A Detailed Report on International Trade Finance and Investment, UK

This report provides a comprehensive analysis of international trade finance and investment, focusing on the United Kingdom's involvement in global markets. It begins with an executive summary and table of contents, followed by an introduction to the topic. Task 1 delves into the background of financial markets, exploring their types and functions, with a specific focus on the UK's financial market. It examines capital allocation within both the domestic and international economies. Task 2 evaluates the UAE's economy and critically assesses challenges arising from industrialization and trade policies. The report concludes with references, providing a detailed overview of international trade finance, capital allocation strategies, and economic evaluation in the context of the UK and UAE.

International Trade
Finance and Investment

EXECUTIVE SUMMARY
This report summarizes that international trade or finance is a incorporation of trade
activities globally. It involves capital allocation with domestic or international markets.
Financial markets enable improvement in income generation capacity of nation. It involves
money as well as capital market. Apart from it, there are various factors of capital allocation in
an international and domestic market.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
Table of Contents.............................................................................................................................3
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
Background of financial market:.................................................................................................4
Allocation of capital within domestic economy:.........................................................................6
Allocation of Capital within International markets:....................................................................7
TASK 2............................................................................................................................................8
Evaluation of Economy:..............................................................................................................8
Critically evaluating the challenges that is faced by country because of industrialisation and
trade policies:...............................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
International trade financing can be explained as that market which is incorporated across
borders of nation. It expands trading process of nation and explores new area of income
generation and investment proposals for country. This report is based on analysis of international
trading and financing of United Kingdom with international market(Bhattacharya and
Mukherjee, 2016). It evaluates background of financial markets which is a potential platform for
the purpose of security trading as it enhances liquidity creation in country. It states various forms
of financial markets along with their description. Further, capital allocation areas utilised by
United Kingdom is identified in context to both, domestic economy as well as international
market. In addition to it, economic evaluation is conducted for chosen international market. And
lastly, challenges faced by country due to implementation of policies related to industrialisation
as well as trade is evaluated.
TASK 1
Background of financial market:
Financial markets can be explained as a marketplace which enables security trading that
includes stock, bond, forex as well as derivatives markets. Financial market is an essential
platform for the purpose of smooth operations for capitalist economies by allocation of resources
and creation of liquidity for enterprises (Cohn, 2017). Such markets make it easier for buyers as
well as sellers for trading of financial holdings. Financial markets help in creation of securities
which provides return for excessive funds, that is, investors and also makes such funds available
to individual that desires additional fund, that is, borrowers. Numerous types of instruments
related to finance are purchased and sold at this platform, it involved, derivatives, equities,
currencies as well as bonds. Financial markets are of basically five types, that is, over the
counter, bond market, money market, derivatives markets and forex markets. OTC or over the
counter refers to decentralized market which does not pertain physical location (Ehigiamusoe
and Lean, 2018). Trading in this market I conducted electronically and participants here consists
direct trading of securities, hence, broker is not required. In bond security money is loaned by
investors for a specific period and interest rate for the same is pre-established. In other words,
bond indicates an agreement among borrower and lender which incorporates loan details as well
as record of its payment. In money market, trading is done with products that pertains high

liquidity or their maturity period is for short term. Here, return on interest is low but degree of
safety is high. While considering derivatives market it can be noted that it consists contract
among parties and its value basis is security or index. It is a secondary security market and its
value is derived from value that its linked primary security pertains. Lastly, forex or foreign
exchange is a security that enables participants to purchase, sell, exchange as well as speculate
currencies.
Financial market of UK: financial holding of country’s economy 25 percent while
considering its private equity across globe. In addition to it, United Kingdom also covers 52
percent of European equity market. During this time, stock exchange of London is noted as
highest stock market of Europe as it employs around 5000 individuals of UK (El Ghoul a nd
Zheng, 2016). Contribution of nation in terms of gross domestic product in the year 2007 is 0.8
percent and it serves from past three hundred years. It generated revenue of 1.4 trillion US dollar
from financial market at year end. This market place is popular for the purpose of selling of
assets, that is, foreign exchange and derivatives. Entrepreneurs and business persons prefer this
market as it provides opportunity for business expansion and profit earning. Financial market of
UK performs various functions such as, creation of open system for businesses for attracting
large amount of fund which can be achieved through bond and stock market. This market is
utilised by large number of people, hence prise set by this market is also transparent. Share
market provides adequate liquidity to its users. While considering authenticity of this platform it
can be stated that it is a effective approach for profit generation and it holds very limited foreign
currency. This market is an effective tool for providing finance to large companies and helps in
achieving goals of business. Apple in 1977 persuaded loan of 250000 from investors, five years
later, these borrowers further took amount of 100 million from financial market by sharing large
amount of share of small size. Apple is hundred billion worth company and employs almost
10000 people every year (Gosavi, 2018). Hence, this organization works effectively for
enhancing economy of country. Various forms of assets related to finance are included in this
market, such as, shares that pinpoints ownership of business in paper form. Further, bonds
indicate loans that government issues to big entities. Foreign exchange markets refer to
exchanging one currency to other. Excess to 412 billion customers are managed by brokers of
stock and managers of fund in financial market of United Kingdom.

Allocation of capital within domestic economy:
Domestic economy: Economy of UK is fifth largest in the world while measures in term
of nominal GDP. It has highly developed as well as market-oriented economy. While stating in
context to purchasing power parity, economy of United Kingdom is ninth largest in the word.
Further, it is 21st largest by gross domestic product per capita which comprises almost 3.3
percent of world’s GDP. In the year 2019, United Kingdom was considered as fifth largest
around globe in terms of export while it is fifth largest in context to imports of goods. It
comprises 3rd largest in terms of inward FDI, that is, foreign direct investment and 5th largest on
the basis of outward FDI. United Kingdom is stated as most globalised in terms of economy.
This nation consists domination of service sector as it contributes almost 80 percent of gross
domestic product of UK. Industry of financial services is essential for nation, further, London
proved to be 2nd largest centre of financial across globe. aerospace industry is noted as 2nd largest
national industry of aerospace. Pharmaceutical industry of country is 10th largest in world and
plays a critical role in world’s economy (Guariglia and Mateut, 2016). While considering five
hundred largest companies of world, headquarters of 26 among them is in United Kingdom.
Trade organization entitled with nation are World Trade Organization, AIIB, and OECD. It is a
developed country that pertains high developed economy. Population of United Kingdom is
stated as 67,025,542 in January 2020. Gross domestic product rank of nation is 5th in terms of
nominal and 9th in terms of PPP in the year 2020. Unemployment rate of United Kingdom is 3.9
percent and average gross salary is £585. Country is ranked 8th in terms of ease of doing business.
Business investment of UK is estimated to be reduced by 0.2 percent from 2017 to 2018, while
its gross fixed capital formation enhanced from 0.9 percent in same time period.
Capital allocation within domestic economy of United Kingdom: Capital allocates
states distribution of financial resources of country in a way that improves efficiency and
profitability of entity. Capital is allocated in various forms in UK which is explained below.
 Infrastructure enhancement: Development of infrastructure can be stated as
constructional activities that improves basic services of foundation of nation for the
purpose of stimulating economic growth as well as improves quality of life of its citizen.
Government of United Kingdom focuses on its infrastructure development and hence,
allocates capital in it. Reason is that infrastructure enhancement improves region’s
competitiveness and its efficiency. It improves connection with supply chain of country
with the motive of increasing transaction of goods across borders and creates opportunity
for nation.

 Small business: It indicates those organizations which have operations at small level and
incorporates small number of employees. United Kingdom invests capital in small
businesses because such entities create employment for people and hence serves as a
source for income generation. Small companies create significant portion of tax income
for nation which includes, income, property and employment tax. Raise of local
employment improves standard of living for people of UK (Ito, T. and Hoshi, 2020).
 Large players: Large company can be defined as that organization which employee large
number of individuals and operates globally or at large level. Investment of government
of UK in large business results as a support for development of business which leads to
its expansion and technological adoption. It enhances stabilization in macroeconomy of
country. It further improves productivity of country and boosts its growth process.
Allocation of Capital within International markets:
International market can be described as a market which is across international borders of
nation. Allocation of capital states financial resource distribution of an entity along with its
investment in such a manner that productivity of an enterprise or country improves and it leads to
profit maximization (Kahouli and Omri, 2017). United Kingdom allocates its capital in U.A.E in
a manner which enhances its efficiency, these capital allocation tactics are described below:
 Debt repayment: Debt refers to obligation incorporated with government of nation in
context to repayment of amount borrowed by it. This includes holders of bond, bank
borrowings, trade finance providers etc. In context of international market of U.A.E,
nation is majorly concerned for loan repayment therefore, all obligation is timely paid off
which enhances credibility of country and improves its value.
 Capital increment: By researching about economy of U.A.E and its sector which are
profitable, nations formulates effective capital allocation and improves its profitability.
Gross domestic product of United Kingdom is improved through it and hence its
economy is impacted positively. This leads to increment in consumer disposable income
as economy of nation is improved which have high impact on its economical factors, that
is gross domestic product or income disposal.
 Mergers and acquisition: Acquisition of another company by United Kingdom based
organization proves to be an efficient approach for profit maximization and economy
enhancement of nation. Therefore, United Kingdom implements strategies for acquisition
of entities that is based in U.A.E. for capital allocation. It improves capacity of country

for fund generation and it also leads to enhancement in value of nation. High risk is
involved in this approach but it also consists high return in future.
 Dividends: It is amount which organizations pay to shareholders as a reward for their
investment in an entity. This strategy is highly valuable for shareholders hence it pertains
huge influence on their decisions regarding investment. Efficient capital allocation in
U.A.E international market leads to financial resource improvisation for United
Kingdom. This is a reason for improvisation of investment capacity of nation regarding
shareholders. This ultimately leads to enhancement of value consisted with country in
context to international market (Market, 2016).
 Share buyback: This strategy indicates purchase of firm’s own share in market across
borders. It ensures decrement in outstanding share numbers which helps country to
enhance its financial metrics in U.A.E. international market. It improves book value as
well as earning pr share in context to nation.
TASK 2
Evaluation of Economy:
While studying the economy of United Arab Emirates it can be analysed that country
pertains diversified economy which is mostly essentially reliant on natural gas as well as
petroleum for the purpose of revenue generation. On evaluation of state budget of U.A.E it can
be stated that 77 percent is accounted for oil exports. Population of a country can be computed as
9,630,959 in 2018 and nominal Gross domestic product of a country is 354 billion US dollar in
2020, while, PPP gross domestic product is 647 billion US dollar (Paraná, 2018). Public debt
pertained with U.A.E is 19.7 percent of its GDP in the year 2017 and its budget balance in the
same year is -0.2 percent of GDP. Revenue of U.A.E consists of 110.2 billion in 2017 and its
expenses showcased 111.1 billion. Trade organization incorporated with a country is OPEC
(Organization of Petroleum Exporting Countries) and WTO (World Trade Organization). Main
industries operating in U.A.E are petroleum, ship repair, aluminium, petrochemicals, cement,
handicrafts, fishing and fertilizer. Country pertains exports of 308.5 billion US dollars in the year
2017 and major exporting goods consists of 45% of crude oil, natural gas, dates and dried fish.
Exporting partners of U.A.E are Iran, Japan, South Korea, Switzerland, India, and Oman. While
considering imports of U.A.E it can be stated that nation comprised import of 229.2 billion US

dollar in 2017. Major goods that are imported are machinery or transport equipment, chemicals
and food products. Main importing partners of country are United States and India (Sengupta,
2016).
Critically evaluating the challenges that is faced by country because of industrialisation and trade
policies:
Industrialization: It is a process in which the economy transferred from agriculture to
the manufacturing of the goods. It helps in an economic growth of the nation, delivery of goods
easily and the proper utilisation of resources to solve the problem and help in human control.
Industrialization helps in increasing the income and the living standard of the people in the
society. Industrialization was first occurred in the 18th and the 19th century in the Europe and
North America and later it spread at other parts of the world. There are different reasons because
of which there is a need on industrialisation in the nation like Increase per capita income which
helps in increasing the productivity within the country and more manpower is utilized (Ullah and
Giles, eds., 2016). Industrial development in the economy increase the per capita income, Rise in
capital formation requires high level of the investment industry with in the economy, Optimal
use of economic resource can use the resource inside the country easily in comparison to
agriculture. UAE builds the good communication network across the country so that easy
industrialization take place. UAE provides favourable incentives and the well-connected
transportation system and free economic zones with low cost are provided by the UAE.
Industrialization helps in improving the profits and increase the sale of production and reduce the
cost of production. The improvement has an greater impact in the profit margin of goods and
services. Industrial development is same as the modernisation which helps in increasing the
output and the productivity in the organisation. Industrialisation helps in reducing the poverty in
the nation and provide jobs at both small and large scale to the people (Willsher, 2016). It also
helps in increasing the high standard of living of the people and have skilled labours so that they
can perform their task easily. On consideration of challenges that nation faces due to
industrialisation policies, following are some stated issues:
 Challenge 1: Unequal income distribution: It builds a higher gap between the rich and
the poor because of not proper division of labour and capital. It helps in accumulating the
excess profit which can easily derived from the economic activities and helps in
increasing the disparity income and wealth. UAE has this advantage also if there is no

proper division in the capital there is a huge difference in the rich and the poor people
which leads to decline in the economic condition of the country and no growth of the
lower-class people which leads to poverty.
 Challenge 2: Emigration: It is another negative impact faced by the country as in this
factor the workers have to migrate from different cities and they lose their individuality
and have limited job satisfaction as they do not have fixed working environment. The
major health issues may also incur when they work in dangerous factories. Long working
hours may depress the person and won't be able to work, this challenge may also face by
the UAE as if there is a regular migration they won't get fully engaged with working
conditions and this results to the less efficiency.
Trade policies: It is a regulation which controls trading that nation incorporates with foreign
countries. Policies related to trading consists regulations and targets that U.A.E. pertains for
relations of trade among countries. Such policies are specifically defined by each country and
formulated by public officials. Major constituents of trade policy are tariffs, trade barriers and
safety (Yi-Fang, 2017).
 Challenge 1: Warfare of economy: Globalisation comes up as a critical challenge in
against of polarization as it leads increment in conflicts and major power of economics
have seizing influence on U.A.E.
 Challenge 2: Intellectual Property Theft: As trade policies enhances distribution of
goods across borders, it also improves risks associated with illegal copying of product by
competitors. It can be in various forms such as, proprietary information as well as market
branding. It is a complex activity as it always pertains some political risk attached with
U.A.E. Policy changes among different countries may have high impact on trading
operations of various nations it deals with.
CONCLUSION
On the basis of this report it can be concluded that international trade is incorporation of
activities related to trade that is conducted globally. Further, financial market is a market place or
platform that consists trading activities which relates to securities. Financial markets involve
forex, derivative, bond, stock and OTC markets. It is an helpful approach for smooth operations
of economy of country. Capital allocation in domestic economy indicates fund distribution with
nation for this purpose, infrastructure development and small as well as large companies can be

considered. Additionally, allocation of capital within international borders states capital
distribution across borders of nation. With this intention, approach of investment in mergers and
acquisition, share repurchase, dividend payment can debt payment can be applied.

REFERENCES
Books and Journals:
Bhattacharya, B. and Mukherjee, J., 2016. Foreign direct investment and macroeconomic
indicators in India: a causality analysis. In International Trade and International
Finance (pp. 373-384). Springer, New Delhi.
Cohn, T. H., 2017. Governing global trade: International institutions in conflict and
convergence. Routledge.
Ehigiamusoe, K. U. and Lean, H. H., 2018. Tripartite analysis of financial development, trade
openness and economic growth: Evidence from Ghana, Nigeria and South
Africa. Contemporary Economics. 12(2). pp. 189-207.
El Ghoul, S. and Zheng, X., 2016. Trade credit provision and national culture. Journal of
Corporate Finance. 41. pp. 475-501.
Gosavi, A., 2018. Can mobile money help firms mitigate the problem of access to finance in
Eastern sub-Saharan Africa?. Journal of African Business. 19(3). pp. 343-360.
Guariglia, A. and Mateut, S., 2016. External finance and trade credit extension in China: Does
political affiliation make a difference?. The European Journal of Finance. 22(4-6). pp.
319-344.
Ito, T. and Hoshi, T., 2020. The Japanese Economy. MIT press.
Kahouli, B. and Omri, A., 2017. Foreign direct investment, foreign trade and environment: New
evidence from simultaneous-equation system of gravity models. Research in
International Business and Finance. 42. pp. 353-364.
Market, F., 2016. Structured Finance in Shipping. The International Handbook of Shipping
Finance: Theory and Practice, pp. 191-193.
Paraná, E., 2018. About Digitalized Finance. Brill.
Sengupta, R., 2016. The impossible trinity: Where does India stand?. In International Trade and
International Finance (pp. 511-523). Springer, New Delhi.
Ullah, A. and Giles, D. E. eds., 2016. Handbook of empirical economics and finance. CRC Press.
Willsher, R., 2016. Export finance: risks, structures, and documentation. Springer.
Yi-Fang, Z. H. A. N. G., 2017. Internet Endogenous Trade, URL Linked Data and Growth
Marginal Effect: Theoretical Model and Empirical Evidences from
China. Contemporary Finance & Economics. (9). p.9.