The UK Business Environment: Fiscal, Monetary Policies and Impact

This report provides an introduction to the business environment, emphasizing the influence of both internal and external factors, with a particular focus on the UK. It delves into the roles of fiscal and monetary policies in economic development, outlining their mechanisms, such as government spending, tax adjustments, and interest rate management. The report details how fiscal policy tools like contractionary and expansionary measures impact the economy, and highlights the functions of monetary policy in managing the money supply and interest rates. Furthermore, it discusses the similarities between these policies, including their effects on unemployment, inflation, and economic growth, as well as the implications for businesses. The report concludes by summarizing the importance of these policies for sustainable economic development and the dynamic nature of the business environment.

INTRODUCTION TO
BUSINESS
ENVIRONMENT

1. INTRODUCTION
• Business environment is the combination of
internal and external factors that influence the
organisation's operating situation.
• It is the most rapid and dynamic factor that
affect the entire cycles of business.
• The changes in business environment for all
companies is under drastic changes that is
caused by various forces that includes
globalisation, technological development and
corporate social responsibilities.

2. ROLE OF FISCAL POLICY
• Fiscal policy is an economic policy by which
government of nation adjust its level of
spending to supervisor and influence the
economy of country.
• For example, increasing government spending
and tax cuts. In order to manipulate rate of
taxes, interest as well as spending of
government is influenced by the fiscal policy
and this policy is used government of United
Kingdom

SOME ROLES PLAYED BY FISCAL
POLICY IN ECONOMIC
DEVELOPMENT OF UK
Contractionary fiscal
policy- It is the type of policy
that involves increasing of
taxes, decreasing government
expenditure or both to fight
the pressure of inflation. Due
to increasing taxes, household
have less income of disposal
to spend that resulted in
decreasing consumption

Cont.….
 Explanatory Fiscal Policy-
It is the form of fiscal policy
that includes lowering of
taxes, rising expenditure of
government or both to fight
the pressure of recession.
Household income increases
when taxes is lower down.
Higher disposal income rises
the level of consumption.

Cont.…
Resource Mobilization: It affects capital as well as
saving in private sectors of UK by granting several
subsidies and concessions in tax.
Development and Growth of Private Sector: The
productivity as well as production of private sector of UK is
affected by relief in tax
Keep balance in budget: The fiscal policy of UK has
stabilized effect on an economy when the budget is balanced.
Reduction in Stability: Government used various tool
related to fiscal policy like concession in tax, tax holiday,
Utilization of infrastructure concession, subsidies etc.

UK GDP RATE

3. ROLE OF MONETARY POLICY
• Monetary policy is the macroeconomic policy that laid
down the by the central bank. All the management of
money supply and rate of interest is involved in this
policy.
• In order to achieve objectives of macroeconomic such
as inflation, growth, liquidity and consumption,
government use demand side economic policy.
• It is the decision made by government of nation
concerning the supply of money and rate of interest.

ROLES PLAYED BY MONETARY
POLICY IN ECONOMIC
DEVELOPMENT OF UK
Expansionary
monetary policy: It is
the policy which is
used by Central Bank
of UK (Bank of
England)
Contractionary
monetary policy: It is
the type of fiscal policy
that government of UK
used to fight with
inflation.

Expansionary monetary policy
&
Contractionary monetary policy

Cont.…
Appropriate balance between demand for and supply of money
• Monetary policy plays an effective role in economic development of
country. UK government has systematic control in supply of money
as it prevent fluctuations in economy as well as coat the ground of
fast development.
• It plays an important role to achieve appropriate balance in
between the demand and productive capacity of economy.
Price Stability
• For economic growth of country, it is very essential that there
should be proper maintenance of stability in price at domestic level.
• UK is a developed country so it does not face inflationary pressure.
It also helps in controlling rates of bank, open market operation as
well as direct control on foreign exchange.

Cont…
Development of Capital Market-
• It encourage people to invest people more in productive
activities.
• This policy also reduces the risk of loss in shares by systematic
control of shares by UK stock exchange.
Credit Control-
• Monetary policy has incredible role in controlling the credit of
country.
• Monetary policy adopts both quantitative and qualitative
method in controlling of credit.
Debt Management-
• UK is a developed country but still sometimes, they need to
borrow funds on a big scale to implement programmes of
economic development.