Impact of Economic Factors on Virgin Holidays: A Macro Analysis

This report analyses the impact of economic factors on Virgin Holidays, including unemployment rate, inflation, and UK growth rate. It also discusses the government's involvement tactics and recent worldwide issues faced by the company.

Business Environment

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................2
Examination of the economic factors along with the effects on business..............................2
How will the current UK growth rate affect your selected business? (Give reference to
economic life cycle, unemployment rate, GDP, inflation.)....................................................3
How may the administration's existing involvement tactics impact a business you've selected?
(For example, economic and financial strategies, the layoff programme, and so on.)...........5
What are recent worldwide issues that your selected firm is experiencing, along with advice
for how to address them now?................................................................................................6
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................9
INTRODUCTION
Macroeconomic is a branch of economics which deals with structure, behaviour,
performance and decision-making of the overall economy. The elements of microeconomics are
1

the factors which makes an impact in the direction of a economy. There are various factors such
as monetary policy and fiscal policies which have major influence on both the state and national
economics. The examples of macroeconomic elements are national income, unemployment rates,
GDP, inflation and many more. These are properly supervised by the organisations, customers
and states. In regard to the concept of macroeconomics, the relation between these factors are
examined in detail. (Bell and Blanchflower, 2020.) The founder of Virgin group is under want of
investment to keep his business surviving after the great pandemic. The government also has
introduced various measures to help out such businesses. This report deals with the factors and
tier influence on the chosen company Virgin Holidays. The issues which are faced by the
organisation along with the recommendations is also discussed in the report.
MAIN BODY
Examination of the economic factors along with the effects on business
The economic factors are to be studied properly for framing the strategies and policies for the
business. These can make a huge impact on the decision-making of the organisation. There are
various factors which need to be considered by the Virgin Holidays to run its operations properly
(Chowdhury and Bone, 2021). The two factors are discussed below:
 Unemployment rate: It is related to the people who do not have any work to do. The rate
at which the individual are unemployed is called the unemployment rate. The increase in
the unemployment will lead to reduction in the earnings of the people. It will make a
direct impact on the revenues of the company since customers will spend less money on
buying the products. This will result in the consumers shifting to less costly goods and
services. The businesses can increase their sales by supplying affordable products in the
market(Fairlieand Fossen, 2022.). Virgin holidays will have to take into consideration
these the unemployment rates for making strong strategies. The company can use the
advantage of hiring employee's on a low salary since more individuals are willing to do
work in case of employment. This gives the hotels variety of options to choose from. The
business needs to adjust to the decrease in demand of the products since the purchasing
power of the customers is decreased.
2

 Inflation: It is defined as an increase in the prices of the goods and services in the
market. It is measured by using an index like Consumer Spending Index (CPI), which
records the rates of products of a sample basket over a period of time. It is often
described in form of a percentage. For example- 2% inflation rate annually shows that the
price £1.00 last year is now cost £1.02. It is an essential aspect which needs to be
considered by the businesses. It happens when the supply of money in the market grows
at a faster pace than the estimation. Inflation can happen for both short-term and long-
term. Short-term inflation makes an adverse effect on the people and organisations. In the
long-term, the economy and individuals adjust to the increase in the quantity of money
which leads to higher salaries and prices of the goods and services in the market. Virgin
Holidays must formulate strategies which help in reducing the prices of the products and
services it is offering. This will help the organisation in tackling with the issues of
inflation. This will assist in attracting to a large number of customers towards the
business. If proper solutions to the inflation are not identified, then the company will
have to face loss in the business.
The government play a very crucial role in the inflation in the economy. It needs to produce extra
amount of money before it affects the prices of the goods and services. The crooked governments
constantly produces large amount of money for enriching the government officials and the
members of the staff. It has been seen that the individuals tend to transfer super-inflated
currencies for more stable currencies from other countries. The swap of the currency needs to be
carried out quickly before the value gets lower. Another thing which can be done is swapping of
the products quickly since the actual maximum value can be obtained by trading the
hyperinflated money for any other thing.
How will the current UK growth rate affect your selected business? (Give reference to economic
life cycle, unemployment rate, GDP, inflation.)
The COVID-19 pandemic has impacted the entire world and has changed the economy of UK
completely. The nation is now embarking on a new economic collaboration with the EU. Every
3

business has adopted different path for dealing with the pandemic. The organisations have
formulated various strategies for making recovery and development(Gollier, 2021.). In February
2022, approx. 39 % of the organisations currently involved in trading examined that the cost of
products in the previous month had rise up from 33 % in January 2022; the proportion of the
companies that have reported that the rates of the raw materials, goods and services that are sold
have been almost unchanged, increasing from 16% to 17% over the period. Nearly 16% of the
temporary closed businesses have said that the recent increase in the rates of retail gas have made
an impact on the output by the suppliers until this the proportion has been almost steady since
last December. In late January 2022, 54 percent of the existing businesses indicated that the
revenue had remained unchanged in the last two weeks in comparison to the average seasonal
expectations. This is the highest ratio recorded since the early September 2021. Around 18 % of
the employee's was expected to be adopting a mixed form of working, with another 12%
workers working from their home and 62 % of the workforce was anticipated to be working from
a particular location which has increased from 57 % in December, 2021. The companies that
have temporarily ceased the business operations said that filling up the vacancies was very tough
in the previous month, with the similar percentage reporting a scarcity of labour. Both the figures
are greater for the companies with 10 or even more employees at 36 % and 33 % respectively. In
the recent month, 59% of the organisations with 10 or even more employee's in the personal
healthcare and other community work activities in the market stated that the job vacancies were
very difficult to fill. The distribution and warehousing companies had the largest demographics
of the workers in the starting of the February 2022, with around 36% of the employee's being 50
years old or more.
The pandemic has influenced the e-commerce platforms and digitalization in moving to the
remote working. This remains unclear as to what degree these changes will become permanent
and how will these make an effect on the different segments of the economy(Torjesen, 2022.).
The recovery will not be easy and the companies will have to remain patient in the process of
development. The organisations in every country must deal with the implications of the Covid-19
pandemic, the companies in the UK also need to adjust to the changes in relation to the new
commercial partnerships with the European Union.
4

The most flexible businesses which have the best preparation of the existing situation will make
their way to the process of recovery. The Smart organisations will attract new customers and will
improve the behaviour of the staff. This will lead to long-term competitiveness and increase in
the innovation and engagement.
How may the administration's existing involvement tactics impact a business you've selected?
(For example, economic and financial strategies, the layoff programme, and so on.)
The component of tax reduces the amount of the products traded which results in decrease in the
profits. The customers surplus also reduces as the rise in the purchaser price but the profit
reduces as the seller's price decreases. Some of the damages which are caused by the price but
there is one loss that no party acknowledges i.e. the amount of unit which would have been
traded if the tax component does not existed in the process (Hague, 2018.). The need for the
items identifies the value while the supply identifies the marginal cost. The variations in the
figures are coloured in black which represents the income which is lost from trading the units
that are changed due to the presence of tax. A deadweight loss can be defined as the profits
which are lost in the process of trade. The capital loss is the difference between the seller's prices
and the buyer's values of the commodities that are not economically viable due to the tax or any
other interference of the market.
A floor price is the lowest price where a commodity can be sold. The government has set price
floors for several agricultural products (Lea, R., 2022.). A maximum price is the highest price that
a goods or services can be sold for. Apartments are subject to rent control, which sets a
maximum price. Simple market dynamics analysis may easily express the notion of pricing
floors and ceilings. Consider a price floor, or a legal minimum price. There are no repercussions
if the minimum price is modest enough—below the equilibrium price—because the same
mechanisms that tend to induce an equilibrium price continue to work. There'll be a surplus if the
floor price is greater than the market equilibrium because at the floor price, greater units are
provided than are requested. Discrimination is a prominent and unpleasant side effect of price
limitations. Bias against with a particular group, race based, religion, or other considerations,
necessitates transacting not on cost but on another aspect in a free or unrestrained market. Thus,
5

discrimination is costly in a free market—for example, discrimination implies not renting a place
to the potential buyer but also to the potential buyer of the favoured group. With a price cap, on
the other hand, there is a scarcity, and suppliers can differentiate at a reduced cost, or even for
free. That example, whether there are double as many persons looking for flats as there are
systems available just at price cap, landlords can "pick and choose" between potential tenants
while still receiving the maximum allowed rent(Hussain, Saliaand and Karim, 2018.). As a result, a
maximum price has the unintended consequence of decreasing the price of discriminating.
Finally, governments frequently meddle in market transactions by imposing a quota.
A limit is a maximum amount of production that is generally set based on previous output. A
quota's immediate impacts usually include a money shift from purchasers to suppliers. Because
the price rise was caused by a production constraint, ineffective manufacturing and overstock are
avoided. That transaction has an unfavourable and rather sneaky quality to it. So because right to
create is a profitability and competitiveness, it has a value that the producer must collect.
What are recent worldwide issues that your selected firm is experiencing, along with advice for
how to address them now?
The end of 2021 was marked by an increase in living costs due to rising energy prices. This,
along with the pandemic's economic impact and ongoing supply chain challenges, has resulted in
inflation that, per the UK government, may reach 5% by 2022. This increase in inflation will
very certainly lead to an increase in interest rates, as the Central bank of Britain has already
warned. With the borrowing costs expected to rise, firms will need to examine any existing loans
and hunt for better rates ahead of any prospective increases.
Furthermore, in 2022, a host of tax changes will take place, including the termination of a
COVID VAT deferment plan, the implementation of a plastic wrapping tax, and an increase in
National Health care premiums. Supply Chain Troubles Sadly, the distribution network issues
that have already been plaguing the country since the second half of 2021 have no end in sight.
The combination of Brexit-related red tape and COVID-19 limits, which have resulted in
employee shortages, has brought the already rickety supply chain infrastructure to a standstill. As
a result of these advancements, many organisations' just-in-time approach is no more the best
choice, and storing greater stock is now preferred. According to Dan Swan, a McKinsey
Operations specialist, supply lines are not just a great evil but a true differentiator for businesses.
Many corporations are now concerned about climate change. Businesses are proactively worried
6

about the effect of climate change, according to a Deloitte research from 2021, with climate-
related calamities and resource shortages topping the list of corporate worries. As the public
grows more environmentally conscious, there is a greater focus on sustainability. Businesses
must be able to reconcile their environmental footprint with their financial statements. Because
of the working remotely revolution fuelled by the COVID-19 epidemic, digitization is more vital
than ever (Kaplan, A., 2018.). Businesses that are unable to embrace technology will struggle,
according to Deloitte, and those on the route to digitalization do better financially. Artificial
intelligence (AI) can help organisations save costs, become more efficient, and even solve some
supply chain concerns. Despite this, many firms are still trailing behind and are having difficulty
raising the capital necessary to digitise. The year 2021 was characterised by the Great
Resignation, when businesses throughout the world battled to retain and hire new staff. This
appears to be partly due to the epidemic, as individuals were burnt out and moved their attention
away from their current employment. This has been exacerbated in the UK by Brexit, that has led
in a workforce reduction.
It is recommended that concerning the global challenges more technology oriented approach for
business should be adopted (Khan, 2021.). The hotels should try to open more branches or
expansion should be more focused in countries who are not the members of EU as the trade
restriction and stringent policies will not be the obstruction then in the growth of the business.
CONCLUSION
It can be concluded from the above report that macroeconomic is a very essential aspect
in relation to the business. These factors can have a huge impact on the operations of the
business. However, the year 2020 has taught us that we must never underestimate the impact of
unanticipated global events. While it is much too early to predict how the two main events will
affect our globe, it's indeed safe to state that Brexit and the Covid-19 epidemic have totally
changed the global business landscape for the better. Of course, it's hard to predict when a
disease will spread globally. Nobody would, after all. Nobody could have predicted that
widespread discontent with European immigration regulations and some economic restrictions
would lead to a full-scale partnership collapse, ending in Brexit. There are, however, certain
methods to "fortify" your company so that it becomes prepared to confront new problems.
Another of them is using PEO and Enhanced oil recovery services to assist your company remain
7

nimble, adaptable, and responsive. In addition, some risks associated with economic and political
unpredictability will be eliminated.
8

REFERENCES
Books and Journals
Bell, D.N. and Blanchflower, D.G., 2020. US and UK labour markets before and during the Covid-19
crash. National Institute Economic Review, 252, pp.R52-R69.
Chowdhury, F. and Bone, J., 2021. Who Helps the Helpers? Resilience and Challenges of Business
Accelerators and Incubators during the Pandemic in the UK. Resilience and Challenges of
Business Accelerators and Incubators during the Pandemic in the UK (April 14, 2021).
Fairlie, R. and Fossen, F.M., 2022. The early impacts of the COVID-19 pandemic on business
sales. Small Business Economics, 58(4), pp.1853-1864.
Gollier, C., 2021. The cost-efficiency carbon pricing puzzle.
Hague, D.C., 2018. Pricing in business. Routledge.
Hussain, J., Salia, S. and Karim, A., 2018. Is knowledge that powerful? Financial literacy and access to
finance: An analysis of enterprises in the UK. Journal of Small Business and Enterprise
Development.
Kaplan, A., 2018. A school is “a building that has four walls… with tomorrow inside”: Toward the
reinvention of the business school. Business Horizons, 61(4), pp.599-608.
Khan, W.M., 2021. Social entrepreneurship: an exploratory study of conception, business models and
challenges in the UK (Doctoral dissertation, University of the West of Scotland).
Lea, R., 2022. The Spring Statement: some help in response to the “cost of living crisis” as the OBR
downgrades growth and revises inflation higher. Arbuthnot Banking Group, 4.
Torjesen, I., 2022. GPs face huge pension tax bills this year after rise in inflation.
9

10