Analyzing the Contemporary Business Environment: UK Economic Responses

This report evaluates the contemporary business environment in the UK, focusing on the economic impacts of the COVID-19 pandemic and Brexit. It analyzes the effects of lockdown on the UK's economy using the circular flow of income model and examines the major economic responses of the UK government and the Bank of England, detailing their implications. The report also explores how the pandemic has affected various sectors, including manufacturing, retail, and education, and the challenges faced by National Statistical Institutes in compiling GDP data. Furthermore, it discusses the fiscal support provided by the government, such as the Coronavirus Job Retention Scheme, and the measures taken by the Bank of England to support lending and cut interest rates, aiming to minimize long-term damage to the UK economy. Desklib provides access to similar solved assignments and study resources for students.

Evaluating the
Contemporary
Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Main impacts of lock down on the UK’s economy using circular flow of income................1
Major economic response of the UK’s government and their impacts on the UK’s circular
flow of income........................................................................................................................2
Major responses of the Bank of England and their implications on the UK’s circular flow of
income....................................................................................................................................5
Impacts of Brexit on the UK’s economy................................................................................6
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Contemporary business environment involves a vast competitive market which involves
changes that are at fast pace and owner of such business need to eligible enough in order to
understand the requirements and developments of the organisation. The present report involves
the major economic response of the UK's government and its impact on the UK's circular flow of
income. It also involves the major responses of the Bank of England and their implications on the
UK's circular flow of income with impacts of Brexit on the UK's economy. It also involves
market economy functions and the role of government. It involves how the UK's government is
using circular flow of income in order to analyse the main impacts of lock down on the UK's
economy. It involves major economic response of the UK's government and their impacts on the
UK's circular flow of income. It involves impact of Brexit on the UK's economy.
MAIN BODY
Main impacts of lock down on the UK’s economy using circular flow of income.
The circular flow of income involves a model of the economy that involves major
exchanges which are represented in terms of flows of services, goods and money among the
economic agents. The flow among the goods and money is exchanged in a closed circuit
correspond in terms of value but run in the opposite direction. The covid pandemic has lead to a
decrease in the demand of the services or goods with the impact on the ability of business to
supply these products(Ahamad, 2021). In terms of response to the COVID-19 situation will also
impact the ability to National Statistical Institutes (NSIs) in order to compile with the labour
market, inflation and gross domestic product. The international monetary fund forecasts a fall in
the UK's economy as compare to the declines in the 2008 to 2009 global financial crisis. It
involves how the workplace closures disrupt lower productivity and supply chains, quarantines,
social distancing, curtail mobility and regional lock down. The resolution foundation can be
highlighted with the “the duration of the outbreak with public health restrictions imposed to
contain the social distancing measures and spread of virus that people uses to reduce the chances
of getting affected. This indicates how these factors affect the circular flow of income which
involves three approaches to measure GDP. The three basic approaches involves :
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Expenditure: It involves the value of the sum related to all final expenditures deducting the
imports within an economy.
Production: It involves the value of the output of the services or goods that are produced with
deduction of the intermediate inputs that are used in the process of production adding any taxes
net of subsidies on these products.
Income: It involves the value of income that is generated through the sales of production of
services or goods adding taxes net of subsidies on products and production.
The UK economy has a large financial service industry with any impact on its output will
result in a change in the implicit and explicit charges through volume of these financial
transactions as well as the financial intermediaries(Andrades and Dimanche, 2019). There is an
adverse impact of pandemic on the supply and demand of the services or goods on the UK
economy that lead to lower use of capital inputs and labour in the production process. Due to
pandemic there has been a decrease in the level of the employment and working hours. There
are various industries that are majorly exposed to the pandemic including those who are majorly
impacted with the restrictions in the social distancing and place that is being undertaken. In case
of construction industry, the containment measures have affected the labour availability. Also
any reduction in the capital income will result in reflection in the GOS which results in the fall in
company's profits. The global pandemic has expected to impact on the gross trade flows that
reflected in the reduction in the trade intensity and external demand. The impact because of
domestic demand results in impact on import volumes(Black, 2019).
Major economic response of the UK’s government and their impacts on the UK’s circular flow
of income.
With keeping in mind the social economic fame , the government of UK has provided the
fiscal support in order tpo safeguard the companies, vulnerable populations, households which
involves the extended coronavirus job retention scheme. The UK government has spent a huge
amount since the beginning of the year in order to deal with the covid 19 spread. In order to deal
with these situations various measures have been taken in order to combat a socio economic
crises in the UK but the situation in the UK is much more difficult than expected. In terms of
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education, the primary and secondary educational centres have less number of students in each
class as compare to state primary and secondary educational centres(Hassi, 2019).
Due to covid pandemic situation there has been a consequence of the pandemic. The cost
of living in each country is majority dependent on the culture and conditions of living. The
estimated total cost of pandemic on the global economy has been estimated through the United
Nations in one trillion dollars. Also with the current living, it is obvious that responses and
policy changes in one country will have a effect on other countries through the age of
globalisation where both the economies and humans are interconnected with each other strongly.
With the serious implications for people's healthcare services and health services, the covid
pandemic had a major impact on the the economy and businesses. Due to pandemic, there has
been a increase in the level of the current labour market crisis which is quite unique has basically
involved leaving jobs rather than reduced hiring.
As with the cancellation of flights, the businesses have asked workers to stay at home
which resulted in a global health crisis that become a global economic crisis. In covid more than
4000 people died worldwide with more than 113000 confirmed cases. The economic effects had
a drastic impact on the well-being of communities and families. The government in order to deal
with the pandemic has imposed bans on certain type of activities. The institutions and firms
which involved private companies and private schools has taken required measures in order to
avoid infection. The business closure in terms of the business decisions or government bans has
resulted in the lost wages for workers in various cases including the informal economy which
involves no paid leave . All these actions have affected the various sectors of the economy
including the manufacturing, retail, health sector, trade and transportation and education. These
short term economic impact results in reduction of long term growth(Ivanova, 2019).
In relation to the circular flow of income, the office for budget responsibility finds that
the GDP may reduce by 35% also the national institute of economic and social researchers
estimates that the fall could be between 15 to 25 %. There is a major impact on the home
production activities that do not come with the boundaries of production. These will not involve
the home repairs, caring for children and cooking. In addition to that financial intermediaries
charges for their services through fees and commissions but there is no involvement of implicit
charge reflected through the interest margin. These captures how the intermediaries pay lower
rates of interest as compare to those who lend their money but charges high rates of interest. The
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financial intermediation services indirectly measured is calculated to the effective rates of
interest payable and receivable.
The national accounts provide a practical and conceptual framework for reconciling and
recording the different economic flows. The market transactions of services and goods are well
represented through framework. Though the non-market output has long been analysed as the
measurement change that is likely to be impacted due to considerably covid 19 pandemic. In
terms of the volume of the healthcare output in the UK is estimated due to available information
on various number of different kinds of procedures and activities which are carried through
weighting and period cost of each activity(Jean-Vasile and Alecu, 2017).The impact on the
covid 19 pandemic on total healthcare output is complicated. The increase in number of cases is
likely to increase the healthcare output. A rise in the high -cost case provided through the health
service. The upwards pressure is likely to go offset through reduction in the activity in
healthcare system.
The closure of the schools and colleges across the UK has been the part of policy
response in relation to the COVID-19 pandemic that presents several practical and conceptual
challenges for the management approach. In order to deal with the coronavirus, the government
of UK has implemented schemes such as self employment income support scheme and
coronavirus job retention scheme which are likely to be the most important part of fiscal
interventions in terms of the direct impact on the gross domestic product. The corona virus job
retention scheme focuses on helping the employers who are severely affected through the covid-
19 pandemic which aims to retain the employees. The self employment income support scheme
aims to those people who are a member of a partnership and self employed in the UK. The
expectations point to a significant decline in the first half of the year that reflects how the
pandemic has led to reduction in the demand of the services or products as well as the business
ceasing operating. The NSI will face a significant challenges in compiling the GDP that lead to
the high-level of uncertainty. There are some other conceptual challenges that captures the large
price changes as well as the changes in production and spending patterns.
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Major responses of the Bank of England and their implications on the UK’s circular flow of
income.
The Bank of England is the central bank of the United Kingdom established in the year
1694. There were various major responses that are placed in the package of measures that helps
to keep the firm and people in jobs and helps to minimize the long term damage to the economy.
The bank of England works closely with the HM government in order to ensure that heir
responses have a maximum impact on UK's economy(Keen Dyer, 2018).
Helping banks to expand lending : The Bank of England focused on reducing the amount of
financial resources that the building societies and bank needed to set against their lending to the
UK households and businesses. The UK Banks took the decision to not pay any dividends to
their shareholders in 2020 and also published a guidance for the banks on dividends related to
2020 results. The Bank of England focuses on temporarily reducing the regulatory burden placed
on them. IN case of dividing the 2021 results the prudent dividend not paid out but can be
accused. The bank of England also expects other banks to be precedent and cautious when
paying bonuses to their staff.
Helps in cutting interest rate on lending :
The bank of England offers building societies and banks long -term funding at interest
rates which is close to 0.1%. More funds will be provided to the bank which will increase their
lending and provides additional support to banks who offer more lending to the medium and
small sized companies . The business and firms often need support in difficult economic
situations(Kim and Shim, 2018).
The bank of England's three policy committees announced a timely and comprehensive
package of measures to held the UK firms, households and businesses that ridge across the
economic disruption which is mainly associated with the Covid-19 . The front line of combatting
the challenges of covid 19 involves the extraordinary efforts of NHS Health carers, professionals
and volunteers across the country wit exceptional support through FCO to UK citizens abroad.
The banks of England plays an important role to help the households and UK business to deal
through an economic shock that proves large and sharp. The bank's three policy commitments are
announcing and comprehensive measures in order to help the households bridges and businesses
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across the economic disruption which is associated with the Covid pandemic. All these measures
helps to keep the people in jobs and firms in business and helping them to prevent a disruption
from causing a longer lasting harm related to economy.
Helps businesses pay their suppliers and staffs. The magnitude of the economic shock is
highly uncertain an d weaker activity and supply chains could challenge the cash flows and
increase demand for the short term credits from households and working capital from
companies. These issues will have a major impact on the small business. This economic shock
will affect the supply and demand in the economy(Larson, 2020).
The bank of England works closely with the government in order to support large
businesses through offering them corporate debt and cash. This also helps the businesses and
firms to keep their suppliers and wages. The building societies and banks can use the funding
which helps in focusing on medium and small sized firms.
Impacts of Brexit on the UK’s economy.
The impact of Brexit was a major concern of debate during and after the referendum on
the UK membership of the European Union. According to the data of 2017 the Brexit
referendum resulted in reduction national British income by 0.6% and 1.3%. Analysis by
Nottingham University Economists and Stanford University estimated that uncertainty around
Brexit resulted in reduction in investments by the business through approximately 6 % points
that resulted in reduction in employment. The near unanimous and overwhelming agreement
among economists result in major impact on the UK'S economy in long and medium term. The
2016 survey of economists showed an overwhelming agreement that determines that Brexit
would result in reduction in the UK's real per capita income level. From a 2017 study, it has
been examined that the economic impact of Brexit-induced results in reduction in migration. In
the month of January 2018, the Brexit analysis of the UK government was leaked which
indicated that the economic growth of UK would be stunted by the 2-8% for 15 years at least
following the Brexit scenario(Lodhia and Stone, 2017).
The UK's exit from the EU marks a drastic change in the UK's economic relationship.
The country will be moving away from cooperation and close integration from its nearest
neighbours while providing reopening opportunities in order to negotiate trade deals in a direct
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manner with the non-EU countries. Various analyses have made an attempt to estimate the effect
Brexit is likely to have on the UK economy. All these considerations of economic are considered
to be one of the questions that will influence the MP's mind when they come to vote or scrutinise
on the Government's withdrawal agreement(LYPOV, 2021).Various studies have concluded that
Brexit will result in reducing the economic growth although the reduction in scale of prediction
varies widely. The economists have made an attempt in order to analyse how the economy of UK
will develop and grow in the near future as the country adjusts its new relationship with the EU.
On one side , few scenarios and dimensions for deals reached among the EU and UK. In such
case, the short term impact of Brexit can result in more pain as compare to the other long term
projections(Subrahmanyam and Shekhar , 2017).
There are basically three reasons in order to think that the short-term costs of adjusting to
Brexit can be larger as compare to long-term costs. In order to deal with this scenario, the
government need to set new systems in order to operate outside the EU which involves
processing immigration and systems for monitoring from the EU (Ţoca, 2017) The firms had to
deal with additional costs in order to adapt the regulations and new rules. The adjustments can
be larger if EU and UK had to trade with each other according to the WTO rules. The important
factor that will shape voter's and MP's opinions about the advantages of the Brexit deal will
involve a impact on the economy. So it is very important that the public and politicians
understand what is known and not known about the Brexit scenario that might affect the UK
economy(Trojanowski, 2020).
CONCLUSION
From the above report it has been concluded that the contemporary business environment
plays an important role in understanding the economic impact of the COVID-19 and its
economic response of the central bank. The report involves the usage of the circular flow of
income with main impacts of lock down on the UK's economy. It also involves the major
economic response of the UK's government and its impact on the UK's circular flow of income.
It also involves the major responses of the Bank of England and its implications on the UK's
circular flow of income. In addition to that it involves the impacts of Brexit on the UK's
economy. Moreover it involves detailed impact on the UK's economy during the Brexit Scenario.
The entire report involves how contemporary business environment helps in understanding about
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the economic impact of the COVID-19 and its economic response on behalf of the central bank
and bank of England.
Recommendations
From the above report there are a few recommendations that the UK's government need
to follow in order to understand the economic impact of the COVID-19 and the economic
response of the central bank and government. The government need to maintain support to the
low-middle and poor income groups through a suite of labour market which involves job
creation, skills training and cash for work with support of social assistance programs.
The government in order to analyse the main impacts of lock down on the UK's economy
need to use the circular flow of income. In order to analyse the implications on the UK's circular
flow of income the government need to analyse the major responses of the Bank of England. The
government in order to deal with COVID situation need to analyse the impacts of Brexit on the
UK's economy. The government in order to handle the economic impact of COVID-19 need to
take proper measures and constantly value the circular flow of income in order to deal with any
type of uncertainty. It is also necessary to promote deep understanding of government support
through development of up-to-date information and user friendly medium and linking new
registrations for social assistance into a single database.
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REFERENCES
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