy
of UK.
TASK
Major impact of COVID 19 on the economy of UK.
After arising of the pandemic situation, the economic condition of every nation has been
impacted in different ways like due to the lock down, there is shutting down of business along
with less practise of export and import activities. It result in the declining of Gross Domestic
Product in country and also effect individual's lives in a negative way. The causes of shutting
down business is low level of demand of products and other services at the marketplace. It is
examined that during this time period, people became more about their health and the hygiene
and this result in declining company's sales. The COVID 19 mainly affect the hospitality,
travelling and tourism, industries (Balasubramaniam and et. al., 2020).
It is also observed that, the pandemic situation also impact profit margin of different industries as
the demand of goods and services decrease in market with more restriction on imports and export.
It is predicted by the budget responsibility office that it cause around 35% fall in GDP, but the
research and economy's national institute has made it clear that the GDP of nation has decreased
around 15 to 25%.
In country's economy, the employment rates also declined in business industries as well as nation
because of the COVID 19. It is also determined that mostly employees in organisation had lost

their jobs and become unemployed. The demand and trade flow of different product and services
except essential goods has also declined. The government made a large investment to made
separate COVID zones and availability of vaccines for citizens. It lead a decrement in economic
rate of country. In April 2020, the nation government borrowed around £299 billion money for the
protection of country's citizens. This amount of money is considered as a highest debt that was
borrowed by nation. As per an analysis of the national statistics, it is determined that the
economy's debts has increased with a percentage of 100.5% that impact the economic situation
and cost of nation ( Brownlow and Budd, 2019).oyment as due to the lock down in country,they
lost their occupation. In the expert's survey it has been analysed that approximately 22%
population of country has been suffering adversely due to the situation of pandemic and around
73% of the people were engaged in food industry and the construction business were also
impacted severely because of COVID 19.
Additionally, the companies with education sectors also got impacted by the COVID 19. there was
a temporarily shout down in the education institution or sectors. Due to this, there was no classes
for primary students. The transportation sectors has also stopped due to the pandemic or lock
down situation, it lead to a decline in oil prices in economy. The British petroleum estimated a
decline in rate of petroleum around 0.5%, but, there was approximately 17% downfall is
measured in the price of petrol ( Fernandez-Pacheco Theurer and et. al., 2018). Therefore, almost
all industries such as hospitality, transportation, education, agriculture and many other has been
impacted in the pandemic situation of COVID 19.
Major economic responses by the UK's government and their effects on circular flow of income in
UK.
The COVID 19 has made a great impact on the individual's lives. In first wave of COVID
19, it has been seen that, positive cases of coronavirus increased in very immense manner. In this
situation, to minimize number of these cases the government authorities of UK has imposed some
restriction on entertainment industry, social gathering, hospitality, travelling and tour industry.
Due to this, there was close to 9.8% downfall is determined in the economy of UK. The
government of country undertake different kinds of measures and policies in order to arrange food
and funds for the individual of society. There are different actions taken by UK's government to
support economy and families during the pandemic situation which are mentioned below:

 The National Health Services generate extra fund to provide different type of services to
general public.
 'The authorities focus on vulnerable people to manage their payments (Heneghan, and
Hall, 2021).
 The government also support all small enterprise and employees in term of sick leaves, tax
rebate and many more.
The UK's government developed three essential loan scheme that include, Coronavirus business
interruption loan, British Business Banks and the Coronavirus large Business Interruption
schemes. Additionally they focus more on the employment, around £1,000 amount is paid to
those people who were on furlough. It is also has been decided for youth employees to work only
25 hours per week as per their needs. In 2021, during second lock down, the central government
imposed new measures like the job retention scheme. The authorities focus to provide loans for
small business and the new start up so that the employment rates can be increased. In relation to
the bank rates, the country's central bank minimize bank loan rates by 0.15 and also hold some
major areas which compromise the non financial bank bond (Junlan and Chengke, 2020).
Therefore, the nation's government developed different kinds of scheme such as mortgage
holidays, kick start scheme, bounce bank loans, self employment scheme, job retention scheme,
VAT payment referrals, Eat out help out scheme and many more. The government introduced all
these schemes to faces all the challenges and problems that which were come due to the pandemic
and overcome from the declined economy. There are some measures which are discussed below:
 Self-employment Income Support Scheme- 26 March 2020, the UK's government
develop this scheme with the motive of to support those individuals or people which had
lost their occupation and shut down their business due to to COVID 19. under this scheme,
it mainly focus on those individuals whose profit margin from self employed enterprise is
less than £50,000. on 29 May, the nation's government declared second round of this
scheme to manage different rounds in the future (Lobanova, 2021).
 Eat Out Help Out Scheme- The government launch this scheme for hospitality industry
in order to generate or earn some profit. At the time of COVID 19 lock down, is has been
seen that there was a major decline in hospitality sector. Therefore, the authorities develop
this scheme to overcome form this problem. In this scheme, 50% bill that include non

alcoholic drink and food has been paid by government from the Monday to Wednesday.
To uplift the motion of restaurants, the discount of £10 has been given to single person as
it will also lift the country's economy (Odunitan-Wayas, Alaba and Lambert, 2021).
 Job retention scheme- The government develop this scheme with the motive of to uplift
all kinds of business in the country. This scheme make enable the management of all the
enterprise to manage their business operational activity effectively. As the business were
not able to pay employee's salaries due to the COVID 19. on March 2020, the government
launched this scheme which comprise that about 80% of monthly salaries has been paid by
the business organisation in order to enhance employee's retention rate. The government
extend this scheme till September and it is mandatory for the companies to pay salaries to
their employees and other staff members who were on the furlough. Approximately 17.5%
billion employees enjoy this scheme in which 8.75 individuals were furlough.
 Bounce Bank Loan Scheme- On 4th may 2020, the UK's government launched this
scheme by chancellor to help or encourage the medium and small enterprise. This scheme
was introduced with the motive to uplift these small and medium size business
organisation. This scheme is mainly for the sole proprietorship enterprise and medium or
small scale business s they face many challenges such as less availability of funds,
decreasing in sales and many more. The financial and banking sector of country support all
small and medium sized business so that these enterprise can overcome form these type of
uncertainties. The banking sector provide around £2000 to £50,000 to these business to
manage their sales and annual profit. The government give 100% surety to other financial
institutions to provide loan at the rate of 2.5% per year. The duration of loan's repayment
has been decided that is six months (Papava and Charaia, 2021).
Responses of the England Banks and their implication
At the time of pandemic situation in COVID 19, the bank of England play a vital role in
the in the economy. To uplift the business in country, the British banks help them and employees
so that they can face damage and problems at this crucial time of the COVID 19. these banks
support to the country in improving and enhancing economic condition of nation. The Banks of
England has been take some measure and crucial decisions which are given below:

 Reduction of interest rate- Bank of England had altered the interest rate now they are
accountable to cutting down or manage the interest rate of loans. This banks had declined
the interest rate around 0.1% for the business in UK and for house of the country. The
Monetary Policy Committee has enhanced the holdings for nation's government by £200
billion in order to manage both the corporate and incorporate bonds. It is analysed that the
chancellor of exchequer has cut down the cost by 0.1% and the Monetary Policy
Committee also start to manage meetings that result in minimizing the interest rate in bank
by 0.1%. the main purpose of the UK's government behind these working is to manage the
situation so that the businesses can start with different practise on new note and within the
time period. It is also identified that the chancellor is concern about the evaluation of
interest rate and financial costing that result to improve national economic condition. In
relation to COVID 19 measures, the nation's HM treasury has declared that the
government has paid more focus on enforcement of the funds and financial areas. It made
enable the companies to operate and mange their different business activities effectively.
 Government bond Sustenance- Under this measure, the Bank of England attempt to
manage several business activities of small businesses and also support the large business
enterprises. These banks allocate funds to all business organisation so that they become
enable to pay worker's salaries in order to perform smoothly all business functions. The
UK's government also introduced Coronavirus Business Interruption Loan for the small,
medium and large business enterprises in country. These business mainly focuses on
approximately £45 million turnover in which around £5 million has been managed by
themselves. The government guaranteed that it has been paid 80% of the repayment to all
lenders and also hold the financial sectors. The commercial banks has given short term
loans on the commercial paper to manage or support all kind of business. UK's government
has also developed Term funding schemes and medium size business in order to support
them ( Pappas, 2019).
 Monetary stability- The UK's authorities implement many monetary policies measures in
order to bring stability in their economy. These policies not designed exclusively to restore
the credit flow to help it. The government also devised particular initiatives so that it can
improve the access finance for the business corporations. They launched this scheme in

order to bring n econo0mic stability during COVID 19 in country (Singh, and et. al.,
2021).
How Brexit affect the UK's economy
After a discussion, the United Kingdom and European mutually agreed for a deal which
explain their future relationship. In this deal, there are new laws and regulation regarding the
living of UK and EU. Due to the Brexit, the economic get impacted in various ways which are
defined below:
 Immediate issue by Brexit- Due to the Brexit , in UK's economy the most important
impact has been observed that are general uncertainties. It lead to downfall among nation's
economic conditions. Therefore, it is determined that, there is a slow growth of UK by
2.4% in 1015 and 1.0%in 2019. This deal has to lead a reduction in business investment
by 6% and also decline the employment by 1.5%. the leaving of European Union is a
double edge sword for UK's business (Wilson, 2017). It is very hard to export and import
between EU and UK, but it become very easy to trade with other nations. The Brexit deal
give an advantage to the UK as now there will be more opportunity of employment Brexit
majorly not only impact the tourism industry but also effect the foreign investment and
trade relations. The changes has been also made in travelling sector and VISA. The Brexit
impact UK in term of more expense related to air travel and longer passport queues etc.
UK's economy also get impacted by the new rules as along with this country's trade
relations has came in major hurdle. The Brexit also create issues of pass port and trade
relation. (Sutrisno, Panuntun and Adristi, 2020).
 Further impacts- As per the survey of 2016, it is analysed that the UK's per capita income
has been minimizes and it is estimated that the economy has been declined by 2 to 8%.
During Brexit, the nation's government has manage country's budget in order to imposed
new rules in their economy. It is examined that at the end of 2022 the UK's economy will
generate a loss about 0.5%. a business that operating in European Union has been
maintained and controlled effectively. After the Brexit, UK is less restricted by the EU
regulations. Therefore, it is argued that the Brexit has positive effect on UK's business as

now the country is free to trade with non EU marketers such as Australia and America.
This deal has formulate new custom formalities between UK and EU as now that can make
business deal with some other nations. Fundamentally, these long term process and areas
help to manage that losses which occur due to the Brexit. These process are also helpful to
analyse those challenges that came in the way of different economical output situations.
CONCLUSION
From the above report it is find that, due to the COVID 19, the business environment has
change rapidly. During the pandemic situation, the lock down impact UK's economy adversely as
well as global economy. Almost industries had to face the negative impact of COVID 19 as many
of them had to shut their business and several individuals had lost their jobs and become
unemployed. To overcome from all these crisis and issue the UK's government had formed some
new policies and regulation. They launched many schemes in order to uplift business and make
enable them to give employee's salary. The authority make efforts to help those people which had
lost their occupation due to lock down. The government introduced some beneficial with the
purpose to help small and medium enterprises. The Brexit deals also influence UK's economy as
the new rules and laws are formed to work in the organisation. In order to functioning smoothly
and efficiently in an the organisation, it is essential to adopt new rules an policies.
Recommendations
To deal effectively with the crisis of COVID 19, the government of UK should take some
action and priorities vulnerable individuals. To overcome from these challenges and issues, there
are some suggestion for the government which are given below:
 The government need to consider some factor that remain behind such as place and people
to help or support the employees and organisation and coordinate as well as the responsive
government. They need to formulate some essential policies and laws regarding business
and export and import trade.
 It should imposed effective restrictions to minimize the impact of COVID 19 on individual
and society. The government should encourage people to take precautions for their work
safety and health benefits.

 They should develop such type of scheme which are very helpful for the people and their
health. They launched scheme regarding employment in order to decline the rate of
unemployment in the economy as it will lead to a grow in nation's economy.
 They need to focus on small and medium business and support them by giving fund so that
they can continue their business operational activities. They also need to support local
markets by buying goods form them and help the country's economy in its development.

REFERENCES
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