International Investment: UK Financial Crisis Analysis and Recovery

This report provides an in-depth analysis of the global financial crisis and its profound impact on the UK economy. It begins by examining the causes of the 2008 crisis, including financial benefits obtained by banks, poor management of liberalization, excessive lending, and non-payable debts, as well as the impact of Brexit. The report then assesses the crisis's impact on the UK's financial market, presenting pre- and post-crisis data on various UK companies, including their prices, returns, and capital gains, and analyzing the performance of different sectors. The analysis includes tables illustrating year-over-year performance, total investments, and capital gains before and after the crisis. Finally, the report discusses the UK's recovery strategies, focusing on fiscal and monetary policies employed to mitigate the crisis's effects and restore economic stability. The report also examines macroeconomic indicators and their influence on economic recovery, providing a comprehensive overview of the crisis and its aftermath.

INTERNATIONAL
INVESTMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1. Analysis based on Global Financial crisis and its causes...................................................1
2. Global financial crisis impacts over UK's financial market...............................................3
3. Recovery of UK's economy in terms with Fiscal and monetary policies...........................6
4. Economic recovery UK in terms of various macroeconomic indicators as well as increase in
the performance......................................................................................................................6
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
APPENDIX....................................................................................................................................14

INDEX OF TABLES
Table 1: Year over Year analysis of UK companies before financial crisis....................................3
Table 2: Total investments in UK companies before crisis.............................................................4
Table 3: Total capital gain by UK companies as per pre crisis assumptions...................................4
Table 4: Year over year analysis of the UK companies after financial crisis..................................5
Table 5: Investment generated by the UK companies after Crisis...................................................5
Table 6: Capital gain analysis over UK companies after crisis.......................................................5

INTRODUCTION
Investments are the requirement in operating any business operations as well as
implementing any plan in the organisation. Hence, in the present report there will be discussion
based on the various analysis over the GDP, unemployment and inflation rates in UK. However,
there will be analysis of the global financial crisis causes which in turn harmful for the nations in
meeting such obstacles. The report shed lights on the various reasons behind the causes of global
crisis as well as its after impacts over the countries. It will influence the operational performance
of UK and influence various sectors such as trade and finance, health and security, employment
opportunities etc.
1. Analysis based on Global Financial crisis and its causes
In accordance with 2008 global crisis which has shaken every nation with such financial
shocks. Hence, it can be said that there will be impacts of various causes which are responsible
for the global crisis in world. However, due to such obstacles the Economy of UK was highly
influenced and affected in every sectors such as reduction in the employments opportunities,
increase in the rates over interest and bank loans. However, due to such problems there are
several other problems also took place such as reduction in the GDP rates, inflations or
employment (Kartio, Mirza and Shaikh, 2017). Thus, it can be said that All the economic
problems incurred in UK as well as other nations which are depended or undeveloped. Moreover,
there were various causes behind such global crisis such as:
Financial benefits obtained by Banks: In context with the high level of monetary
fluctuation in the country the governments of UK has force banks to grant large amount of loans
to the various big and small scale companies. Thus, In regards with such operations there has
been drastic reduction in the monetary systems the country as well as no money left for banks.
Hence, due to such changes there has been huge debts incurred in the economy of UK
(DesJardine, Bansal and Yang, 2017). Banks were forced to make the grants for home loans and
various commercial loans which in turn lead them to the recession and there is no capital left for
banks in making any further business operations in the country.
1

Illustration 1: Money acquired by banks during financial crisis
source: (Financial Crisis & Recessions, 2017)
Poor management of liberalisation: Due to impacts of various financial liberalisations
there has been increase in the expansion which are due to poorly managed or regulated cash flow
in the country. Thus, the variations in the currency rates and the maturity mismatch which led the
UK to huge credit risks. Hence, in accordance with the derivative markets which are unregulated
as well as poorly managed which in turn influences the systematic risks. However, in
consideration with home price and the financial markets which were facilitated the money for
making the operational activities more effective (Brunn and et.al., 2016). Thus, such changes led
them to the poor management monetary system in UK.
Loans: In accordance with the previous years of the financial crisis on which government
of UK has pressurised banks in context wit granting loans and advances to home and corporate
2

properties. Hence, there will be variations in the operational activities during the period of 2000-
2007 which influences the financial sector in the manner as pushing house prices 31% faster than
the income or salary of the individuals. 20% of the amount utilised into commercial real estate
such as office premises and relevant corporate properties. There has been increase in the umbers
of businesses and around 8% which are out of the financial sector as well as same numbers of
percentage increase in the credit cards and personal loans. Hence, it can be said due to granting
the maximum amount of loans in every sector or piece of work which in turn become the main
reason behind UK's financial crisis (Balakrishnan, Watts and Zuo, 2016).
Non-payable debits: As per the banks has granted the maximum part of the money to the
property expense which in turn affect the personal debts of citizens (Kemp, 2016). Hence, it can
be said that such grants or loans has affected the bankruptcy and well as non payments of such
loans.
Brexit: Due to financial crisis which in turn affect the monetary and economic
environment in the country. Thus, the impacts over UK's trade and finance businesses due to
increase in the taxes or prices of the commodities. Hence, impact of Brexit affect Bank of
England in context with increase in the rates of interest for the first decade as well as fluctuating
currency rates which in affecting the business environment in country.
2. Global financial crisis impacts over UK's financial market
Pre crisis
S.N
O Companies Price
Return (%) y-o-
y Beta Industry
1
Associated British foods
(ABF)
716.4
8 0.42% 0.1 Tourism
2 Admiral group (ADM)
933.7
2 1.04% 0.03 Car insurance
3 Barratt development (BDEV)
108.5
5 -1.27% -0.08 Development
4 Intercontinental hotels (IHG) 14.60 -1.12% 0.63 Hospitality
5 Morrison (MRW)
289.1
0 0.08%
0.03
8 Retail
Table 1: Year over Year analysis of UK companies before financial crisis
Source :(Annual and Interim reports, 2017)
3

Companies Price Stocks
Total
investment
Expected
return Weight
Associated British foods
(ABF)
716.476
87 20 14329.53736 0.09% 36.50%
Admiral group (ADM)
933.724
3 20 18674.48608 0.08% 47.57%
Barratt development (BDEV)
108.546
55 15 1628.198205 0.16% 4.15%
Intercontinental hotels (IHG)
14.6039
48 20 292.07896 -0.69% 0.74%
Morrison (MRW)
289.100
01 15 4336.50009 0.05% 11.05%
Total investment 39260.8007 100.00%
Table 2: Total investments in UK companies before crisis
Companies Price
Expected
return
Sto
cks
Expecte
d price
Capita
l gain
Total
value at
end
Total
capital
gain
Associated British
foods (ABF)
716.4
7687 0.09% 20 717 0.62 14342.01 12
Admiral group
(ADM)
933.7
243 0.08% 20 934 0.75 18689.39 15
Barratt
development
(BDEV)
108.5
4655 0.16% 15 109 0.17 1630.73 3
Intercontinental
hotels (IHG)
14.60
3948 -0.69% 20 15 -0.10 290.08 -2
Morrison (MRW)
289.1
0001 0.05% 15 289 0.15 4338.71 2
Total gain
30
Return =
0.07%
Table 3: Total capital gain by UK companies as per pre crisis assumptions
Post crisis
S.N
O Companies Price
Return (%) y-o-
y Beta Industry
1
Associated British foods
(ABF) 3074 1.83% 0.71 Tourism
4

2 Admiral group (ADM) 1847 0.93% 0.62 Car insurance
3 Barratt development (BDEV) 626 2.33% 1.03 Development
4 Intercontinental hotels (IHG) 4273 1.76% 1.44 Hospitality
5 Morrison (MRW) 210.5 -0.12%
-
0.021 Retail
Table 4: Year over year analysis of the UK companies after financial crisis
Companies
Pric
e
Stock
s
Total
investment
Expected
return Weight
Associated British foods
(ABF) 3074 20 61480 1.31% 31.30%
Admiral group (ADM) 1847 20 36940 0.60% 18.81%
Barratt development (BDEV) 626 15 9390 2.39% 4.78%
Intercontinental hotels (IHG) 4273 20 85460 2.52% 43.51%
Morrison (MRW)
210.
5 15 3157.5 0.05% 1.61%
Total investment 196427.5
100.00
%
Table 5: Investment generated by the UK companies after Crisis
Source: (Financial Reports, 2017)
Companies
Pr
ice
Expecte
d return
Sto
cks
Expecte
d price
Capit
al gain
Total
value at
end Total capital gain
Associated
British foods
(ABF)
30
74 1.31% 20 3114 40.32 62286.38 806
Admiral group
(ADM)
18
47 0.60% 20 1858 11.02 37160.33 220
Barratt
development
(BDEV)
62
6 2.39% 15 641 14.99 9614.78 225
Intercontinental
hotels (IHG)
42
73 2.52% 20 4381 107.51 87610.27 2150
Morrison
(MRW)
21
0.
5 0.05% 15 211 0.11 3159.19 2
Total capital
gain
3403
Return = 3403 /
39260.8007 * 100
5

= 1.7%
Table 6: Capital gain analysis over UK companies after crisis
Interpretation: By doing assessment, it has been identified that situation of global crisis
has placed high level of impact on financial market. In comparison to benchmark which in turn
accounts for 42%, return of portfolio is highly lower such as 1.7%. The rationale behind this,
after the period of financial crisis firms has faced difficulty in attracting large number of
customers. This in turn placed direct and negative impact on productivity and profitability of
firm. Hence, difference which takes place between standard and portfolio return clearly shows
that situation of monetary crisis influenced financial market or performance to a great extent. On
the other side, from assessment, it has been identified that during recessionary period from 2007
to 2009 return of portfolio was positive and higher than compared to benchmark. Moreover, data
of index shows negative return when condition of recession occurred. Thus, it can be said that
portfolio return is significantly affected after the situation of post crisis.
3. Recovery of UK's economy in terms with Fiscal and monetary policies
In context with having the adequate recovery form the global economy impacts there has
been use of various kinds of monetary and fiscal variations faced by the UK government. Hence,
there has been recovery of economy as government has decided to sort out various macro level
issues in the initial stage (Archibugi, 2017). Such as increasing rates of the imports which in turn
helps in gaining the maximum amount of revenue through the numbers of imports in the country.
Thus, a part from gaining revenue there will be drastic changes in the reduction of numbers of
imports.
However, in the current era in UK there has been various policies and procedures which
are adopted by the country in context with making an adequate change in the various taxation or
currency rates which in turn helpful various small scaler corporation in having the appropriate
amount of revenue gathering (Parkin, 2016). There has been changes in the various policies of
the UK government such as fiscal and monetary policies which in turn helps the country in
making the adequate investments or revenue gathering by small size enterprises.
6

4. Economic recovery UK in terms of various macroeconomic indicators as well as increase in
the performance
GDP: By considering the current GDP rates UK is the second fastest growing economy
as compared with the G7 economies. Hence, it can be said that there has been improvements in
the domestic productions of the UK such as increase in manufacturing the units within the
national boundaries as well as inviting various imports from the external sources (Reeves,
Loopstra and Stuckler, 2017). Following are the diagrams which are reflecting the GDP
evolution of country.
01/03/2007
01/04/2007
01/05/2007
01/06/2007
01/07/2007
01/08/2007
01/09/2007
01/10/2007
01/11/2007
01/12/2007
01/01/2008
01/02/2008
01/03/2008
01/04/2008
01/05/2008
01/06/2008
01/07/2008
01/08/2008
01/09/2008
01/10/2008
01/11/2008
01/12/2008
01/01/2009
01/02/2009
01/03/2009
01/04/2009
01/05/2009
01/06/2009
01/07/2009
01/08/2009
01/09/2009
01/10/2009
01/11/2009
01/12/2009
9799101103105
GDP Evolution
01/12/2009
01/03/2010
01/06/2010
01/09/2010
01/12/2010
01/03/2011
01/06/2011
01/09/2011
01/12/2011
01/03/2012
01/06/2012
01/09/2012
01/12/2012
01/03/2013
01/06/2013
01/09/2013
01/12/2013
01/03/2014
01/06/2014
01/09/2014
01/12/2014
01/03/2015
01/06/2015
01/09/2015
01/12/2015
01/03/2016
01/06/2016
01/09/2016
01/12/2016
01/03/2017
01/06/2017
8090100110120130140
GDP Evolution Post crisis
7

Interpretation: In accordance with the above listed graphs or diagrams which explains
the improvements in the GDP rate of the nation from the year of global financial crisis. Hence, it
can be said the government has make changes in the policies as well as which in turn improves
use of internal source than compared with importing such goods. Thus, it can be said that such
improvements will be helpful for the nation in obtaining the great employment opportunities.
UK residential property price index: Due to global crisis there has been decrease in the
prices of the residential property which in turn making losses in every dealing of the property
(Kartio, Mirza and Shaikh, 2017). Hence, it can be said that people are not having adequate
amount over selling their properties. Thus, the growth of the economy can be seen the below
listed graph.
Interpretation: In order to understand the growth of the prices of residential property
there has been bull in the prices after such global crisis and its impact till 2009. Hence, the rise in
8

the pieces of the property is due to increase in the selling of such property which were rapidly
increasing and people started buying them in the cheaper rates. So after recovering from such
losses they have improved the prices of such property and which in turn helpful in making the
increase in the prices of such assets.
World bank UK GDP in current USD currency: In accordance with the world bank's
analysis for GDP growth rate in UK in accordance with the current USD it can be understand by
analysis at below listed diagram (DesJardine, Bansal and Yang, 2017).
Interpretation: In order to look at the analysis and the growth of UK's GDP rate by
World bank's assumptions it can be said that there has been improvements in the domestic
production as well as improvements in the small scale units which in turn provokes the
manufacturing of the products and services within the national boundaries. Thus, it can be said
that the GDP in the current era is also not so favourable as it was in 2012-2014 there has been
decline in the rate of the GDP rates. Thus, it can be said that currently there were many imports
than compared with the exports as well as there has been reduction in the manufacturing of
domestic production.
Unemployment rate UK: As per the impacts of the global financial crisis in UK there
has been reduction in the employment opportunities which is due to various big MNC's were
becoming bankrupt or insolvent as well as the numbers of jobs were reduced, people were not
able to have adequate amount of revenue as per their efforts. On the other side there has been big
drawbacks has to be faced by various small scale firms which in turn are affecting the revenue
9

gathering (Brunn and et.al., 2016). However, in accordance with recovering from such financial
crisis UK governments has developed various laws and techniques to present new employment
opportunities as well as give financial help to small scale industries to make the adequate
improvements.
Interpretation: By considering the above listed graph it can e said that there has been
draw backs there has been reduction in the employment rates in 2008 to 2009. Hence, as per
considering the 2010 there has been improvements in employment opportunities in UK and
which was continued to grow till 2012. However, after 2014 there has been decline phase as it
can be said that unemployment is hitting the country again.
Consumer price index UK:
10

Interpretation: By considering the above listed graph it can be said that there a\was
reduction in the consumer price index because of the increase in the inflation in UK which in
turn affects the expenditure made by consumers in purchasing any commodity. Hence, it can be
said that after facing such financial obstacles the prices are to be set on the affordable rates on
which buyers have again started to purchase such commodities.
UK consumer confidence indicator: As per the increase in the rates of imports of the
products the prices of such imported commodities were also risen by business (Balakrishnan,
Watts and Zuo, 2016). Hence, these in turn affects the consumer confidence in losing in context
with making the expenditure of buying any articles.
11

Interpretation: As per the above stated graph the period between 2008-2009 there has
been downfall of the consumer confidence in such year. Hence, it can be said that in 2010 the
consumer has started making expenditures or spend money over buying commodities which in
turn reflects that there has been increase in the confidence of such buyers. However, while
considering the current time the consumers is again on the same position as it was before 2007.
CONCLUSION
On the basis of above study, it can be said that the Global financial crisis has affected
various big economies in the world which has provoked the unemployment, inflation and the
bankruptcy. Hence, there has been discussion based on the UK and impacts of such financial
crisis over UK economy as well as various fruitful steps taken by Governments in context with
having the adequate recovery from such obstacles. There has been presentation of various table
which includes the measurement based on the fluctuation on GDP rates, unemployment and
inflation in UK.
12

REFERENCES
Books and Journals
Archibugi, D., 2017. Blade Runner economics: Will innovation lead the economic recovery?.
Research Policy. 46(3). pp.535-543.
Balakrishnan, K., Watts, R. and Zuo, L., 2016. The effect of accounting conservatism on
corporate investment during the global financial crisis. Journal of Business Finance &
Accounting. 43(5-6). pp.513-542.
Brunn, S. and et.al., 2016. Assessing the Impacts of the Global Financial Crisis on Major and
Minor Cities in South and Southeast Asia: A Hyperlink Analysis. In Spatial Diversity and
Dynamics in Resources and Urban Development (pp. 135-155). Springer Netherlands.
DesJardine, M., Bansal, P. and Yang, Y., 2017. Bouncing Back: Building Resilience Through
Social and Environmental Practices in the Context of the 2008 Global Financial Crisis.
Journal of Management, p.0149206317708854.
Kartio, M. A., Mirza, A. and Shaikh, F., 2017. Impact of Global Financial Crisis on the
Performance of Commercial Banks of Pakistan–A Case Study of MCB Bank Limited.
Kemp, A. G., 2016. Maximising Economic Recovery from the UK Continental Shelf: A
Response to the Draft DECC Consultation Strategy.
Parkin, M., 2016. Mounting Evidence: Findings from Natural Experiments in Inflation
Targeting.
Reeves, A., Loopstra, R. and Stuckler, D., 2017. The growing disconnect between food prices
and wages in Europe: cross-national analysis of food deprivation and welfare regimes in
twenty-one EU countries, 2004–2012. Public Health Nutrition, pp.1-9.
Setterfield, M. ed., 2016. Growth, Employment and Inflation: Essays in Honour of John
Cornwall. Springer.
Online
Financial Crisis & Recessions. 2017. [Online]. Available through
:<http://positivemoney.org/issues/recessions-crisis/>.
13

Annual and Interim reports. 2017. [Online]. Available through
:<https://www.abf.co.uk/investorrelations/reports>.
Financial Reports. 2017. [Online]. Available through
:<https://www.morrisons-corporate.com/investor-centre/financial-reports/>.
APPENDIX
Workings of such measurements
Pre crisis
Formula for calculating expected return RF+B(AMR-RF)
UK RFR 0.05%
S.NO Companies Price
Return
(%) y-o-
y Beta
Expected
return
1 Associated British foods (ABF) 716.48 0.42% 0.1 0.09%
2 Admiral group (ADM) 933.72 1.04% 0.03 0.08%
3 Barratt development (BDEV) 108.55 -1.27% -0.08 0.16%
4 Intercontinental hotels (IHG) 14.60 -1.12% 0.63 -0.69%
5 Morrison (MRW) 289.10 0.08% 0.038 0.05%
Post crisis
Formula for calculating expected return RF+B(AMR-RF)
UK RFR 0.05%
S.NO Companies Price
Return
(%) y-o-
y Beta
Expected
return
1 Associated British foods (ABF) 3074 1.83% 0.71 1.31%
2 Admiral group (ADM) 1847 0.93% 0.62 0.60%
3 Barratt development (BDEV) 626 2.33% 1.03 2.39%
14

4 Intercontinental hotels (IHG) 4273 1.76% 1.44 2.52%
5 Morrison (MRW) 210.5 -0.12% -0.021 0.05%
15