Impact of Ukraine War on UK Economy: Macroeconomic and Financial Advice

This essay discusses the impacts of the ongoing war in Ukraine on the UK's economy and provides macroeconomic and financial advice to address any damaging consequences. It covers topics such as the effects of the war on trade, macroeconomic advice for the UK government, financial advice for the UK Central Bank, and more. The essay also includes relevant data and statistics to support the arguments presented.

Contemporary
Business Environment

Table of Contents
INTRODUCTION.........................................................................................................................3
Explain the main impacts of the ongoing war in Ukraine on the UK’s economy.......................3
What macroeconomic advice can be given to the UK government regarding any adverse
effects the war in Ukraine may have had on the UK's economy?...............................................4
What financial advice can be given to the UK Central Bank to address any damaging
consequences the conflict in Ukraine may have had on the UK economy?................................6
CONCLUSION..............................................................................................................................7
REFERENCES..............................................................................................................................8

INTRODUCTION
The economic effects of the war will depend on the duration and intensity of the fight, as
well as the level of limitations and financial turmoil. Here is a breakdown of how trade
interruption might affect the UK. This size of conflict includes enormous sociopolitical risk,
which could be the obstruct economic progress by itself (Chowdhury and et. al., 2022). It has
been determined that persistent decreases in manufacturing output, employment, and
international trade are caused by high geopolitical risk. As a result, the focus of this essay will be
on the crucial aspects of how the war would affect the UK's economic condition, along with its
impact, consequences, and potential remedies.
MAIN BODY
Explain the main impacts of the ongoing war in Ukraine on the UK’s economy.
Russian and British businesses hardly ever interact directly. The degree of monetary
coordination of Russia with the world monetary framework isn't extremely high, and exchange
between the two is generally little in contrast with the size of every economy. Russia's extension
of Ukraine and the reactions the UK and its partners took in reprisal to it, be that as it may, may
keep on impacting the UK economy. Just 0.7% of the UK's administration and item commodities
to Russia represent generally 1.5% of the overall imports. The majority of British exports to
Russia are appliances, manufacturing, and automobiles and their parts (Ferreira and et. al., 2022).
In 2019, the most recent year for which information is both accessible and unaffected by the
breakdown, the bulk of Russia's imports to the UK was made up of billions, of oil and petroleum
products, and other such items. The likelihood that the dispute may harm trade is increased by
four factors:
 Businesses will face logistical challenges when sending goods to and from Russia.
Except in the case of essentials like food, medicine, and international urgent supplies,
shipping giants, for instance, Maersk and MSC have already made an announcement
prohibiting all corporate deliveries into and out of the nation. This prohibition extends to
all points of entry and exit, along with the harbours on the Baltic and Black Seas and in
Far Eastern Russia.
 Imports of "twin" products and expertise to Russia (i.e., those with both armed and non-
military resolutions) are forbidden, and the sanctions may be strengthened. Punitive

damages make global transactions incredibly challenging and discourage some Russian
banks from utilizing the SWIFT payment network infrastructure.
 Because of concerns regarding their reputations and the difficulties imposed on by
current and impending sanctions, multinational corporations are already leaving Russia.
Large firms already do this, like Volvo, Apple, and General Motors. Russian companies
and individuals would find it much more challenging to import goods as a result of the
severe depreciation of the rubble, which also will inevitably lead to a decrease in total
demand (Goman and Roslov, 2022).
They will likely result in a large decrease in Russia's overall trade volume, particularly for
imports. The UK economy won't be significantly impacted by the lack of direct linkages between
Russia and the UK. The indirect effects of increased market prices and instability in resources,
particularly the energy industry, might put the UK in a considerably worse situation.
What macroeconomic advice can be given to the UK government regarding any adverse effects
the war in Ukraine may have had on the UK's economy?
Russia's invasion of Ukraine is expected to have the largest impact on Britain's GDP of
any significant industrialized powerhouse next year, causing it to grind to a standstill. The
figures demonstrate that the UK was suffering from a multitude of factors, including higher
interest rates, higher taxes, lower commerce, and significantly more expensive energy (Urbaniec
and et. al., 2022). As a result, the UK government can think about taking some economic action
to lessen the negative effects of the prolonged conflict.
Upsurge in Nation’s Energy Production – The UK increased natural gas production by 26% this
year as Europe struggled with an energy crisis brought on by Russian limitations on gas pipeline
shipments. According to government statistics, the UK increased its natural gas supply to
Europe's storage facilities throughout the Ukraine War. Due to Russia's interruption of gas
supplies to the area, which has seen an all-time high in the price of consumables, the area is
currently experiencing an energy shortage (Jung, Kang and Shin, 2022). Coastal Power and
energy UK claims that in June, the country broke all relations with Russia in the energy industry
and stopped importing any coal, gasoline, or oils from it. The supply will be under more pressure
as a result. European nations are scrambling to find alternates to Russian gas. One of the sources
they are attempting to obtain is the UK, a relatively small exporter, in order to have an adequate

supply for the colder seasons. Over through the season, the UK had the capacity to supply its
European neighbours with additional natural gas; however, given the country's current scarcity in
the winter, this is unlikely to occur. Market watchers believe that it will probably need to buy gas
from Norway in order to meet the requirement for it over the winter.
Increase Public Spending – By increasing investment to encourage economic expansion, the
UK government plays a significant role in response to the financial downturn and its
consequences on the economy as a result of the ongoing state of the conflict. It is critical for
legislators to determine if their efforts are actually promoting productivity expansion considering
the sum of money spent in this area (Mann and Roberts, 2022). There is a considerable
likelihood that tax hikes will partially offset the effects of rising federal spending, keeping
aggregate demand at its current level (AD). It is possible, nevertheless, that increased spending
and taxation will boost the UK's GDP. The extra spending by the government could have a
multiplying impact. Increasing employment through government expenditure will increase
consumer purchasing power since the jobless will have additional cash to spend. Federal
spending may lead to a bigger overall growth in GDP than the initial infusion whenever the
economy confronts such areas of excess production.
Increment of Universal Credit – Millions of workers in the UK will see raises in their salaries as
a result of the expansion of universal credit and a number of other benefits occur when the first
of two payments totalling £650, which will be sent to and over 8 million households, begins to
emerge. Even with cost-of-living allowances, the rising price of petroleum, gasoline, and grocery
products has already made things difficult for several individuals. The AET will rise from £355
to £494 for a single claimant and from £567 to £782 for a pair as of September 26, 2022. An
examination of the revenues indicated by applicants on the UC caseload between April and June
2021 indicated that the extent of the AET rise would result in about 17% of the Light Touch
caseload moving to Strenuous Work Search. The DWP kept a tonne of statistical information for
this study's administration of the benefit (Morgan, 2022).
Introduce Small Business Support Schemes – Loans of up to £25,000 are available to budding
entrepreneurs who are just starting out or seeking to expand, giving them a much-needed boost,
they need. For more information on new business financing options, visit the British Business
Bank's Finance Hub. With funding and collaborative research, Innovate UK assists companies in

advancing and comprehending the potential of novel concepts. (Troise and et. al., 2022). The
access to information, resources, and markets provided by the entrepreneurs' knowledge transfer
network allows them to commercialize the proposed idea. Another government-sponsored
initiative is Tech Nation, which provides free online courses to help people improve their digital
skills as well as programs to support UK tech enterprises. The UK's digital economy is
thoroughly examined by Tech Nation's Data Council for UK Tech, which also serves as a
reliable resource of marketplace research and information.
What financial advice can be given to the UK Central Bank to address any damaging
consequences the conflict in Ukraine may have had on the UK economy?
The Bank of England's job is to assist UK families and businesses in navigating a
possibly severe but brief economic shock. A comprehensive and timely package of measures to
assist UK firms and citizens in navigating the damage to the economy that is expected to be
linked to the impacts of the conflict has been laid out by the three strategic panels of the Bank
(Muzykant and et. al., 2022). These steps will ensure that businesses continue to operate
efficiently, that people have jobs, and that a brief disruption won't have a long-term detrimental
effect on the economy. The knowledgeable counsel in this respect can also be taken into account.
Increase the Reserve-Ratio for Banks – Capital requirements are one of the three methods the
Federal Reserve uses to carry out monetary policy. The Federal has, however, employed open
market transactions far more frequently recently to carry out monetary policy since they are a
much more precise weapon than modifications to reserve requirements. Since depository
operations will be taxed more heavily as a result of the UK banks' increased reserve
requirements, fewer banks will provide banking services overall. If additional measures are not
taken, raising the necessary reserve proportions will decrease the number of loans that can be
supported by a certain level of deposits, deplete the supply of money, and raise the cost of
borrowing. (Pacariz, 2022).
Sustenance of Government Bonds – Lending money to the government in exchange for a fixed
interest rate is known as a government bond. This is an investment that relies on debt. It can be
used to raise funds for new initiatives or networks, and shareholders can utilise that investment to
get a fixed return paid on a regular basis. Interest rates have a substantial impact on the demand
for bonds. If interest rates remain lower than the coupon rate, demand for bonds is anticipated to

rise since they represent a profitable investment. However, if interest rates rise above the bond's
coupon rate, demand may decrease. The UK's banks might consider engaging in government
bond futures trading to speculate on interest rates or to hedge against hyperinflation and rate
changes.
CONCLUSION
Consequently, it is possible to draw the conclusion that any disruption in the energy
supply to Europe will have a greater effect on wholesale prices in the UK than would be
predicted from direct trade linkages. Gas prices in the UK and Europe were synchronized in
2022. This is due to the fact that businesses purchase gasoline from the UK prior to sending it to
Europe, which restricts the UK's supply and drives up prices in Europe until they are able to be
balanced. A disruption in Russian gas shipments to other European countries would also jack up
the prices in plenty of other marketplaces that the UK uses, such as Norway, because of
increased demand throughout Europe. In addition, irrespective of the civil conflict’s short-,
medium-, or long-term effects, because of their dread of the very worst, individuals and
companies all around the world, including those in the UK, are likely to put off major purchases,
which will impede the pandemic's overall recuperation.

REFERENCES
Books and Journals
Chowdhury, S., and et. al., 2022. AI-employee collaboration and business performance:
Integrating knowledge-based view, socio-technical systems and organisational
socialisation framework. Journal of Business Research, 144, pp.31-49.
Ferreira, J.J., and et. al., 2022. Knowledge worker mobility and knowledge management in
MNEs: A bibliometric analysis and research agenda. Journal of Business Research, 142,
pp.464-475.
Goman, I. and Roslov, N., 2022. Use of Soviet Constructivism Experience in Urban Planning of
a Contemporary City for Digitized Society. In Business Ethics and Digitization (pp. 89-
107). JB Metzler, Berlin, Heidelberg.
Jung, S., Kang, J. and Shin, H.W., 2022. Professional event associations in crisis: exploring the
relationship between recovery strategy fit and organizational commitments from the
perspective of members. International Journal of Contemporary Hospitality
Management.
Mann, R.A. and Roberts, B.S., 2022. Smith & Roberson's business law. Cengage Learning.
Morgan, G., 2022. Employers' Organizations: Sources of Power and Limits to Power. In
Contemporary Employers' Organizations (pp. 23-39). Routledge.
Muzykant, V.L., and et. al., 2022. Smart City Image Processing as a Reflection of Contemporary
Information Codes. In International Conference on Image Processing and Capsule
Networks (pp. 519-530). Springer, Cham.
Pacariz, S., 2022. Foreign direct investment (FDI) as indicator of regime type: contemporary
Serbian–Turkish relations. Southeast European and Black Sea Studies, 22(1), pp.101-
120.
Troise, C., and et. al., 2022. How can SMEs successfully navigate VUCA environment: The role
of agility in the digital transformation era. Technological Forecasting and Social Change,
174, p.121227.
Urbaniec, M., and et. al., 2022. Fostering sustainable entrepreneurship by business strategies: An
explorative approach in the bioeconomy. Business Strategy and the Environment, 31(1),
pp.251-267.