International Trade Finance and Investment Report: UK Analysis

This report delves into the intricacies of international trade finance and investment, focusing on the United Kingdom's financial landscape. It begins by defining international finance and trade investment, highlighting its role in expanding businesses across borders. The report then provides a background of financial markets, emphasizing their importance in allocating resources and ensuring liquidity. It explores various financial market types, including over-the-counter, bond, money, and forex markets, and examines the UK's financial market, its contribution to the global economy, and its functions. Furthermore, the report analyzes capital allocation within the domestic and international markets, discussing infrastructure development, investment in small businesses, debt repayment, mergers and acquisitions, and dividend payments. It concludes with an economic evaluation of Germany's economy, assessing its strengths and its position in the global market, and analyzes challenges faced by nations regarding trade policies and industrialization.

International Trade
Finance
and
Investment

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Financial market background:.....................................................................................................1
Allocation of capital within domestic economy:.........................................................................2
Allocation of capital within international market:.......................................................................4
TASK 2............................................................................................................................................5
Economic evaluation:..................................................................................................................5
Critical evaluation of the challenges that are faced by a nation regarding trade policies as well
as industrialization:......................................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
International finance and trade investment can be explained as a financing activity that
indicates financial transaction among international borders of countries for specific period of
time. It signifies expansion of an industry as well as business in other countries by enhancing
area of income for the purpose of generating and investing funds in a country (Hafeez and et.al.,
2018). This report is based on evaluation of an international trading as well as financing of
United Kingdom along with international market.
This report covers determination of background of financial markets. Further, it analyses
main platform which are there for the purpose of security transaction and the reason is that it
improves the liquidity as well as efficiency of a business and in addition to it, facilitates
increment of gross domestic product. Various types of financial markets are there which are
described for fostering enhanced utilization of available resources in an efficient manner. Apart
from it, this report states evaluation of capital in context to domestic market as well as
international trade. Allocation of capital in the domestic and in an international market is
determined. Lastly, challenges that are faced by a nation in relation to industrialization as well as
trade policies are analysed.
TASK 1
Financial market background:
Financial market can be indicated as a marketplace which pertains trading for security. It is
essential as it provides smooth functioning in context to capitalist economy by enabling adequate
allocation of resource and ensuring creation of liquidity for an organization. Financial market
provides procedure that is easier in relation to sellers as well as buyers in relevance to trading of
financial holdings. It helps in creation of security because it ensures effective return on excessive
or improvised security, for example, investors (Hill and et.al., 2017).
In addition to it, financial market ensures availability of fund for people that pertains desire
for excessive fund, as such type of people are borrowers. Various types of financial instruments
are sold as well as purchased in such a financial platform. Different types of financial market are,
derivative market, money market, bond market, forex market as well as over the counter market.
Over the counter market refers to a market that do not pertain any physical location, such types
of financial market is decentralised. Further, electronic trading is computed in this type of market
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and even participants are included in the process of direct trading in relation to securities. In
other words, it can be stated that there is no requirement of broker in it. In relevance to bond
security, in this type of financial market, loan money of investors is for specific period of time
and along with it interest rate for it is pre-established. It can be described as an agreement among
borrowers and payer where detail regarding loan is actively recorded with the motive of
payment. Trading for money market incorporates products that are of high liquidity value that is
matured in the short-term period of time (Kirton and Maclaren, 2018). In this type of market,
return on interest is low apert from the fact that its level of safety is high. Value associated with
money market is evaluated from value of primary security. Forex security enables participants to
purchase, sale as well as speculate currency.
Financial market of United Kingdom: Economy of United Kingdom incorporates
financial holding which is 25 percent in relevance to private equity in world. In addition to it,
United Kingdom covers 52 percent of European equity market. During this period, Stock
exchange of London is indicated as a largest stock market in Europe. Almost 5000 number of
people are employed in it in United Kingdom. Contribution of nation in context to GDP is 0.8
percent in the year 2007. From prior 300 years, financial market of UK. It generates total income
of 1.4 trillion at the end of the year. Nation is popular in relation to sale of assets, that states
derivatives and foreign exchange. Entrepreneurs as well as business-men mostly prefers financial
market due to the fact that it ensures expansion of business activities and enables high earning of
profit. Financial market of United Kingdom performs various types of functions, such as,
creation of open system for the purpose of attracting large amount of fund for business and it can
be achieved by stock market as well as bond market. Utilization of financial market is computed
through large number of people and that is set for it is transparent. Further, users are provided
with appropriate liquidity in the market. In consideration for authenticity in financial market, it
can be stated that it serves as a productive approach for the purpose of generating profit as
limited amount of foreign money that is hold by it. It is an efficient tool that provides finance to
large businesses and is helpful for achievement of goals of an organization (Lester, Mercurio and
Davies, 2018).
While considering FDI stock of United Kingdom it can be noted that inward FDI stock of
country is 1.196 trillion US dollar and its outward FDI stock is 1.443 trillion US dollar. As the
currency of the UK, the pound sterling pertains a rich history as well as it is one of the oldest
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currencies which is actively traded in the forex market. Further, The United Kingdom is the fifth
largest in context to contributor to International Monetary Fund. Apart from it, UK is the
founding member of World Bank and hence supports various multilateral efforts for promoting
human as well as economic development, reducing poverty, as well as boosting of shared
prosperity in the world.
Allocation of capital within domestic economy:
Domestic economy: It can be described as an activity related to production and trading
activities which is consisted in an economy of a country. Economy of UK is estimated as fifth
largest in a world while measured in relevance to nominal GDP. Economy of nation is market
oriented, along with it, nation is highly developed. In relation to purchasing power parity, UK’s
economy is ninth highest in a world. Apart from it, economy of a country is twenty-first largest
in context to GDP in per capita that is comprised of around 3.3 percent of gross domestic product
of globe. In the year 2019, United Kingdom was estimated to be 5th largest in a world in relation
to exports as well as imports. Apart from it, nation is computed as third largest regarding inward
FDI and it is fifth largest in relevance to outward FDI. United Kingdom is estimated to be top
globalised in relation to economy. Nation entitles domination of service sector that pertains
major contribution of around 80 percent of Gross Domestic Product of UK. Industry of financial
services is essential for country; and therefore, London is proved as second largest in context to
financial sector in a world. Aerospace Industry entitled to be 2nd largest industry around globe.
Pharmaceutical industry of nation is tenth largest in a world as it is vital for economy of world.
Due to cutting of BoE, current interest rate of United Kingdom is 0.1 percent. Balance of
payment of the nation changed from surplus to deficit of 469 to 22 billion sterling pound.
Allocation of capital within domestic economy of United Kingdom: Capital allocation
can be stated as distribution of financial resources in a way which enhances its efficiency and
improvises its productivity. Allocation of capital can be incorporated in a country in different
forms that are evaluated below:
 Development of infrastructure: Infrastructure development refers to activities that are
related to construction that leads to improvisation of basic foundational services of a
country for the purpose of improvement of economy as well as enhancement of quality.
Capital allocation of United Kingdom have main focus on activities related to
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infrastructure with the motive of enhancing efficiency and competitiveness of a nation.
Apart from it, country’s supply chain leads to enhancement of opportunities that are
created for the purpose of development (Newman and Posner, 2018).
 Investment in small business: Businesses that performs operations at low level are termed
as small organization. Less number of people are employed in such small enterprises and
capital that is invested in such organizations are also less. UK invests in such organizations
that enhances opportunity of employment creation in a nation and capacity of income
generation in a nation is also improvised due to enhancement in level of disposal income of
citizens. Such type of organizations possesses major impact on generation of tax for a
nation which includes employment tax, income tax and property tax.
Allocation of capital within international market:
International market refers to a market which operates across borders of a nation. Allocation
of capital states distribution of fund resource of an organization. Apart from it, investments of a
nation are in such a way that productivity, profitability and efficiency of a country improvises. It
ultimately facilitates maximization of profit. Therefore, capital is allocated by United Kingdom
in Germany’s international market and tactics or techniques for it is explained below:
 Repayment of debt: Debts indicates burden and obligation that is associated with
government of a country in relation to amount that is borrowed by nation. It includes
holders of bond, bank borrowings, trade finance providers etc. In context to Germany’s
international market, it can be stated that, nation is mainly concerned for loan repayment,
therefore, all obligations are paid with the motive of enhancing credibility of a country
and its value is improvised (Porter, 2016).
 Mergers and Acquisitions: It can be described as an effective approach which enables
improvement as well as expansion of profit which is generated by a country. Strategy of
mergers and acquisitions facilitates allocation of capital by ensuring acquisition of
efficient organizations of Germany. This leads to improvisation of recognition as well as
increment for capacity of fund generation of a country.
 Dividend Payment: Dividend refers to an amount that is paid by a company to its
shareholders as a return for investing funds in an organization. Therefore, formulation of
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effective strategy for the purpose of paying dividend plays an essential role in a company
as it ensures that businesses of a country to improvises its market value. If shareholders
are paid low amount of dividend as compared to expectations of such holders of shares
than value of a firm will decline in a market. Therefore, nation pertains main focus on
allocation of capital with the motive of repaying dividends in an appropriate manner.
Payment of dividend ultimately leads to increment of value of an organization in context
to international market. Strategy of paying dividend pertains huge impact in relation to
decision making regarding investment because it incorporates high result for profitability
as well as productivity of a country in a future period of time.
TASK 2
Economic evaluation:
On evaluation of Germany’s economy, it can be stated that economy of a nation is highly
developed social market across a country. Economy of Germany is the highest economy in entire
Europe and it is termed as a fourth largest economy in context to the nominal Gross Domestic
Product in the entire world in the year 2017. Further, economy of Germany is fifth largest in
relation to purchasing parity Gross Domestic Product (Ranjan and Raychaudhuri, J., 2016). In a
nation it is accounted that 28 percent in euro area of an economy in an international monetary
fund. Nation is a founding member for the European Union as well as in Eurozone. In the year
2016, country reached to its largest amount of surplus in the entire world which worth around
310 billion. Country is a biggest exporter around the world, and it comes under one of the largest
exporters of goods. globally with worth of 1448.47 billion. In Germany, percentage of
agriculture is 0.9 and of machinery is 41. Products which are mainly exported by a country are
transport, basic metals, food products, rubber, pharmaceuticals as well as transport equipment.
Germany has largest economy in relation to the manufacturing sector that is highly affected by
downfall of finance. In context to international monetary fund nation effectively manages funds
available that ensures growth and development in the longer run.
Germany is the first nation which have nuclear power, biomass, solar energy as well as
gas. Nation proves to be first major industrialized country that committed the transition of
renewable energy as well as biomass. It is majorly industrialized in relevance to conversion of
the renewable energy in the form of Energiewende. Here, 99 percent of all companies which is
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situated in Germany belong to small or medium size organizations where largest 2000 companies
are publicly listed and registered in all aspects of revenue as well as profitability. Germany
comes up as a top affair in entire world in context to affairs of trading. Two third of the trading
affair of a world takes place in a country and it is exploited in state of named Lower Saxony.
FDI stock of German indicates increase of 1.653 trillion US dollar in the year 2017.
Export of nation increased to 2.004 trillion US dollar in the year 2019 and its main exports are in
US, France, China, UK and Italy. Further, unemployment rate of country among youth positively
decreased to 5.8 percent in the year 2020 while in the same year overall unemployment rate
increased to 2 million.
Critical evaluation of the challenges that are faced by a nation regarding trade policies as well as
industrialization:
Industrialization- It refers to the method which is applied for transforming the
agricultural product into products of manufacturing. It helps in increasing the growth of an
economy in a nation, in other words it can be stated industrialization used for the purpose of
delivering the product by companies to its customers in an effective manner by adequately using
the available resources in an adequate way that helps in solving problems of human.
Industrialization helps in improving the level of income as well as standard of living. It occurred
in 19 centuries in European cities later, it happened in north America. Further, it spread all over
the globe. hence, there are different reasons are there which emerged the requirement of
industrialization as there is a requirement of enhancing the level of productivity of farmers and
improved the manpower that is used in a simplified manner. In relevance to implemented to
industrialization, it can be noted that in an economy there is a need of increasing per capita
income, and in addition to it, industrialization leads to rise in a formulation that results in
improving the activities related to development of an economy around the world (Ryl’skaya,
Kozhankov and Bobrova, 2018). Utilisation of resources in an optimal manner leads to
increment in agriculture sector of a country. In context to Germany, there are various favourable
incentives and apart from it, country pertains reduction in cost related to transportation. Even,
reduction in cost related to production enables improvisation in the profit that is generated by a
business. Some challenges that are faced due to industrialization are described below:
Challenge 1: Unequal distribution of income- Emergent of industrialization leads to
enhancement of unequal income distribution. It serves as a reason for creating gap in distribution
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of income in a country which ultimately results in incorporation of differentiation between rich
people and poor peoples. Industrialization also helps in accomplishing economical activities as
well as activities related to finance that results in improvement of disparity income or wealth.
While considering challenge of industrialization that is faced by Germany, it can be noted that
application of industrialization approaches in a country as no division occurs in working
condition of labourers because of the fact thar there is a differentiation among rich and poor that
leads to decrement in the condition of living of individuals which are citizens of a country.
Through industrialization, no growth occurs in the class of such people which leads to increment
in level of poverty in a nation. It also occurs because of increment in the distribution of income
among rich and poor class of people (Sengupta, 2016).
Challenge 2: Emigration: It indicates that there is a negative impact which is faced by a
country due to industrialization, as the people have to migrate from one place to a different place
for the purpose of employment. It is because industrialisation decreases the requirement of
manpower which results in losing of job by people. It further comes up as a reason for negative
implications on health of workers and hence, health issues of worker increases.
Trade policies- It indicates regulation that is implemented by government of a country
in relation to activities of trading with foreign countries (Shapiro and Hanouna, 2019). Such type
of policies incorporates various rules and regulations which is implemented in Germany for the
purpose of governing activities of trade in a nation. Such policies of trade are specifically utilised
by each nation for the purpose of enhancing and managing its activities related to trading.
various types of constituents are there for the utilisation of trade policies such as, tariffs, trade
barriers or safety.
Challenge 1: Welfare of economy: Globalization comes up as a critical challenge against
welfare of economy due to the fact that trading policies leads to arrival of conflicts economical
power which pertains seizing influence on Germany (Willsher, 2016).
Challenge 2: Intellectual property theft: In context to trade policies it can be noted that,
distribution of the products and services across borders, increases the risks that is associated with
intellectual rights for competitors. It is utilised in various forms, such as, proprietary information
for market branding (Yuying and Beibei, 2017). It comes up as a complex activity that utilised
for political risk with Germany in context to changes in policy among various countries that
pertains negative influence on operations of various countries.
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CONCLUSION
From the above report it can been concluded that in international finance and trade
investment indicates incorporation of various activities of financial statements for conduction in
the global. In financial market, market place refers to the platform which consists the activities
where there is the utilisation of operations of the economy of a nation. Further, it also involves
the derivative market, bond market, stock market and forex markets. Here, allocation of
monetary fund or capital in an domestic market as well as in international market proves to be
very helpful. It also ensures smooth functioning for operations of an economy in a country. By
the utilisation of it, development in the infrastructure of a country is ensured and for small and
large type of organizations that are considered. For this purpose, mergers and acquisitions,
repurchases of share as well as payment of dividend for the payment of debt are ensured.
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REFERENCES
Books and Journals:
Hafeez, M., and et.al., 2018. Does finance affect environmental degradation: evidence from One
Belt and One Road Initiative region?. Environmental Science and Pollution
Research. 25(10). pp. 9579-9592.
Hill, M. D., and et.al., 2017. Trade credit or financial credit? An international study of the choice
and its influences. Emerging Markets Finance and Trade. 53(10). pp. 2318-2332.
Kirton, J. J. and Maclaren, V. W., 2018. Linking Trade, Environment, and Social Cohesion:
NAFTA Experiences, Global Challenges. Routledge.
Lester, S., Mercurio, B. and Davies, A., 2018. World trade law: text, materials and commentary.
Bloomsbury Publishing.
Newman, A. L. and Posner, E., 2018. Voluntary disruptions: International soft law, finance, and
power. Oxford University Press.
Porter, T., 2016. States, markets and regimes in global finance. Springer.
Ranjan, P. and Raychaudhuri, J., 2016. The “new-new” trade theory: a review of the
literature. International Trade and International Finance. pp. 3-21.
Ryl’skaya, M. A., Kozhankov, A. Y. and Bobrova, O. G., 2018. Customs payments: trends in the
development of customs administration in Russia in the framework of the Eurasian
Customs Union (EACU). Finance: Theory and Practice. 22(4). pp. 88-103.
Sengupta, R., 2016. The impossible trinity: Where does India stand?. In International Trade and
International Finance (pp. 511-523). Springer, New Delhi.
Shapiro, A. C. and Hanouna, P., 2019. Multinational financial management. John Wiley & Sons.
Willsher, R., 2016. Export finance: risks, structures, and documentation. Springer.
Yuying, J. and Beibei, H., 2017. The Effect of Export Rebate Policy on the Duration of Export
Trade: Evidence from Export Survival Rate of Heterogeneous Firms. Journal of
Finance and Economics. 43(06). pp. 40-51.
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