University of Suffolk: Contemporary Business Environment Report

This report analyzes the contemporary business environment in the UK, focusing on the economic impacts of the COVID-19 lockdown and Brexit. It examines the effects on the circular flow of income, detailing the roles of households, firms, the government, and the foreign sector. The report further assesses the UK government's major economic responses, including policy measures, public finance strategies, and financial interventions, alongside the Bank of England's actions, such as interest rate adjustments and funding provisions. The analysis considers the implications of these responses on the UK's economic stability and future growth, providing insights into investment enhancement, capital formation, and trade barrier adjustments. This document is available on Desklib, a platform offering a wide range of study tools and solved assignments for students.

Contemporary
Business Environment

Table of Contents
INTRODUCTION......................................................................................................................3
TASK 1......................................................................................................................................3
Explain the impact that occurs due to lockdown on the UK’s economy in the context of
circular flow of income..........................................................................................................3
TASK 2......................................................................................................................................5
Explain the major economic response of the UK’s government and their impacts on the
UK’s circular flow of income.................................................................................................5
TASK 3......................................................................................................................................7
Analyse the major responses of the Bank of England and their implications on the UK’s
circular flow of income..........................................................................................................7
TASK 4:.....................................................................................................................................9
What are the likely impacts of Brexit on the UK’s economy.................................................9
CONCLUSION........................................................................................................................11
RECOMMENDATION...........................................................................................................12
REFERENCES.........................................................................................................................13

INTRODUCTION
Business environment is the most effective factor for any business. Business and the
environment are both inter linked with one another. It includes all the forces that lie inside
and outside the surrounding. Change in any of the force effect directly or indirectly to the
organisation efficiency. The environment keeps on changing and is very uncertain it is
because of dynamic changes that occur frequently (Boone, Kurtz and Berston, 2019).
Contemporary business refers to modern business. Contemporary business is a business
environment which has ides of the present time. It has vast competitive market which keeps
of changing and the business has to make thought through which they can grab the responses.
Economy fluctuation, technological advancement, new competitors, laws and policies all are
causes for the contemporary business environment. In this report a discussion will be made
by the consultant that is to be present in the front of UK government about the economic
impact due to Covid 19 (Barr and et. al, 2018).
TASK 1
Explain the impact that occurs due to lockdown on the UK’s economy in the context of
circular flow of income.
Circular flow is an economic model where they represent the flow of money, services
and goods, trade etc., between the agents of the economy. There are four economy elements
that of circular flow of income in the UK and during the Lockdown all these factors affect
and they in turn impact the economic condition of the country (Brodeur and et. al, 2021).

This diagram of circular flow shows the flow interdependence of activities that are related to
the nation’s economy. The Pandemic hit the world in such a way that all the activities are
stopped and lockdown occurs in the world. The overall economic condition of the UK has
worst effect of this Crisis.
 Household sector: Household provides many factor services. There services are
connected with the firm, government and the foreign nation. In exchange of the
service they get the factor payments. Government and the foreign country also gives
them the transfer payments in return. The consumer spends their savings in
purchasing of goods and services that manufactured by the firms. They also pay the
income tax to the government for their personal income. During the Covid lockdown
all these activities stopped which effect the economy as people are not spending their
money and the flow of currency stopped which affect the balance of payment of the
country (Codagnone and et. al, 2021).
 Firm: They are the major contribute to boost the economy as they manufacture the
product that the sale to earn revenue and that revenue is used for the economical
development. They receive the money from the household, government and from the
export to the foreign country. During the pandemic government stop giving subsidies
to the companies also production is stopped, and barrier are made for exporting. So
the firm is not getting the revenue, due to which they do not invest in any
advancement of the economy. So the inflow and outflow is so little which impact the
economy development of the country (Pollard, 2018).
 Government: the economy of the country is run by the government. They are those
legal authorities which directly invest in the economy so that it can develop in best
way. They receive their revenue from the consumptions of the households, production
by the firms and transfers made by foreign sector. When Covid 19 hit the UK then
government grants many laws and rules to save their economy but this rules and
regulation affect the flow of income as they are also not receiving any revenue from
the above three sectors. The situation of deflation is created in the nation and
government has not enough currency that they can invest in economic enhancement
(Singh and et.al, 2021).
 Foreign Sector: When the exchange takes place from one country to another then they
receive foreign currency and with lockdown there is no exchange taking place as all
the activities between the countries are stopped. Import and export is not there so

there is no chance were UK government can invest their money or any foreign people
can invest in them (Ibn-Mohammed and et. al, 2021).
TASK 2
Explain the major economic response of the UK’s government and their impacts on the UK’s
circular flow of income
The pandemic create a period of recession in the UK and the government need to take a
strong decision so that they can response and recover from it. The degree of the recession is
unprecedented in the modern times. The GDP rate of the country is decreased by 9.8% in the
year 2020. This declined is much more then 1948. The UK government has responded back
to the pandemic by different ways so that they can maintain a good circular flow of income
(Nicola and et. al, 2020).
 Policy response: Political body and the central bank of the UK together introduced
various policies so that they can boost the economy by mitigating some of the
negative impact of the Covid 19. In the country various policies and plans are being
designed and announced by the government and Bank of England were they are
supporting the Businesses and worker who affect the most. They are encouraging the
business by giving subsidy and employing the workers. By doing so they are helping
both the businesses and reducing the unemployment rate. They are also giving
financial support to the employees and the companies. This helps in circular flow of
income as employee will get the money which they can invest in buying goods and
services and this gives revenue to the firm and from that revenue they can pay the
taxes to the government. This help in economic development of the country and
attempt to decrease the pandemic uncertainty in the nation (Bloom and et. al, 2019).
 Public finance: The country public finance has drastically affected by the shock of
the economic pandemic of the corona virus. The government budget sees a deficit in
the year 2020 and 2021. The government spending increases and the revenue they get
in the form of taxes reduced. So to support the public finance they decide to spend
billion of amount in the years so that they can maintain their economic circular flow.
So to get the revenue they start supporting the public finance and raising their money
through it. This will help the government to increase their fund and the market will
also get currency which can be flow for various purpose. This strategy help them to

recover their situation of deflation and create a path for the economic inflation (Erken
and et. al, 2018).
 Financial response: Government has also protected the UK firms by providing then
massive fiscal helps to vulnerable population. They are providing many loans and
guarantees from March 2020. They are providing global fiscal helps in terms of
spending billion of amount on it. They are also supporting the health care by granting
gifts if any body dies on it to their family. The local government also help to the small
and middle scale enterprise by providing them loans on less interest rate. Number of
instrument has been activated so that they can protect and maintain the public
investment project. Instruments like improving self financing capacity, relaxing the
rules of budgets, enhancing capital transfer, simplifying te long term project access
and many more. They also supporting by given many schemes on public private
partnership and equity financing (Power and et. al, 2020).
 Enhancing investment: The government of UK response to the corona virus crisis by
increasing the investment. They are supporting the public to inject their money on the
bank to spur their investment by giving more interest rate. They are also trying to
attract foreign direct investment by removing barrier and also stemming the loss of
FDI outgoing. Investment also help the Country in technological advancement and
create more employment rate as the entrepreneur can get the capital which they can
use for diversification and expansion which in turn help in economy to be stable.
 Providing capital formation: All the countries have major features that help them to
boost their capacity to build a strong economy. So the UK government is planning to
raise the capital so that production and manufacturing can be increased. They are
maintaining adequate supply of the capital for the economic development. This
maintain the flow of circular income as the supply is enhancing and consumer get
more goods and service which was not there in the lockdown. The household’s money
is investing in the firm production and the organisation are in the state where they can
pay the taxes which government uses for country’s advancement (Hale and et. al,
2021).

 Removing trade barrier: Import and export is the major source through which
economic can be developed. They are the major source of finance for every country.
UK is a developed country where exporting is more than importing. Many big
organisations are situated in there and Export their product to overall world. But when
the Pandemic occur all the trade outside the country has been stopped for further
spreading of virus. This impact the UK government because most of the revenue they
generate by implementing a high tax on the goods. But when they are not getting the
revenue so they remove many trade barrier so that after the crisis more export can be
done and government can get the foreign currency which they can invest for
technological advancement. This also helps them in circular flow of income as their
foreign sector enhance which is the major element of flow of income. This also help
them by maintaining their Balance of trade which was going deficit but after this it is
coming in the line (Stephenson and Fontana, 2019).
TASK 3
Analyse the major responses of the Bank of England and their implications on the UK’s
circular flow of income
Bank of England is the central bank of United kingdom. All the functioning related to
inflow and outflow of money id decided by them only. They are responsible for controlling
the situation of inflation and deflation in the market and the circular flow of income is in their
control. The central bank of UK is strong enough for helping the household and business
sector for recovering the economy (Scally, Jacobson and Abbasi, 2020). There are so many
measures that are taken by the Bank of England to maintain the economy and circular flow of
income. Some of then are discussed below:
 Cutting the interest rate by the central bank: Bank of England has cut their interest
rate by 0.1%. On 19th march 2020 a special meeting is made by the Monetary policy
committee were they decided to cut down the rate of interest. The rate which the
central bank decide is the official interest rate of the county. This action is taken by
the bank so that household and business can take loan from the bank and will pay low
rate. This will also help them to solve the problem of capital and can use them for
there purpose. The circular flow of income is also maintain as the firm and the people

can get the money which they can invest or spend in the market which help the market
to acquire money which were stop during the lockdown of the pandemic.
 Providing more funding to cooperative banks: The central bank of UK has provide
more funding to the other banks so that they can increase their lending in the time of
Corona virus outbreak. They also support more to those bank which helps in
providing higher lending to small and medium sized companies. This support is
provided because these firms and companies need more capital in the tough time of
economy. Cooperative bank helps many organisation and people by injecting capital
in the country which is used by them for their and economical development. If
cooperative bank has money then this can be used by the firm for their purpose of
running business and manufacturing those innovative products which help the nations
by giving technological advancement to other country by investing money in them
(Allen and Allen, 2019)
 Helped in paying staff ad suppliers amount: Bank of England closely work with the
government bodies of the country to help the large scale enterprises by offering them
capital which they can use to repay their cooperative debts. This help the
organisations to keep paying salary and wages to their employee and debt amount to
their suppliers. During the Covid 19 a situation is crated in the country of deficit
amount,, no one has the money which they use to pay debts because all the activities
are stopped. So to run their large scale business the central bank decided to pay the
cash so they can use to build the society and in future their flow of cash will be
maintained (Patel, 2020).
TASK 4:
What are the likely impacts of Brexit on the UK’s economy
The impact of Brexit is much more worse than that of Covid 19 and it is a long term
effect for the economy of the country. December 2020 is the period were the Transition
period between the EU and the UK of the Brexit can officially came to end. Brexit is the
economic and policy union were UK is the member from 1973 (Ellington, 2018). This
withdraw has worse for the UK. The economy of the country has slowed down many large
scale business has shift their headquarter from UK to EU. There are some impact of Brexit on
the UK’s economy which is been discussed below:

 Growth: The biggest disadvantage of the Brexit is that it totally crush the UK’s
economic growth. The uncertainty is that it slowed down the overall growth from
2015 to 201. UK’s growth from 2.4% to 1.0% in 2019. In the researcher it is been
noted by the United Kingdom government that within fifteen year there growth will
be declined by 6.7%. Immigration wil be restricted so that they can save their current
trade. The British pound comes down from $1.48 on the day of the referendum to
$1.36 the next day. This help the country in exporting things but the import of the
goods and services are increased. Country also not regained the pre-Brexit high (Hay,
2018).
 Jobs: due to crisis of Brexit Britain’s younger worker affect a lot. It is predicted that
by the end of 2030 the shortage of labour increased by 3 million that all will be skilled
worker. The jobs will easily bot available for the UK workers. The organisations
employers will incurred a problem were they cannot find the applicant easily. This
situation hits many of the small skilled and medium skilled enterprise in a wider way
as they will not get employee foe their smooth functioning (Valverde and Latorre,
2018).
 Trade: UK has lot of trade agreement with almost 70 countries. After the Brexit the
company need to sign forty new trade agreements with the other countries so that a
free trade can be done.
The most impact of Brexit is on London, UK. The financial sector of the London has come in
the state of depressed growth. The financial sector of London saw only 1.4% growth to zero
percent in 2019. Many international companies are not liking to invest their amount on
London for entering into the EU economy. Barclay's moved 5,000 clients to its Irish
subsidiary, while Goldman Sachs, JP Morgan, and Morgan Stanley switched 10% of their
clients. The biggest Bank of America has also shift their 1000 banks to other country and 40
brokers in Paris. It also create the problem of supply chain were the scarcity of the Lorry
drivers has enhanced in the UK. There is also a shortage of product and empty shelves for
the buyer to buy because of driver shortages who provide raw material and finished goods.
Due to this UK government need to give Visa to the truck drivers from many countries
(Bernanke, 2020).

CONCLUSION
From the above report it is been concluded that if any crisis occurs in the country then it
leaves a greater impact on the economy of the country. Not only this circular flow of the
income also imbalance due to this. In the present report it is concluded that the two pandemic
that is Brexit and Covid 19 hit the UK economy in such a way that the country suffer a lot.
Thee impact of the crisis is for long term and government need to take many measures so that
they can cop up with the challenges. The major impact that occurs during the lockdown in the
circular flow is that the Four important elements of the income that is household,
government, firms and foreign all impacted. During the lockdown the economy of the nation
is unstable and the flow of income is in deficit as all the activities are being stopped so that
spread of the virus can be reduced. In the withdraw of Brexit the UK growth, job and trade
affect a lot and a major country the comes in the contact was London. The city financial
position is reduced. Bank of England has take various action so that they can response back
to the pandemic.

RECOMMENDATION
In the current study of contemporary business environment it is been recommended that the
business effect a lot when there is economical instability and the dynamic change also affect
the business cash inflow and outflow. As it is been noted that the two major challenges Brexit
and Corona virus both are uncertain and businesses are not ready to fight with this problem.
The organisation major problem is that there are the shortage of the fund so that they can
invest and cope up with the ideas. It is also recommended that business should support the
economy so that country economy is so developed that if any pandemic occurs then they are
in the position which does not gives a long time impact on that. The business makes sure that
there all the actions are in the favour of growth and development of the country and can pay
the taxes to the government as revenue. Business deal with such a constant changing
environment where external factor effect then so worse which is to bad for the company to
survive. With the help of contemporary business environment company can uses their new
idea in the present time so that they can solve the uncertain condition.

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