UK Government Response to Inflation in the Global Business Environment

This document discusses the UK government's response to inflation in the global business environment. It covers the socio-economic impacts of inflation, the government's target inflation rate, and the use of interest rates to control inflation. The document also includes a PESTLE analysis of the business environment and its transferable skills.

Global Business Environment (CW1)
Document Title
The UK Government Response to the Rise of Inflation within the Economy
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Part 1: Inflation and its socio-economic impacts-
INTRODUCTION
Inflation is the rate of rose in price over a period of time. It increases the overall cost
of living in the country (Shelupakhin and Kuznetsov, 2021). There are several reasons behind
the rise in price that must be monitored. The UK government take necessary actions that
helps them to reduce the inflation such as Interest rates, changes in tax regime, lower
government expenditure etc. There are various problems in the national and international
market that take place due to inflation. The nature of business environment is dynamic and it
keeps on changing. There are various external factors that change and impact the working of
businesses
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Part 2: UK Government actions
What is the government target of inflation rate .Consider the reasons for high inflation in
the UK. Choose ONE of the following government policies/practices/actions to reduce
the inflation rate according to the set target.
One of the important measure taken is rise the interest rate. Due to inflation the rates
of products and services becomes expensive (Morrison, 2020). . The people are not able to
make purchases with the money them have. So the individuals go to bank and borrow money
and the government takes action on enhancing the rate of interest. This is a cycle due to
which the borrowing capacity of the citizens of UK reduces. It is seen that people are left
with less money to spent and make purchases. There will be less flow of money in the nation.
This leads the prices to fall and inflation also comes down. The higher interest rate reduces
the buying power of people and this is problematic situation for the citizens.
The rising interest rates majorly helps to control the rate of inflation. The changes in
monetary policy help the citizens to manage their working and carry on the work in suitable
manner (Andrade and et.al., 2018). The managed inflation rate motivates the people to start
new business and carry on new work. There is good flow of money in the economy and stable
position. This reduces the risk in economy as well. The government is also able to manage
their debt and there is debt reduction. It is necessary to provide better standards to the people
as the cost of living is normalised. The small businesses are also able to carry on their
operations. It enhances the opportunities for the people to carry on new outlet and get
successful as the prices are normal and people have ability to consume them.

Part 3: Assessing the government actions /policies /practices Criterion 2: Analysis and
criticality-30 %
Pestle analysis is the strategic tool which can help the firm to become more competitive with
the new environmental conditions. There are various factors in this tool which is been
described below:
 Political factor – This is the fist step in which there are various rules and regulations
which needs to be followed by the organization. In UK there are multiple rules and
exports policies which needs to be fulfilled by the firm in order to supply the goods
and services to other regions.
 Economic factor – This is the stage in which there are various economic aspects
which include the responsibility towards various things and other factors as well. The
impact of the consumer behavior will also affect the organization performance in the
market (Özen, Özdemir and Grima, 2020). They need to provide the quality products
and services as per the customer preferences.
 Social factor – There are various social factors which includes consumer buying
patterns and providing equal opportunities to the individuals. The organization needs
to recruit the candidates in order to enhance the employment rate and provides various
benefits to the society.
 Technological factor – There is the proper use of technology which needs to
implemented by the workplace. The technological factors includes artificial
intelligence which will help them to carry out the functions in a better way.
 Legal factor – The legal factors includes the discrimination laws and other
intellectual property rights. The Foreign investment will help the organization to
expand their business in multiple regions.
 Environmental factor – The organization needs to protect the environment by taking
the effective measures. The company needs to decrease the carbon emissions to
preserve the environment and utilize the resources in a proper manner (Dwi, 2019).

Part 4: References (not counted) – (Criterion 1 and 3)
Andrade, P and et.al., 2018. The optimal inflation target and the natural rate of interest (No.
w24328). National Bureau of Economic Research.
Dwi, S.I.S., 2019. Analysis of the effect of return on assets, earnings per share, inflation rate,
and interest rate on stock return: a case study of SOE banking companies listed in
Indonesia stock exchange. Russian Journal of Agricultural and Socio-Economic
Sciences, 85(1), pp.24-34.
Morrison, J., 2020. The Global business environment: towards sustainability?. Bloomsbury
Publishing.
Özen, E., Özdemir, L. and Grima, S., 2020. The relationship between the exchange rate,
interest rate, and inflation: the case of Turkey.
Shelupakhin, A.S. and Kuznetsov, I.O., 2021. Counterfeiting as a monetary factor influencing
the inflation rate. Entrepreneur Guide.
Consider the following transferable skills -Criterion 4 -transferrable skills 15%