Business Environment Individual Case Study: COVID-19 Impact on UK

This case study analyzes the profound impact of the COVID-19 pandemic on the UK economy, highlighting the significant decline in GDP, job losses, and disruptions across various sectors. It explores the major economic responses implemented by the UK government, including the "Eat Out to Help Out" scheme, job retention scheme, self-employment income support scheme, and kick-start scheme, assessing their implications for economic recovery and employment. Furthermore, the study examines the Bank of England's monetary policy interventions, such as interest rate reductions and government bond purchases, aimed at mitigating the economic fallout. The conclusion emphasizes the challenges faced by the UK economy and the importance of government and central bank interventions in fostering recovery and stability.

Business Environment -
Individual Case Study
Lo1 and Lo2

Table of Contents
Introduction..........................................................................................................................................3
Main Body ...........................................................................................................................................3
Impact of the COVID-19 on UK's economy:..................................................................................3
Major economic responses of the government of UK and their implications on the UK's economy
.........................................................................................................................................................4
Conclusion ...........................................................................................................................................7
References............................................................................................................................................8

Introduction
Business environment is the combination of various internal and external environment to
attain the business objectives. It is the collection of elements such as individuals, institutions and
more so that a firm can attain success in an efficient manner. The Covid-19 has affected the business
organizations profoundly (Long and et. al., 2021). The report will cover impact of the pandemic on
the business entities in UK. Additionally, it will cover the response of government of UK and their
implication. Further, it will include how bank of England responded towards the impact of
pandemic on the economy of country.
Main Body
Impact of the COVID-19 on UK's economy:
The COVID-19 put a great impact on the economy of UK by minimizing the job
opportunities, source of income for the individuals. It also hampered the overall growth of the
country and reduced down the GDP significantly. In 2020, the GDP of the country declined by
9.7%. Due to the spread of virus, lock down imposed in the entire country as a result the GDP was
25% lower in April 2020 than the earlier (Coronavirus economic impact, 2021), hospitality
industry hit by the impact of pandemic as people stop to move from one place to other. Also, the
international flights was on halt during the COVID-19 which directly affected the tourism within
the country. To curb the transmission of virus, a lock down was announced by the government of
UK. During the lock down, economic activities got down by 30%. As per the study of office of
national statistics, 23% of business has closed temporarily or paused trading. In addition to this, the
business entities which were continuing the functions reported a great decline in the revenue. The
COVID-19 put a direct impact on the employment of country. It is found that the employment of
7.6 million people was at risk due to impact of pandemic. Due to incapabilities of the company to
pay the salary, they lay off or fire the employees which enhanced the number of unemployed
people. Nearly, 50% of the jobs which were at risk are in the occupation where people used to earn
less than 10 per hour (COVID-19 in the United Kingdom: Assessing jobs at risk and the impact on
people and places, 2020) . In the country, there were strict lock down hence people were not
allowed to step out from their place which put a major impact on the economic activities of the
nation. The COVID-19 put a major impact on the economy of UK in terms of reducing down the
employment opportunities, shrinking the income of households, enhancing job losses and more. It
reduced down the overall growth rate of the country in terms of reducing GDP, production, trade
activities and more.

Major economic responses of the government of UK and their implications on the UK's economy
Government of UK took ample of actions to deal with the impact of COVID-19. The main
aim of the government is to handle the situation effectively so that the economy can grow in the
future period of time. For this purpose, they run different schemes such as job retention scheme, self
employment income support scheme and more (Romano, 2020). These steps will help the higher
authorities of the country to maintain the growth of the economy in an efficient manner. In this
context, the major steps and implications are mentioned below:
Eat out to help out scheme: This is one of the major government policies that was
formulated in order to support the business which were re-opening after the COVID-19. Under this,
government offered 50% off the cost of food or other non-alcoholic in business of UK. This
scheme was applied all day from Monday to Wednesday in 2020. For this purpose, the discount was
kept at minimum of 10 per head . Nearly, 849 million have been claimed under the respective
scheme. Additionally, under the scheme, 160 million individual meals have been claimed. This
scheme boosted the demand of customers for eating out the scheme. Due to the scheme, restaurants,
pubs and cafes claimed more than 849 million as people were getting food at discount rate.
Additionally, hospitality business entities claimed subsidies from government (Eikhof, 2020).
During the COVID-19, people faced major issues related to food hence the scheme was
implemented by the government in order to fulfil the food requirements of the people. Through the
scheme, people get encouraged to spend on the restaurant food as they were getting discount and
help from the government. As a result, it enhanced the income of restaurants, pubs and other
hospitality organizations in an efficient manner.
Job retention scheme: This scheme was announced by the government of UK to enhance
the job opportunities in the country. It was announced in 2020 to support those employers who
cannot manage their existing workforce as their operations has been drastically affected by the
COVID-19. During the pandemic, companies laid off the employees as they were not have
significant amount to pay compensation to the employees. It also affected the revenue and income
of the company which has direct impact on the economy (Wright, 2020). The scheme has become a
major tool to control the unemployment issue and social fall out issue in the country. This scheme
supported nearly 50 million jobs across the country by may 2020. The main aim of this scheme is to
support the entities to preserve the employees at the time of crisis so that they can continue the
business activities in an efficient manner. Here, employers can claim the amount to cover the
flourished employees. The usual cost for an unworked hour is up to 2500 £ per month. The JRS can
be used by all the employers of UK who has been created a PAYE payroll scheme on or before 30
October 2020 (UK: Coronavirus Job Retention Scheme - An Overview, 2021). Therefore, the
scheme was formulated to support the job environment of the country. It will help in improving the

employment conditions within the country in an efficient manner.
Self-employment income support scheme: This scheme was started to support self-
employment during the coronavirus outbreak. Initially, the scheme was based on paying taxable
grants worth 80% of the average monthly profits of the individuals. The people who engage in their
own business are eligible to get this grants (Khalid, Okafor and Burzynska, 2021). If a person lost
out the income and has to stop working to look after someone then they are eligible to receive the
benefit of the respective scheme. In this, one can get nearly 80% of the average profits to maximum
of 7500 £ for 3 months. Here, the person is not required to pay the money back. However, there is
requirement to pay a particular amount of tax. To get the benefit of self employment support
scheme, it is required to have profit of not more than 50000 £ annually. The main aim of the
scheme is to improve the employment conditions by helping those people who are self-employed.
This scheme will help in enhancing the employment conditions within the country.
Kick-start scheme: Under this scheme, a person is eligible to get universal credit and
six month job with a local employer. This scheme is funded by the government in order to provide
better employment opportunities to the young people to gain significant experience. Basically, this
scheme is for those people who belong from the age group between 16-24 and are at risk of loosing
the employment (Kickstart, 2021). The main aim of this scheme is to provide employment
opportunities to the young people in order to minimize the unemployment issues in an efficient
manner. It will enhance the income sources within the economy. In this scheme, funding of 100% of
the national minimum wages is covered. In addition to this, it also has association with employer
national insurance contributions. Here, the employers can spread the start date of jib until March
2022. In this scheme, one can easily get funding for 6 months after starting the job. Apart from
starting the business, the funds are also provided for training & development of people. Under the
scheme, training programs are arranged for the young people so that they become eligible to get a
good job in the future period of time. Therefore, the scheme aims to help the young people who are
at risk of loosing job in future period of time. Effective implementation of this scheme will helpn in
making the young people job ready which will further help the country in dealing with the impact of
the COVID-19 in an efficient manner.
Major Responses of the Bank of England and their implications to the UK's economy
The effects of Covid-19 pandemic has caused disturbance in all sectors of working
impacting various social and economic factors. The assets possessing high risk and prices of
commodities have suffered a downfall and government bonds started yielding low along with
continuous market impairment in the aspect of UK growth. The magnitude of uncertainty regarding
financial market became extremely high. Due to the major shutdown of economic activities, the
government of UK took measurable steps in order to overcome the impacts of imposed restrictions.

The bank of England helped the government by bringing changes in their policies, which is
explained below:
 Reduced Rate of Interest: The bank of England attempts to recover from the economic
recession by helping UK business entities and households. The bank of England reduced
their interest rates from 0.75% to 0.25%on 11 march 2020. further more, it was bought down
to 0.1% on 19 march to ease the borrowing of funds for business man and households. This
reduction also improved consumer confidence at serious times during the pandemic and
increased the cash flows of organisations and individuals. This also helped in improving
financial status of people by enhancing their ability to borrow funds. The bank of England
served as a funding agent in introducing the schemes like Covid-19 Corporate Financing
Facility, under which the government provided support to large businesses mostly non-
financial through purchasing commercial paper. Commercial paper is an unsecured money
market instrument issued in the form of a promissory note.
 Government bonds: In order to cope from the effects of economic disruption caused by
Covid-19 pandemic, government adopted fiscal policies like issuance of debt securities. The
monetary policy committee of Bank of England voted to increase the Asset purchase facility
which encourage the holding of government bonds and corporate bonds by BOE.
Sustenance of government bonds helped the UK economy in recovering Union budget
deficit. It assists in raising funds for projects like improving infrastructure facilities. The
bond support scheme provided by government offers partial assurance to banks in regard of
UK export which helps the banks to fulfil requirements for contract bonds. The issuance of
government bonds by the bank of england assures minimal credit risk and high amount of
liquidity. It also helped the bank in developing a wide availability of maturities and highly
enhanced market structures along with progressive derivative markets. Thus this helped the
bank in enhancing their funds and as a result it increase their lending capacity which helped
businesses and households to recover their status.

Conclusion
From the above report, it has concluded that the impact of covid-19 on uk economy was
rough indicating disturbance in circular flow of income. The pandemic caused business entities to
collapse or terminate, increased unemployment, increasing debts denoting diminishing condition of
UK economy. The government followed measurable progressive steps to improve the situation
caused by the pandemic by introducing schemes like furlough scheme, kick start scheme, job
retention scheme and other such steps to recover from the effects of pandemic. It has observed that
the bank of England supported government by changing policies like reduced rate of interests and
encouraging purchase of government bonds to help households and businesses.

References
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