BSc Business Economics: Impact of Economics on UK Businesses

This essay provides an in-depth analysis of the impact of economics on businesses operating in the United Kingdom. It begins with an introduction to business economics and economic impact analysis (EIA), which is crucial for assessing the influence of economic events and policies on companies. The main body of the essay examines various economic factors, including unemployment, changes in consumer income, interest rates, tax rates, and recessions, and how these factors directly affect business decisions and strategies. The essay discusses the effects of unemployment on stakeholders, the implications of fluctuating consumer income on spending and business performance, the impact of interest rate changes on savers and creditors, and the role of tax policies. Additionally, it explores how businesses can navigate economic downturns and recessions by adapting their strategies. The essay concludes by highlighting the importance of understanding economic principles for effective business management and decision-making.

Business Economics

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
REFERENCES............................................................................................................................................9

INTRODUCTION
Business economy is an area of applied economics that examines corporate financial,
operational, business and environmental problems (Demirel, Rentocchini and Tamvada, 2019).
Company economical assessment uses economic theory, and mathematical approaches to
evaluate such issues affecting companies, business organization, governance, expansion and
policy. In the area of market economy research themes could include how and why companies
grow, the influence of business people, corporate relationships and the role of governments in
legislation. The report is based on analysis of impact of economics on businesses in United
Kingdom and this has been done in accordance of various kinds of aspects and legislation.
MAIN BODY
An economic impact analysis (EIA) analyses the economic impact of an occurrence in a given
region, from a single district across the globe (Tien, 2019). It usually tracks increases in
corporate income, company earnings, personal salaries and/or employees. A new strategy or
project or merely the participation of one enterprise or organization can be included in the
economic case studied. Economic impact analysis is usually carried out where public interest is
raised regarding the possible effects of a new project or program. An economic study usually
analyses or forecasts the change between two possibilities of economic development, each
predicting that the economic happening takes place. An analysis of the economic effect normally
analyses the difference in economic activity or calculates it between different alternatives, one in
the absence of an economic event and one (which is referred to as the counterfactual case). This
should be done before or after the incident (ex ante or ex post).
The analyses of the economic effects aim to quantify or forecast economic activity changes in a
particular area triggered by a particular enterprise, entity, regulation, initiative, project, activity
or economic occurrence. A district, municipality, town, county, quantitative distributor, state,
nation, continent or the entire world can be one of the study regions.
Types of economic impacts-

Economic effect analyses often predict various impact forms. The overall growth in sales
revenues is an effect on the production (Malerba and McKelvey, 2020). The effect on the
production is not synonymic to local enterprises, however, using some of this revenue to pay for
commodities and services from outside sampling sites. The added value effect, which measures
the increase of gross production of a variety in a study area, is a more cautious metric for
economic development. The gross regional property (GRP), which reflects the entire domestic
economy, is very close to the national Gross Domestic Product (GDP). This effect forecasts the
growth in local workers' incomes and local business income. This effect predicts the rise in local
salaries and earnings for local workers (not total revenue, like the output impact). Even so, when
converted to the outside world the value added effect can overestimate local earnings.
The effect on labor revenues, meaning a raise in the overall amount of money paid to local
people in the form of the wages, is a much more conservative indicator. Increases in revenue
may occur by raising and/or rising current workers' hours or by providing new opportunities for
many people. This is a calculation of the economic effect not on corporate income or benefits,
but only on personal income. The job effect, which estimates the rise in the number of total jobs
in the local area, is a related metric (Colombo, Dagnino, Lehmann and Salmador, 2019). This
calculation has an influence on the rate of workers in the area instead of assessing their financial
consequences on money. The effect of land valuation, calculating an increase in overall property
values and reflecting income and wealth produced, be it personal or corporate, are also a measure
of economic influence.
Below some key factors are mentioned which shows impact of economics on business: - In a
nation dealing with the production, sale and use of goods and services the economy covers these
operations. The global environment has a major effect on enterprises. The amount of customer
buying influences costs, decisions on expenditure and the number of employees employed by
companies.
The economic climate affects businesses in four main ways:
Unemployment-Unemployment means individuals who are engaged in search of work but cannot
find jobs (He, Lu and Qian, 2019). This does not actually mean that if anyone has no
employment, they are unemployed. Any people either chose not to work because they are

comfortable financially or because they are looking after their families. Others can't perform
when they're sick. Unemployment ensures that the market does not make good use of the
available jobs. Economic growth would not be as rapid as possible and it will begin to slow. This
economic slowdown would hit companies directly. National unemployed is a statistic assigned,
the government's goal is to achieve a low rates of inequality. There are some reasons why people
become unemployed, for one, they are made to redundant, are fired or leave school.
Unemployment can affect a number of corporate stakeholders significantly.
 The company can earn better returns if it has less staff and if training and salaries are
smaller, but the risk of lower clients with lower discretionary incomes will have a
negative effect on them.
 Employees can be afraid of their position if high unemployment, if salaries and labor
rights are therefore less negotiating leverage. When unemployment is minimal, the roles
and risks of workers are safer and higher.
 When unemployment is poor, suppliers will get more orders, while more consumers will
have discretionary incomes for buying goods. If unemployment is high, manufacturers
may be paid less and rates will have to be reduced.
 When unemployment is so high, the nation would have to pay more welfare payments to
provide more initiatives to reduce unemployment. If unemployment is strong, taxes give
the government more revenue and lower public benefits.
Changing levels of consumer income-Revenue is money earned from employment or savings.
How much you make will affect how much you invest (Garg, 2019). Rising household wages are
also expected to increase general consumption. Expenditure would increase industries, reduce
unemployment and enhance the economy. However, spending is expected to decline if household
income falls. This suggests that companies are not as well performing, unemployment is rising
and the market is less sustainable.
 Increasing profits can result in a greater dividend for shareholders and investors, but the
pay of workers may also be increased. This could lower the amount of money a company
makes as general market revenues decrease.

 Employees and consumers may benefit from more profits, which they can spend freely on
expensive products and services.
 Suppliers can receive additional customers due to higher revenues, or decrease orders if
revenues decrease. They can have to growing the workers' salaries as well.
 If earnings increase and revenues decrease, the budget will collect more taxes.
Interest rates-The interest rate is the expense of saving money or the amount of interest a saver
gets. The figure also shows how much is gained or charged in interest. This amount is a statistic.
For instance, for every £100 borrowed, an interest rate of 4% annually will require £4 to be
charged annually. In addition, for each £100 saved, a saver will earn £4 a year. Interest rate
changes impact savers and creditors alike.
 Shareholders and owners can prefer, instead of investing in the company, to store more
capital on the market if inflation goes up. When interest rates decline, they are more
likely to spend funds in the business.
 If rates of interest rise, consumers will be less likely to invest, as they would benefit from
keeping money on an insurance account and would be less likely to get a loan - their
government would then lower tax income. With the decrease in bond yields, consumers
will spend or take loans and save cash in the account less – this will also raise
government revenues.
Tax rates-Tax is a tax on individuals, customers and enterprises imposed by the state. The UK
has a variety of tax forms (Kirikkaleli and Ozun, 2019). These comprise: Corporate tax revenue,
Profit added tax (NICs) National Insurance Contributions (VAT). Tax is a tax on individuals,
customers and enterprises imposed by the state. In the United Kingdom, we classify taxes as
overt and indirect. A direct tax would be collected directly from income or earnings of an
individual or company to the government. At the point of purchase, an implicit tax is imposed on
a product or service.
Includes direct taxes:
Corporate tax is a fee on the income of a corporation. This levy applies only to limited by
guarantee enterprises.

National insurance premiums (NICs), such as the Jobseeker Allowance are charges to fund
health coverage, Pension schemes and occupational benefits. It is paid by both employers and
staff.
Included are indirect taxes:
Value-added tax (VAT) is a fee tax on the price of the commodity sold for the sales of goods or
services. It is obtained by companies and later transferred to the state. Most products and
services in the UK are paying for VAT.
Taxes on wages are levied, as a percentage of income is paid. There are various revenue tax rates
based on the amount an individual receives, the "standard" rate, the "higher" rate and the extra
rate. Single merchants and company holders pay any income tax on their corporate earnings.
 When taxes are low, investors and investors are paid more and more interest and
dividends. The contrary will happen if taxes rise.
 If tax rates are poor, employees can get a higher salary standard. If you raise taxes, the
salaries of workers will fall.
 If taxes rise, the government receives more revenue. As rates go down, taxes are likely to
reduce their income.
 If taxes are reduced, customers can spend more on goods and services. As taxes rise,
consumers can spend less on lower discretionary revenues.
Recession- Recession is an economic period in which revenues, productivity and jobs begin to
decline. Demand is limited for goods and services. The recession is caused by specific events. In
2001 there was stagnation in America due to slow down in the hi-tech industry, rising fuel costs,
unsustainable consumer lending and terror attacks. Counter-recession advertising campaigns are:
 Companies should upgrade and add new goods. The aim is to reduce manufacturing
hours, pollution and resource costs so that firms can sell goods at lower prices. Recession
raises appetite for good value-added goods and services at reduced costs. Business
consumers purchase economic and profitable goods deliver value for money, assist them
in streamlining processes and operations and in improving their consumer services. The

idea should be to encourage individuals and companies to purchase more. The most
powerful way to end a downturn is to make buying more appealing.
 In the slump, company buyers delay buying new materials and services since they do not
realize if their goods and services are going to be in demand. Vendors should be prepared
to lend credit to customers in order to overcome their unwillingness to buy. Sales of
substitute parts and other services can be an important source of revenue during
recession.
 Companies should recognize that while recession triggers are particular, they continue
because investors and enterprises are unsure and hesitant and afraid to purchase. Their
saving would go down on them at the worst time. Special burden during the slump lies in
companies marketing to customers. When people start purchasing, companies
immediately start buying. Companies who sell to customers must then trust them by
providing them with good quality goods and services at fair rates to broaden their credit.
Companies should be willing to do whatever they need to purchase from customers.

REFERENCES
Demirel, P., Li, Q.C., Rentocchini, F. and Tamvada, J.P., 2019. Born to be green: new insights
into the economics and management of green entrepreneurship. Small Business
Economics, 52(4), pp.759-771.
Tien, N.H., 2019. International economics, business and management strategy. Dehli: Academic
Publications.
Malerba, F. and McKelvey, M., 2020. Knowledge-intensive innovative entrepreneurship
integrating Schumpeter, evolutionary economics, and innovation systems. Small Business
Economics, 54(2), pp.503-522.
Colombo, M.G., Dagnino, G.B., Lehmann, E.E. and Salmador, M., 2019. The governance of
entrepreneurial ecosystems. Small Business Economics, 52(2), pp.419-428.
He, C., Lu, J. and Qian, H., 2019. Entrepreneurship in China. Small Business Economics, 52(3),
pp.563-572.
Garg, B.A., 2019. Review of Nature and Scope of Managerial Economics. Research Review
International Journal of Multidisciplinary, 4(5).
Kirikkaleli, D. and Ozun, A., 2019. Innovation capacity, business sophistication and
macroeconomic stability: Empirical evidence from OECD countries. Journal of Business
Economics and Management, 20(2), pp.351-367.