Foundation Year 0: Contemporary Business Environment and Ukraine War

This essay, written for a BA (Hons) Business Studies course, investigates the multifaceted economic consequences of the ongoing war in Ukraine on the United Kingdom. It begins by outlining the potential impacts of trade disruptions, geopolitical risks, and the existing limited direct business ties between the UK and Russia. The essay delves into specific economic effects, including rising commodity prices, market volatility, and the energy sector's vulnerability. It then proposes actionable economic recommendations for the UK government, such as increasing gas production, boosting public spending, expanding universal credit, and implementing small business support schemes. Furthermore, the essay provides recommendations for the Bank of England, including increasing reserve ratios and managing government bonds. The conclusion emphasizes the importance of understanding the war's short-, medium-, and long-term effects on businesses and households in the UK and globally.

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 economic recommendations can be provided to the government of UK to remedy any
negative effects of the war in Ukraine on the UK’s economy?...................................................4
What economic recommendations, can be provided to the Central Bank of UK to remedy any
negative effects of the war in Ukraine on the UK’s economy?...................................................6
CONCLUSION..............................................................................................................................7
REFERENCES..............................................................................................................................8

INTRODUCTION
The length and severity of the conflict, and consequently the degree of restrictions and
economic instability, will determine the economic consequences of the war. Here is a breakdown
of how the UK might be impacted by trade disruption. A confrontation of this magnitude entails
significant geopolitical risk, which by itself might impede economic growth. It has been
discovered that elevated geopolitical risk causes ongoing declines in industrial output,
employment, and global commerce (Cavusgil, 2022). Thus, this essay will concentrate on the
key elements related to the implications of the war for the UK's economic situation—including
their impact, effects, and potential solutions.
MAIN BODY
Explain the main impacts of the ongoing war in Ukraine on the UK’s economy.
Hardly any immediate business ties exist among Russia and the UK. Russian monetary
incorporation with the worldwide monetary framework isn't serious areas of strength for
exceptionally, trade between the two is unassuming contrasted with the size of one or the other
economy. Be that as it may, the UK economy still could in any case be fundamentally affected
by Russia's attack of Ukraine and the actions the UK and its partners executed accordingly. Just
0.7% of the UK's commodities of administrations and items to Russia roughly 1.5% of its
acquisitions. Vehicles and their parts, assembling, and machines make up most of English
commodities to Russia. All oil and gas products and valuable metals made up practically Russia's
imports to the UK in 2019, the latest year for which information is both accessible and
unhindered by the outbreak. Four factors make it likely that the conflict will impair trade:
 Logistics will be an issue for organizations while delivery things to and from Russia. For
certain exemptions for necessities like food, drugs, and philanthropic guide, delivering
behemoths Maersk and MSC, for example, as of now have proclaimed an impeding on all
freight appointments to/from the country, enveloping all section and leave focuses
including inside Black Ocean ports, the Baltic and in Far East Russia (Chortane and
Pandey, 2022).
 Exports of "dual-use" products and technologies (i.e., those with both military and non-
military applications) to Russia are prohibited, and the sanctions could be expanded

further. Financial penalties make international transfers extremely difficult and
discourage some Russian banks from using the SWIFT money communication system.
 Multinational businesses are already leaving Russia over worries about their reputations
and the challenges brought on by ongoing and upcoming sanctions. Large corporations
like General Motors, Apple and Volvo are already doing this. Due to the sharp
depreciation of the rubble, Russian corporations and individuals will find it much more
burdensome to import goods, which will eventually cause a decline in overall demand.
The aggregate of them is probably going to significantly reduce Russia's trade volumes,
especially imports. Although there aren't many direct ties between the UK and Russia, there
won't be much of an impact on the UK economy. The UK will may face a much greater
difficulty as a result of the indirect consequences of rising prices and market volatility in
commodities, especially the energy sector (Cooke and et. al., 2022).
What economic recommendations can be provided to the government of UK to remedy any
negative effects of the war in Ukraine on the UK’s economy?
The implications of Russia's attack of Ukraine are supposed to nastiest affect England's
economy of any major industrial nation next year, causing it to crawl to a standstill. The numbers
show that a number of reasons, including increased The UK was suffering from rising interest
rates, higher taxes, less trade, and very costly energy. Consequently, the UK government can
consider some economic steps to mitigate the detrimental effects of the ongoing conflict.
Increase in Country’s Gas Production – This year, the UK increased natural gas production by
26% as Europe struggled with an energy crisis brought on by Russian reductions in gas pipeline
flows. According to the official statistics, the UK has increased its natural gas supply to Europe's
storage facilities during the Ukraine war. After Russia cut off gas supplies to the area, where
price levels for the commodities have surged to record highs, the continent is now experiencing
an energy crisis. According to Offshore Energies UK, the nation severed all ties with Russia in
the energy sector and didn't import any coal, gas, or oil from it in June. That will increase the
demand on the supply. The governments of Europe are frantically searching for alternatives to
Russian gas. The UK, a relatively modest exporter, is one of the sources they are trying to secure
in order to have enough supply for the colder months (Estevão, Lopes and Penela, 2022). It was
possible for the UK to supply its European neighbours with extra natural gas over the summer,

but that is unlikely to happen in winter due to the country's shortage. Market observers predict
that in order to meet the demand for gas throughout the winter, it will likely need to import it
from Norway.
Increase Public Spending – The UK government plays a crucial role in responding to the
financial slowdown and its influence on the economy as a result of the continued war conditions
by raising its spending in order to stimulate economic recovery. Given the amount of money
being spent in this sector, it is crucial for policymakers to assess if their efforts are genuinely
fostering economic growth (Lo and et al., 2022). Tax rises are likely to partially offset the effects
of rising government spending. maintaining the same level of aggregate demand (AD). However,
it's feasible that more expenditure and taxes will lead to a rise in the UK's GDP. The additional
government spending may have a multiplier effect. If government spending leads to increased
employment, the jobless will have more money to spend, which would further increase aggregate
demand. Government expenditure might cause the economy to grow more overall than it did
after the first infusion when these areas of excess capacity are present.
Increment of Universal Credit –The increase in universal credit, together with several other
benefits, will result in salary increases for millions of people in the UK. It comes as the first of
two payments totalling £650 to help cost-of-living pressures has begun to arrive in more than
eight million homes (Hallioui and et. al., 2022). The growing cost of gas, petrol, and items on the
grocery shelf has already been making the situation tough for many, albeit with cost-of-living
allowances. In Universal Credit, 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
Intensive Work Search. The DWP kept a tonne of administrative data for this study's
administration of the benefit.
Introduce Small Business Support Schemes –The aspiring businesspeople can get a much-
needed boost from loans of up to £25,000 if they are simply starting out or hoping to grow. For
additional financing possibilities for small enterprises, see the Finance Hub of the British
Business Bank (TAYLOR, 2022). Through funding and teamwork in research, Innovate UK
helps businesses create and comprehend the potential of new ideas. The entrepreneurs can

commercialize the offered idea thanks to their knowledge transfer network's access to
information, materials, and markets. Another government-sponsored program is Tech Nation,
which offers programs to encourage UK tech companies and access to free online courses to
develop digital skills. The UK's digital economy is viewed in detail by Tech Nation's Data
Commons for UK Tech, which is also a valuable source of market information and insights.
(Mardones, 2022).
What economic recommendations, can be provided to the Central Bank of UK to remedy any
negative effects of the war in Ukraine on the UK’s economy?
Helping UK families and companies navigate a potential severe but transitory economic
shock is the Bank of England's role. The Bank's three policy committees have outlined a
comprehensive and timely package of efforts to help UK businesses and people navigate the
economic upheaval that is likely to be linked to the war's effects. With the support of these
measures, businesses will remain operational, people will have jobs, and a little disruption won't
result in longer-term economic damage. The thoughtful suggestions in this regard can also be
addressed.
Increase the Reserve-Ratio for Banks – Among the three techniques the Federal Reserve utilises
to implement monetary policy is reserve requirements. However, since open market transactions
are a considerably more precise tool, the Federal has rarely used adjustments to reserve
requirements in recent years to implement monetary policy. The UK banks' increased reserve
requirements will result in a higher effective tax rate on deposit services, which will reduce the
amount of financial intermediation done by banks. If no additional measures are taken, boosting
the required reserve ratios will decrease the amount of advances that can be sustained by a
specific stage of reserves, deplete the money supply, and raise the cost of credit (Patel, 2022).
Sustenance of Government Bonds – Lending money to the government in the form of a
government bond in exchange for an agreed-upon interest rate. This kind of investment is
dependent on debt. Investors can utilise that capital to earn a fixed rate of return paid on a
recurrent basis in exchange for funding structures or new projects. Interest rates have a
substantial impact on the demand for bonds. If interest rates are lower than the coupon rate,
demand for bonds is anticipated to rise since they represent a profitable investment. But demand
can decline if interest rates increase beyond the bond's coupon rate. The banks in the UK could

think about trading on the government bond futures market to wager on interest rates or to
protect themselves against interest rate changes and hyperinflation. (Qureshi and et. al., 2022).
CONCLUSION
Thus, it may be concluded that any disruption in Europe's energy supply will have a more
significant effect on wholesale prices in the UK than what can be foreseen via direct trade
linkages. Gas prices in the UK and Europe were synchronized in 2022. This is because
merchants import gas from the UK before exporting it to Europe, which limits the supply in the
UK and drives up prices in Europe until they are equalized. A disruption in Russian gas supplies
to other European countries also would raise inflation in other marketplaces that the UK uses,
such as Norway, because of rapid growth throughout Europe. In addition, regardless of the
short-, medium-, or long-term repercussions of the conflict, it is likely that businesses and
households worldwide, including those in the UK, will put off purchases out of dread for the
worse, delaying the pandemic recovery overall.

REFERENCES
Books and Journals
Cavusgil, S.T., 2022. Megatrends and international business. In Megatrends in international
business (pp. 11-21). Palgrave Macmillan, Cham.
Chortane, S.G. and Pandey, D.K., 2022. Does the Russia-Ukraine war lead to currency
asymmetries? A US dollar tale. The Journal of Economic Asymmetries, 26, p.e00265.
Cooke, F.L., and et. al., 2022. Contemporary Talent Management in the Context of Uncertainty.
In Academy of Management Proceedings (Vol. 2022, No. 1, p. 15371). Briarcliff Manor,
NY 10510: Academy of Management.
Estevão, J., Lopes, J.D. and Penela, D., 2022. The importance of the business environment for
the informal economy: Evidence from the Doing Business ranking. Technological
Forecasting and Social Change, 174, p.121288.
Hallioui, A., and et. al., 2022. Systems-based approach to contemporary business management:
An enabler of business sustainability in a context of industry 4.0, circular economy,
competitiveness and diverse stakeholders. Journal of Cleaner Production, p.133819.
Mardones, C., 2022. Economic effects of isolating Russia from international trade due to its
‘special military operation’in Ukraine. European Planning Studies, pp.1-16.
Patel, U., 2022. Box A: The economic consequences of the Ukraine War for UK household
incomes. National Institute UK Economic Outlook, (6 Spring), pp.7-8.
Qureshi, A., and et. al., 2022. Russia-Ukraine War and systemic risk: Who is taking the heat?.
Finance Research Letters, p.103036.
TAYLOR, S., 2022. Contemporary people management issues. Studying Human Resource
Management: A Guide to the Study, Context and Practice of HR, p.65.
Lo, G.D., and et al., 2022. The Russo-Ukrainian war and financial markets: The role of
dependence on Russian commodities. Finance Research Letters, 50, p.103194.