Economic Impact of COVID-19 and UK Government & Bank Response

This report examines the significant economic repercussions of the COVID-19 pandemic and Brexit on the UK economy, highlighting a 4% decline in Britain's economy due to these factors. It discusses key considerations for economic development, focusing on strategies to address the challenges posed by COVID-19 and the implications of Brexit. The report details the UK government's major economic responses, such as the Eat Out Help Out Scheme, Job Retention Scheme, Kickstart Scheme, and Mortgage Holidays, along with the Bank of England's measures, including reducing interest rates and service charges. It also analyzes the potential long-term impacts of Brexit on the UK economy, providing recommendations for navigating these complex economic challenges. Desklib offers more resources like this to aid students in their studies.

Economic impact of the
COVID-19 and the
economic response of the
government and central
bank

Executive Summary
The report will discusses about the impact of COVID 19 and Brexit over UK economy. The Britain
economy declines by 4 percent due to that highlights several major issues in internal environment of
country. Further in the report key considerations to development of an economy is being taken for
instance. Several aspects like; strategies to deal with COVID-19 and considerations to Brexit with its
related impact of economy.

Table of Contents
Introduction – .......................................................................................................................................4
Discussion and Analysis.........................................................................................................................4
Impact of COVID-19 on the UK’s Economy –...............................................................................4
Major Economic Responses of the UK’s Government and their Implications –...........................5
Major Responses of the Bank of England and Their Implications to the UK’s Economy........................8
What are the likely impacts of Brexit on the UK’s economy?......................................................9
Conclusion...........................................................................................................................................11
Recommendations...............................................................................................................................12
References...........................................................................................................................................13

Introduction
The pandemic situation has impacted worlds economy and raised several unpredicted
problems for nations. Due to COVID 19 and Brexit UK government faced some serious restrictions
that laid down the country economy. The decision of leaving the EU has dropped affected UK GDP
by 4%. Exports were reduced by around 19% as well as imports by 21%. In COVID pandemic all the
working operations of UK and other nation had shut down that impacted peoples livelihood and
government function. In this given report the impact of pandemic on UK's economy is being discuss.
Further,major responses and their implications that are taken by UK's government and bank of
England to concur the above situation is being illustrated. In last, some immediate and future impact
of Brexit on UK's economy will discuss in the given report (Brouder, 2020).
Discussion and Analysis
Impact of COVID-19 on the UK’s Economy
COVID 19 virus has spread rapidly in whole worlds economy that shows the
interconnectedness and vulnerabilities of economy. It infected major numbers of people globally.
Around 6.2 percent of adult population in UK'S has faced this viral diseases. Millions of people of
UK's has gone through this deadly disease. Due to the transmitted diseases peoples well-being and
their financial condition has pushed down so harshly. Peoples faced problems even in managing
their day to day operations. Long term pandemic has weakens the circular flow of income that
collapsed the day to day activity of respective peoples of UK. All the businesses operations were
stopped and economy speed were slowed down that lowered the Production, expenditure and
income phases of economy. Peoples were stopped their expenditure on various unnecessary
commodity due to lack of income. The pandemic has restricted the flow of demand and supply and
impact had showed clearly on every persons life (Comunian, and England, 2020).
The COVID 19 has increased the unemployment rate in its initial stages. Number of peoples
were lose their jobs due to this unexpected pandemic. The labour market is majorly impacted. Many
young workers has applied for the unemployment advantages in government policies. The larger rise
in unemployment were among between the age group of 25 to 64. majorly women's, and disabled
workers loose their jobs due to physical restrictions in core sectors like hospitality, leisure, retail
store etc.
Due to restrictions in economy operations many business has collapsed. COVID 19 has
impacted various large of number of businesses sales. Around 40 percent operations of businesses

were closed due to unfavourable conditions that increased hectic situations for entire nation.
However some of the major industry were sternly hit by this unfavourable conditions like hospitality
sector. Numbers of hotels and restaurants debt were increased that indirectly impacted employee of
respective industry to (Dube, Nhamo, and Chikodzi, 2021).
The government of UK's debt were rises more than its GDP due to pandemic. Government
invested millions of pounds into fighting the pandemic situation that lead down them in huge debt.
They borrowed 22 billion pounds which is the highest borrowed money since 1946. due to pandemic
government of UK has reduced the amount of taxes that indirectly affected their income source. On
contrary the expenditures were high and income were low, to overcome by this mentioned problem
government heavily invested in their economy with borrowed money that directly increased their
national debt. The borrowing interest rate were rising recently that burdening the UK's debt. The
speed of GDP has slowed down and takes time to back again on track. Therefore, government debt
problem cant be demolish in a short span of time that means interest burden will also impact its
future operations (Waind, and et. al., 2021).
Major Economic Responses of the UK’s Government and their Implications –
To overcome with COVID 19 situation government of UK played a vital role. They reacted
every quickly to resolve the problems that faced in their economy. At the same time various barriers
has been faced by government due to restricted data and information. They implied several policies
for peoples outbreak the impact of COVID from its economy. Government took the loan and
improvise several existing policies with new one to resolve such issues. Their ventures supports
several businesses to restart their operations as well as employees jobs were safeguards by their
initiative. Below are some responses that took by UK'S government to eliminate the effect of COVID
from its economy (Powley, and Stanton, 2020).
Eat Out Help Out Scheme- one of the major steps that is taken by the UK government to
support in reopening the businesses from lock down. The scheme solely focused into encouraging
the audience towards dining out by providing them some attracting offers. The main prospective for
applying the above mentioned scheme by the government is to safeguard the job in hospitality
sector by supporting their businesses operations though their initiative. Under the developed
scheme government provided 50 percent off on all the food and beverages items that not includes
alcoholic beverages. The offer were run from 3 to 31 august 2020. applied from Monday to
Wednesday. The discount capped at 10 pound per head.
Over million of pound were claimed by thousands of peoples over several outlets. The
claimed offer were sanctioned by government of UK. The provided scheme helped the hospitality

sector into r establishment of their operations. The mentioned scheme boasted the given industry
operations and emphasised the consumers to eat out (HenArial; sans-serifsher, 2020).
Job Retention Scheme- Under the job retention scheme government of UK grant funds to
respective firm employee that used into cover their employee wages. The main focus of the given
policy were to support the employees by providing them wages. In the given policy government of
UK offered the employee to cover 80% of the wages of working employee in their firm. Due to
sudden pandemic situations several business operations were shut down that ultimately reflects in
decline of job securities. Therefore to concur such action government provides liquidity to firms that
succours into operating their operations and hold their workers on jobs.
It is one of the vital steps that has been taken by country to concur several employees by the
effect of COVID 19. by the implementation of mentioned scheme many jobs at organisations were
secured due to support of funds and declines the losses. In the economy of UK, the scheme permit
ventures to make adjustment in working hours at zero costs, widely reducing number of occupations
at termination risk as an outcome of liquidity constraints. Moreover, the stated scheme offered
strong support to employees that loosed their jobs and also initiate aggregated demand. This
initiative succours company in establishing many reforms i.e., provided support in job and career
guidance, implied short time work and unemployment benefits, succours into improvising the
economy reforms (Hite, and McDonald, 2020).
Kickstart Scheme- Due to pandemic situation many teenagers has loosed their jobs and
faced the problem of debt that affects their mental health. Several cases were introduced of
depressions and anxiety during the COVID 19 due to financial crises. In the month of sept 2020
government of UK has announced a scheme that offers the opportunity to teenagers from 16 to 24
age group.In the economy of UK, the scheme permit ventures to make adjustment in working hours
at zero costs, widely reducing number of occupations at termination risk as an outcome of liquidity
constraints e mentioned scheme government were provided the funding to employers so that they
can create a new jobs for youth in the area of Scotland, Wales and England. It solely focuses on
young peoples who are in universal credits as well as on the high risk of long term unemployment.
In instance government implied several rules and regulations that has to be fulfilled by the business
that wishes to participate in such policies (Jones, and Cook, 2021).
Several businesses has recorded impeccable growWaind, E., Ritchie, F., Bailey, N., Caskie, P.,
Morrison-Rees, S., Lowe, S. and Webster, N., 2021. Understanding a pandemic: the power of
administrative data. In Productivity and the Pandemic. Edward Elgar Publishing.th in their operation
by the help of funding. Government included $ 111 million investment for training and incentives for

hiring employees. Around 1,50,000 jobs were generated by the employers during the offer policy
that boost succours in boasting the economy. The kick-start scheme were also helped the existing
businesses through enhancing their operations (Lu, and et. al., 2020).
Mortgage Holidays- In the COVID 19 major numbers of people has loosed their jobs that
arises the financial problem in economy. Peoples were not able to pay their loans timely. To manage
such economic problem government of UK has implied a scheme in which all the citizen can extend
their time from repayment of household loans.
The aim of initiative was to solve the issue of loans payments that were faces by several
individuals. By the implement ion of above policy The mortgage lending were reduced by from $
33.6 billion to $ 21.3 billion in June 2020 and $ 6.2 billion at end of September 2020. further, some
issues were stated towards declined in the credits score of the persons that used the mentioned
advantage. Such problem were also solved by government by improvising the policy that clearly
revealed that households which hits by the pandemic will not affected by credit ratings if the
payments were delayed (Korsgaard, Bjøner, and Nilsson, 2019).
Major Responses of the Bank of England and Their Implications to
the UK’s Economy
Reduces interest rates- When Bank of England reduces its interest rates it will make so many
changes in the economy of UK. Lowering down of interest rates will make loans very affordable
which attract lot of people towards bank for taking loan for different purpose. When more people
get loan this will increase the business of bank because now bank can collect interest from
customers (Barr and et.al 2018). People will available with lot of cash due to which there demand
will increase much more than the supply of products in market, which would cause rise in inflation in
United Kingdom economy. Apart from general customer it will also benefit business and several
industries, when industrialist get loan from Banks at lower interest rate it will help them to do their
production activities in effective and efficient manner which will ultimately increase the demand of
customer because they get products at cheaper price. Ultimately in both ways it will give positive
effect to economy of United Kingdom (Boone, Kurtz, and Berston, 2019).
Reduce service charges to bank- Generally bank charges fees for the service it provide to
their customers. Service such as ATM card service, loan service, overdraft service and many more,
Waind, E., Ritchie, F., Bailey, N., Caskie, P., Morrison-Rees, S., Lowe, S. and Webster, N., 2021.
Understanding a pandemic: the power of administrative data. In Productivity and the Pandemic.
Edward Elgar Publishing.when bank provide such service to their customer they charges fees in

return. Fees are necessary because banks also have lot of expenses such as operating expenses,
administrative expenses, marketing expenses which they have to meet. All these expenses can be
met with the service money they charge from customer (Raman, Garg, and Thapliyal, 2019).
Customer don't generally prefer to take such services from bank because of their high service
charges. If Bank of England can reduce such charges it will attract lot of customers towards bank for
opening of savings account, taking several loans as per need which will increase business of banks.
When people will deposit their cash in bank this will increase cash flow in UK economy as bank will
have lot of funds to give to busWaind, E., Ritchie, F., Bailey, N., Caskie, P., Morrison-Rees, S., Lowe, S.
and Webster, N., 2021. Understanding a pandemic: the power of administrative data. In Productivity
and the Pandemic. Edward Elgar Publishing.inesses and industrialist in the form of loans and
advances, by which they can use it for productive purpose. When all productive business operations
happen this will led to rise in employment which will increase the GDP of United Kingdom economy.
What are the likely impacts of Brexit on the UK’s economy?
Brexit is defined as a policy which is a collection of two words 'Britain' and 'exit' refers to
withdrawal or separation of United Kingdom from European Union.
There are several immediate impact of Brexit policy on UK's economy are.
 Reduce Exports- With the implication of Brexit policy, this causes exit of UK from European
union which would affect the business dealing of United Kingdom as majority of business
depends upon exports to other countries. These countries are all part of European union
(Bansal and et.al 2018).
 Loss of employment of people- As majority of business depend upon exports to other
countries. By departure of United kingdom from European Union this would cause lowering
down exports of goods. When exports of country got down it may negatively affect the
employment of those people who are depend upon exports business.
 Cross- border administrative burden- Segmentation of UK's regulatory body from EU
counterpart would make cross- border commence more difficult to some degree. Hence this
creates problem for doing business with other countries which would eventually disturb the
GDP of country in long run.
 Rise in new laws- After arriving of Brexit in UK's economy it would give birth to new laws
regarding doing business with other European countries. Which would create problem for
UK as it has to follow such complicated laws regarding doing business with countries.
 Rise in employment opportunities for vibrant workers- Entry of Brexit would enable the UK
government sign fresh employment deals with more dynamic markets outside European
union. This would enable vibrant workers to show their talent to UK's government.
On the basis of above impact, there will be several impact of UK's economy due to Brexit policy are.
 Loss of GDP of country- By rising of unemployment because of majority of people
depend upon export business for their survival. When UK economy get out from

European union, this would majorly affect the exporting of goods to other countries
which would impact loss of so many people. Therefore it would negatively impact the
GDP in long run.
 Open several opportunities for UK economy- By exit from European union, UK now not
only need to depend upon limited countries for business it can also explore other
countries of doing business as well. This would enable mentioned country to explore
new market and getting better business opportunities.
 Growth- By doing business with limited Europasian countries, this has negatively
impacted the growth of UK's economy. By exploring other countries after Brexit policy
now United kingdom can grow by exploring business opportunities in different
countries which would ultimately increase business level of respective country.
 Get Fresh Talent- Earlier before Brexit policy, United Kingdom have to depend upon
European union for doing their business. But after this, now mentioned country can
explore different country for doing their business moreover it can also hire new highly
skills people for doing jobs also, which would finally increase the productivity and lead
to rise in profit situation (Bogdan and Beata, 2018).
 Make UK as isolated country- Brexit policy given an exit to UK economy form European
union. Which makes UK an isolated country as this can somewhere negatively affect the
image of this country in global level.
 Rise in cost of doing business- Now after Brexit policy, United kingdom have to explore
other countries for doing their business this will increase the cost of doing business as it
involve other things such as travelling, market research which would increase the
overall cost of business. All these cost can negatively affect the UK's economy.
Conclusion
From the analysis of above report it can be said that global pandemic crises has impacted
the whole economy badly. In above report it is clearly shown that pandemic has adverse effect on
every industry, financial market, as well as peoples lifestyle. It affected the day to day life of
individuals as well as forced to restrict several activities. Several businesses operations were brought
down and employees loosed their jobs in during the situation. Countries faced declines in GDP that
slowed down the growth of economy. Further, for counter the hazardous situation government of
UK and bank of London implied several polices and references in their economy that succours in to
solve such issues that stated in above report. The above steps helped the peoples and businesses
into restarting their operations and again establish the flow of income in mentioned country
economy. In last, Brexit also impacted the UK economy by enforcing the trade barriers in its
economy which result in declines import and export in UK economy. Due to such action they in-
forced to pay huge tariffs as well as increased the cost of materials.

Recommendations
Recommendations to the government on future occurrences:
Proper healthcare and budgeting system- GovernmeWaind, E., Ritchie, F., Bailey, N., Caskie,
P., Morrison-Rees, S., Lowe, S. and Webster, N., 2021. Understanding a pandemic: the power of
administrative data. In Productivity and the Pandemic. Edward Elgar Publishing.nt of UK is
recommended to be ready for future uncertainty in advance that can provide them advantage in
future uncertainty. Like in above report government were struggled to concur the unexpected
situation due to proper resources. Therefore, government have to generate a proper healthcare
system by adopting new techniques and resources in hospital that can succours the economy by
future diseases as well as they have to be restructure their budgeting portfolio which will eliminate
the borrowing and debt. Hence, the proper segmentation of resources and budgeting for uncertain
trades is must for enhancing the economy.
Favourable supply chain management- The government is recommended to restructure
their supply chain management to eliminate the effect of Brexit like situation from their trade
reforms. With the help of above stated recommendations the mentioned country can form a
favourable trade path that can gives them advantage in their future trades and can increase the
growth of GDP. By proper restructure of supply chain the transportation cost can be reduce as well
as they can form a strong connectivity with other country economy that will be beneficial for their
economy growth.

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