Business Economics Report: Brexit, Inflation and Housing Prices in UK

This report examines the economic impact of inflation and Brexit on the UK, specifically focusing on the housing market. It explores how rising inflation and the UK's departure from the European Union have influenced housing prices, consumer spending, and mortgage lending. The report delves into the effects of these economic factors on businesses, including increased costs and fluctuating revenues, and analyzes the role of the government in mitigating negative impacts through monetary policies and other interventions. The analysis includes data and graphs to illustrate the trends and uses economic frameworks to explain the observed phenomena. The report concludes with recommendations for government actions and emphasizes the need for innovation and technological advancements to foster business success amidst economic challenges.

Business Economics Module

Table of Contents
Executive summary..........................................................................................................................3
Introduction .....................................................................................................................................3
Main body........................................................................................................................................3
Effect of Inflation on business.....................................................................................................6
The role of government to for successful business. ....................................................................7
Recommendation.............................................................................................................................8
Conclusion.......................................................................................................................................8
References........................................................................................................................................8
Books and Journals......................................................................................................................8

Executive summary
The report is about Inflation Brexit effect on Housing price which lead to increase in
price of houses and price of monetary lending to consumer at a time of inflation. This also
include the role-played by government to develop the business in the country.
Introduction
Inflation occurs when there is declining power of the currency over the time period.
Inflation affects in increasing in price of goods and service in the country (Syromiatnikova,
2017). UK's inflation arises in the year 2018 and shows 2.29% and increase in 1.55% from 2016.
While the UK left the European union are the trade deal between the two country, price of
market country is being affected since 2016. This report is based on the affects of Brexit on
house price in UK country due to the separation of the contract, prices are affected in the country
with the rise in inflation rate. Businesses are fluctuated with the affects of inflation and Brexit
house price in UK.
Main body
The housing price are being affected due to inflation in the UK country and which results
in people expenditure increases and prices of house are rises with the time. The government had
put the stamp duty on buying the houses and increases with the number of property purchase by
the person. Stamp duty land tax is the tax which s collected by the government from the
consumer while purchasing the property over the certain price has to pay. Rate of tax is
depended on the various factors like type of property, residents or non-resident, first home or
second home purchase by the buyer. After the Brexit, 2016 fear of High house price crises near
corner (Hamnett and Reades, 2019). House price of UK in 2016, EU referendum fixed at
£213,927 by Land registry figure. While in 2019 it been risen to £230,292.

The graph shows the annual rate change in UK price from 2014 to 2020. If there is no deal with
Brexit, homebuyer have faced the uncertainty implication of decision. The cause after the Brexit
inflation in UK:
 Supply and demand: UK houses prices is growth the total number of household leave
behind the supply of housing. This cause property to be overvalued, in spite of low
volume of transactions by people and mortgage lending.
Illustration 1: Annual Rate change in UK price from
2014 to 2020.

The above graph shows the mortgage lending decreases from 2018, but price still rises on limited
mortgage lending (Ansell, 2017). This shows that UK growth in house was not due to increase in
price of mortgage lending but it was due to out of stock availability.
 Number of households and immigration: Brexit control the immigration and cut the
migration level which lead to less population growth in the country. UK's population is
not only increase from the Eastern Europe, but also from other country. Consideration is
taken as the social change migration policies. The below graph stats that trend of UK
population have one of the major impact on long term house price. Economic tools are
applied like Ceteris Paribus and strict immigration control to limit the long term house
price in UK country.
Illustration 2: secured lending to individual has
fallen but prices are still rises.
Illustration 3: UK Population Projection

The effect of inflation with the Brexit consequences are:
The House price is increased in the country which lead to increase in expenditure of
people and also increase price of mortgage lending. Inflation rate cause decline in exchange rate
of the currency in the world(Kiefel and et.al., 2018). It was seen that inflation bring the inflation
in cost of house and increases the price of mortgage lending. The increase in demand and supply
of house will bring the price of house at peak and oversupply of houses bring back to point zero.
Inflation creates the increase in mortgage lending price that effect the decrease in demand of
house and end result in fallen in house prices. Continuous inflation cause damage to economy of
country (Chang, 2018). As the currency become devalued in the world, it is difficult to measure
the international scale of the economy. Government uses monetary policy yo reduce the inflation
rate and to maintain at the balanced point of economy. It overall impacts the economy of the
country by increasing prices in all sector and decrease the value of currency in the world market.
Effect of Inflation on business
Inflation is when there is a rise in price of goods and services. It has an effect on both business
and customers. According to Parker (2018), it affects the price of distributors and suppliers
which in turn lead to an ultimate increase in price of products. The rise in prices of products
leads to consumer saving being less. As said by Adler and Ansell (2020), inflation occurs when
there is an influx of money in the market. People are getting loans at less interest rates and when
the demand overtakes supply, the prices increase in that proportion. Speaking of housing
property, as stated by Adler and Ansell (2020), the current trend of low interest rates on housing,
has increased number of customers buying properties which over a period leads to increase in
rates of land and property, bringing down the effect on customers to shell out more money from
their pocket. The benefits to a business however can be that they receive a higher price for the
property which can increase their capital as some customers would be still taking up loans in
case property rates get higher.
As spoken by Parker (2018), the central bank of the country tries to monitor inflation by
increasing the repo rate which is the rate at which banks borrow from the central bank. This leads
to banks paying up more and to cover that expense, they increase interest rates which again leads
to money influx slowing down and inflation coming down (Barons and Aspinall, 2020).

Brunswick real estate is a company in UK which has seen both the benefits and costs
involved due to inflation. It has effected the prices of raw materials too which lessens on the
margin from supplier. Increase in labour costs to come along with inflation. Increase in revenues
through rising housing property is the benefit seen.
The role of government to for successful business.
The Government have crucial role for the development of business and to maintain the
balance in the economy. The government control the policies by changing the monetary policies
and QE in the country. The government help the business in various forms like subsidies, rebate
and other facilities given. While income taxes and other charge taxes being charged by the
government to spend in the country development. In inflation, government had charged with
taxes and duties which are levy on business and import duty. This increase the expenditure of the
people which affect their income and demand less for the goods and service. The government
increase the interest rate on the mortgage lending which lead to decrease in loan taken by people.
Whereas, if the deflation hit the economy, the government provide with subsidiaries and rebate
by lowing the tax and duty on imports and export. Government will promote investment and
innovation in the country. Interest rate are reduced by government to encourage the investment
through loan by the business(Breinlich and et.al., 2019). People will encourage spending more
and more money to invest in the country and provide with the benefits by the government. To
remain at the inflation point, government used these methods to balance the economy and
country.
Government also promote the innovation and latest technology invented by the locals and
internation and provided with funding to encourage the product and service for the consumer
satisfaction. After Brexit, UK had faced many challenges which are faced by them. The prices of
house are increased and rate of lending money is increased in country and but also they faced
with limited stocks available in the country due to high demand of houses after the separation of
contract. Government shows the major role by increasing the rate of lending mortgage loan for
the people to reduce the inflation rate. Government also create the employment and reduce
unemployment in the country at the time of inflation and recession. UK's Government wholly
control the country and balanced the economy by using various tools and flow of money in the
market which create the balance demand and supply.

Recommendation
The government have to use the monetary and QE tools wisely to maintain the economy.
The limited stocks of houses are the main reason for the high prices in the country which
increased the price of lending the momentary loans. However, government also encourage the
innovation and technology to adopt by the country and create promote the business activities by
providing benefits to country business.
Conclusion
This report conduces that Brexit had affected the country inflation and result in rise the
price of houses in the country. The demand of houses are very high and lead to unable of houses.
As contract occurred, migrates are showed up with high numbers and population growth
increases slowly in UK country.

References
Books and Journals
Parker, M., 2018. How global is “global inflation”?. Journal of Macroeconomics. 58. pp.174-
197.
Adler, D. and Ansell, B., 2020. Housing and populism. West European Politics. 43(2). pp.344-
365.

Ansell, B., 2017. Housing, credit and Brexit. In Conference on Europe and the Credit Crisis,
Apr (Vol. 7).
Barons, M.J. and Aspinall, W., 2020. Anticipated impacts of Brexit scenarios on UK food prices
and implications for policies on poverty and health: a structured expert judgement
approach. BMJ open. 10(3). p.e032376.
Breinlich, H., and et.al., 2019. Exchange rates and consumer prices: Evidence from Brexit.
Chang, W.W., 2018. Brexit and its economic consequences. The world economy. 41(9). pp.2349-
2373.
Hamnett, C. and Reades, J., 2019. Mind the gap: implications of overseas investment for regional
house price divergence in Britain. Housing studies. 34(3). pp.388-406.
Kiefel, M., and et.al.,2018. Understanding Brexit: impacts at a local level: Pendle case study.
Lastrapes, W.D. and Lebesmuehlbacher, T., 2020. Asylum seekers and house prices: Evidence
from the United Kingdom. Journal of Housing Economics. 49. p.101712.
Syromiatnikova, S., 2017. Impact of Brexit on the United Kingdom's housing market.