Report on International Trade Finance and Investment in the UK

This report provides an analysis of international trade finance and investment within the UK economy. It begins with an executive summary and an overview of the financial market. The report then delves into capital allocation within both the domestic and international markets, evaluating the UK economy's performance. It examines the allocation of capital, particularly in relation to trade with the EU and non-EU countries, and discusses the impact of Brexit and COVID-19 on the domestic market. Furthermore, the report explores foreign direct investment (FDI) and the UK's position in the global market. An evaluation of the UK economy is presented, including its GDP, key sectors, and trading partners. Finally, the report critically assesses the challenges posed by industrialization and trade policies, including the impact of Brexit and economic fluctuations, offering a comprehensive overview of the UK's international trade landscape.

International Trade Finance
and Investment

TABLE OF CONTENTS
Executive Summary...............................................................................................................3
Background of financial market.............................................................................................4
Capital Allocation with Domestic Economy..........................................................................4
Capital Allocation with International Market........................................................................5
Evaluation of UK economy....................................................................................................7
Critical Evaluation of Challenges that the country faces due to Industrialization and Trade
Policies...................................................................................................................................8
Conclusion............................................................................................................................10
Recommendation..................................................................................................................10
REFERENCES.........................................................................................................................12

Executive Summary
This report is on the topic international trade in regard to the UK economy.
Globalisation is the major reason behind the international trade which has created
opportunities for the individuals and economy as a whole. This report provides an insight into
the capital allocation by the economy within the nation and on the internal platform. Also, it
critically analyses the impact of industrialization and trade policies on the economy.

Background of financial market
The financial market is the market which includes the stock, foreign exchange,
derivatives and trading of other financial instruments. This is a type of market which assist
the company in having and creating a good liquidity which assist the company and business
to grow and develop themselves. This market assists the company to manage the risk and the
invest in the market and try to earn a good amount of return (Buckle and Thompson, 2020).
There are different types of financial market which are operated and the business operates in
these market in order to earn a good amount of money. These different types of market are
the stock market, commodities market, derivatives, bond market and many different types of
the market in order to earn higher amount of money.
In UK the major financial market activities are very important for the business to have
good and increased profitability. In this the UK financial market involves the different types
of instrument like the fund management, wealth management, banking, different types of
investment products like the derivatives, hedge funds, securities and many different types of
funds and securities to earn a good sort of income for the company. for the companies to
effectively work and operate in the better manner the most essential thing for the company is
to list over the stock exchange of the country that the London stock exchange or any other
regional stock exchange (Sahai, 2020).
Capital Allocation with Domestic Economy
Capital allocation is all about distributing and investing the company’s financial
resources in such a way that helps to increase the efficiency and maximize the profits. In the
same way, companies operating within UK should generate wealth to their shareholder in
order to meet the define aim of the company. It is analyzed that capital allocated by the
government for trade is around 49 euro billions with non- EU countries. Though as compared
to last some years, capital is allocated for trade and union such that machinery and transport
equipment which are considered one of the most valuable export commodity for UK in 2019.
Therefore, UK had an overall trade deficit of 79 billion euro with EU in 2019 and the surplus
is also overweight. Hence, it is analyzed that in 2018, around half of the UK’s export and
import went to European Single Market and this making it main trader partner for UK
(Maggiori, Neiman and Schreger, 2020).
Moreover, the largest allocation of capital within domestic economy is related to
Machinery and transport equipment because it provide the high returns as well. Through the

secondary research it is also analyzed that UK’s largest trading partner is EU and it is also
exhibit that 47% of the UK total trade is accounted from EU. Apart from this figure also
reveal that 43% of the capital is used for export while 52% is for imports. Thus, government
of UK make sure that specific amount is allocated to all the groups which in turn improve the
brand image of country, along with developing different opportunities factor as well
(Harrison, Yohanna and Pierrakis, 2020). In addition to this, it is analyzed that UK export
were worth £689 billion in 2019 or can be stated that 31.1% of GDP. So, UK invest its major
portion in order to export the things to develop effective trading.
It is analyzed that due to Brexit, the economy of the country is affected in negative
manner, whereas in 2020 COVID – 19 is also affected the overall capital in adverse manner.
This in further include decline in business investment as well as prospect of less access of
foreign market that somehow affect the overall domestic market of the company in negative
manner (Siddiqui, 2020). Hence, there is a need to develop effective strategies in order to
minimize the problem so that it will not affect the overall image or reputation in adverse
mode. As there are many industries operating within a business and that is why, it is
necessary to have a proportionate amount of capital allocation that assist to improve the
overall performance of the economy in positive manner. So, the domestic market of UK is so
wide such that it will help to meet the demand of customers through investing into different
options.
Capital Allocation with International Market
International market allocation helps to strengthen the overall country’s relation with
other one. This in turn improve the economy as well as brand recognition in other countries
which is possible when UK invest its amount in different country. For that foreign direct
investment (FDI) works better such that the sources explain that in 2019, the FDI inwards
flow by 59,137 while in 2018 it was 65,300. There is a slight decline in the inflow because of
complete shutdown situation, whereas number of greenfield investment are increases, as
clearly reflected from the table (FDI of UK, 2020).
Foreign Direct
Investment
2017 2018 2019
FDI inwards
(million USD)
101241 65300 59137

Number of
Greenfield
Investments
1329 1550 1537
FDI Stock 1805818 1930484 2075271
Apart from this, it is also analyzed from a World Investment Report 2020 that the FDI
stock of UK was about USD 2 trillion as compared to last year. Hence, UK was 8th recipient
of global FDI inflows behind US, China and Netherlands etc. The economy of the country is
continuously resisting, though London remain the financial capital Europe, whereas Great
Britain a strong currency. The domestic market of the company is clearly reflected that it has
a strong export market and that is why, the economy of the country is strong. On the other
side, there is no capital allocation for its infrastructure and thus the productivity is low as
well. Even government focused to take many measure in order to motivate FDI such that
different grants is available that assist the firm to invest their amount in different countries
(Xiong, 2020). Such that 100% capital allowances are also available to company which can
be incur to capital expenditure for plan and equipment so that effective measures are selected.
In addition to this, capital investment in UK is related to high or long term economic
growth which in turn leads to greater the future production. Hence, study reveals that the
value of UK’s outward investment was around trillion and it is also decreases that somehow
affect the results in opposite manner. Also, this in turn affect the overall economy of the
country in opposite manner. Also, most of the company start merging and acquiring other
companies with an aim to increase the financial performance and benefitted the country as
well. Also, through capital allocation, company is also tries to gain enough knowledge and
range of resources which include cheap labor that assist to improve the overall brand image
of a company. In addition to this, UK dis not invest upon the infrastructure and that is why, it
is necessary to allocate the capital that helps to improve the overall brand image and increase
the overall performance along with efficiency (Mota and Coutinho dos Santos, 2020).
As UK is one of the leading investor abroad and it also receives over 20% of the all
inward investment into EU that assist to attract range of companies towards it. Secondary
research also reflected that there are 18000 different investor into UK and around millions of
people who are directly supported by inward investment. Thus, it is examine that capital

allocation of UK with international market is so strong that helps to meet the demand of
customers as well.
Evaluation of UK economy
With GDP of 2.83 trillion in the year 2019 and population above 66 million, economy
of UK is 6th largest in world. UK is made of the England, Scotland, Northern Ireland and
Wales. It has high quality of the life and economy is diversified. Sectors contributing most to
GDP are manufacturing, services, constructions and tourism. Service sector of the country
comprises of number of industries including retail, finance and entertainment account for
more than 3 quarters of GDP of UK while production and manufacturing accounts for less
than 21%. EU is largest trading partner of UK that accounts for around 43.5% of total exports
in the 2019. As per National Statistics, service sector of UK is largest. Service industry
includes business and finance services, retail, consumer focused industries, food & beverages
and the entertainment. After having steady growth in the 2017 manufacturing sector grew by
only 0.4% and construction outputs fell by around 0.4% in the year 2018 (Salemdeeb, Al-
Tabbaa and Reynolds, 2016). Division of food products is largest within manufacturing
sector of UK, showing decrease in the sales 0.9 billion in the year 2019.
Growth in service industry has increased in 2018 by 2,1% strengthening from growth
seen on previous 2 years. Overall slowdown in the real household consumption in year 2017
continued over 2018. The reduction is blamed in part for Brexit uncertainty and falling
housing market.
Tourism is other big revenue generator for UK. Visitors in 2019, that are residents
from other countries spent over 28.4 billion or over 35.9 billion on tourism and travel in UK
as per ONS. In June, 2019 which is peak season for tourists grew by around 9% on yearly
basis. The overseas visitors had spent around 2.34 billion.
in UK were of 689 billion in the year 2019 that accounts for 31.1% of GDP. Cars are
biggest product by value over 31.6 billion. The financial services of UK accounted for around
63.2 billion of the total exports.
The decision of UK to leave EU took effect from 31st January 2020. There are
number of government and non governmental organisations and agencies have projected
ongoing uncertainty around Brexit is having negative impact over economy of UK. Summary
from different Brexit estimates from Independent government institute found that the reliable
projects of long term impact on economy due to Brexit will differ wildly. It has been
suggested by different government agencies that several areas are been affected due to
uncertainty related to Brexit negotiations. It includes decline in the business investments and
prospects of lesser access to the foreign markets (Minford, 2019). It has spurred the decline in
exchange rates which are raising the inflation and also reducing income of consumers and
due to this spending and consumer income are contributing less to the economic growth.

However it could be said that the economy of UK is highly stable as compared with
other big developed countries. Due to this it attracts numbers of investors and businesses
from around the world to establish their branches and offices in UK. The ongoing economic
fluctuations are affecting the sterling prices. But in long run the economy has strong growth
rate.
Critical Evaluation of Challenges that the country faces due to Industrialization and Trade
Policies
Industrialization mainly accounts for the process in which an economy is transformed
or converted from mere primarily agriculture oriented to the tertiary sector or the in the
production of the goods. The manual labors are being replaced by the machines and
equipment for the purpose of carrying out the mass production (Xu, David and Kim, 2018).
The major features of Industrialization is that it involves the economic growth, division of
labor, making use of the latest technology and technological innovations for the purpose of
solving the problems which leads to less dependency on the manual work. This has resulted
into the unprecedented expansion in the financial well being for some. This has resulted into
specialization of the labors and permit the towns and cities to support the larger population.
The integration of the various economies all across the world for the purpose of
creating valuable and the favorable conditions which helps in attaining growth and
development in both the nations involved. The attractive industrial policies of the UK
economy have resulted into attraction of the large group of the investors and huge
multinational corporations to set up their business in UK. The impacts of financial
rearrangement are both social and monetary that brings new open doors for the organizations.
Industrialization of the is the main pillar which has resulted lead to urbanization (Allen,
2017). But this has also resulted into certain negative consequences in terms imposing stress
over the natural and environmental aspects. The rise in the demand of the industrialization
has affected the surrounding environment and thus, has created a difficult situation for its
stakeholders. But this has resulted into increase in the awareness of the public pertaining to
the negative impact of industrialization on the surrounding environment and the increase in
the government pressure to meet with the social responsibility. The industries have started
recognizing their responsibility towards the environment which has been affected due to their
business operations. This additionally requires arranging and improvement of coordinated
systems working together with the climate through cautious evaluation of past and present
conditions. The empirical information on territories gives comprehension of neighborhood
settings and improvement of strategies over grounded real factors.

The challenge towards the industrialization is that it put an end to the main portion of
the human processes. It can be seen that there are different components which results into
exposing the laborers to hazard of robotization. The public authority of nation needs to take
genuine measures to control the joblessness that would be made because of the
computerization of number of occupations or the activities (Dwivedi and et.al., 2019). They
are to be furnished with constant trainings backing to fit to the rebuilding of mechanical
cycles. It will be seen that laborers who have prepared themselves with specific information
and experience of the field will decrease their risk at significant levels. Additionally, the
laborers are needed to expand their specialized aptitudes and different abilities to fit to the
mechanized climate. The less particular or under skilled labor force would confront trouble to
hold on the lookout. Automation is seen for the most part as the negative factor causing
joblessness where there is no consideration given over the future development and openings
which would be made because of computerization.
In terms of the trade policies, the public authority has various impacts over different
monetary areas such as the area service sector which is made up of 79 per cent and
merchandise market is made up of 21 per cent from which 45 per cent are imported and 55
per cent traded. The economic deal between the economies assumes an indispensable
function in impacting the organizations of the economy. It can very well may be seen that
different entities in the UK nation are grabbing the beneficial points of the passporting rights
which results into offering chance to provide services and merchandise in European Union
nations (Menary, Collier, and Seers, 2019). This passporting rights can have a significant
influence on the financial aspect or the segment of the UK economy. The foreign exchange
tactics states that the whether the nation is allowing the external investments or the projects
advancing inner turns of events. It very well may be assessed that the non-industrial nations'
exchange approaches are centering essentially over drawing in direct speculations for
mechanical turn of events and accelerating the economic growth cycle. The impact of Brexit
in which Britain will exit from EU has made complexities in terms of carrying out the
business dealings. It has diminished the development in the GDP and furthermore expanded
the expense of organizations bringing in or sending out products as they need to pay levies
after Brexit. Such trade approaches can make immense troubles for the economies and
business work effectively watching out. Moreover, the effects are seen on the exchange rates
because of the trade game plans affecting the trade and firms working in overall business
areas.

Conclusion
It can be concluded from the above that the financial market is the center point which
enables the business and the economy to generate wealth which is further utilized for the
purpose of meeting with the domestic and international trade requirements of the economy. In
this report, UK economy is taken into account and states about how the country allocates its
capital within the country, that is, domestically and other the country in the international
markets. It determines the value it created for the nation which ahs resulted into fast growth
and development of the country. Along with this, there are certain challenges that a nation
faces because of the industrialization and the imposition of the trade policies and the way the
positive impact of it overcome the negativity. Therefore, it can be stated that it requires huge
amount of money in order to invest in a particular economy in order to accomplish the
desired goals which helps in making the life of the people more easier and healthy.
Recommendation
With the above evaluation it is very much clear that it is of utmost importance for the
companies to effectively manage the finance in the country. Improving the management of
the finance is very important for the companies and it is very important for companies to
effectively work in the financial market.
The first and foremost recommendation for the improvement within the financial
market is that they must first understand the profile of the investment option. This is
particularly because of the reason that whether the investment option is better or not. This is
essential as if the company will not be having good option of return then this will not yield
maximum output.
Another major recommendation is that the person or the company must follow and
analyse all the risk which are being attached with the investment option. The major reason for
this is that when the company invest in the financial market then there are many different
types of risk which are attached. Hence, for this the company need to analyse the risk which
are being associated with the investment option (Gower, Meier and Shutes, 2020).
In the end it can be said that working in the financial market is very important for the
companies as this will assist the company in earning a good amount of profit. Thus, this will
assist the company in managing and addressing the finance and earning a good amount of
money from the financial market.

REFERENCES
Books and Journals
Allen, R. C., 2017. The industrial revolution: a very short introduction (Vol. 509). Oxford
University Press.
Buckle, M. and Thompson, J., 2020. The UK financial system: Theory and Practice.
Manchester University Press.
Dwivedi, Y. K. and et.al., 2019. Artificial Intelligence (AI): Multidisciplinary perspectives on
emerging challenges, opportunities, and agenda for research, practice and
policy. International Journal of Information Management. p.101994.
Gower, P., Meier, F. and Shutes, K., 2020. Regulator communication and market confidence
in difficult times: lessons from the great financial crisis. Eurasian Journal of
Economics and Finance. 7(4).
Harrison, R.T., Yohanna, B. and Pierrakis, Y., 2020. Internationalisation and localisation:
Foreign venture capital investments in the United Kingdom. Local Economy. 35(3).
pp.230-256.
Maggiori, M., Neiman, B. and Schreger, J., 2020. International currencies and capital
allocation. Journal of Political Economy.128(6). pp.2019-2066.
Menary, J., Collier, R. and Seers, K., 2019. Innovation in the UK fresh produce sector:
Identifying systemic problems and the move towards systemic
facilitation. Agricultural Systems. 176. p.102675.
Minford, P., 2019. The effects of Brexit on the UK economy. The World Economy. 42(1).
pp.57-67.
Mota, J.H. and Coutinho dos Santos, M.J., 2020. Does Internal Capital Market Affiliation
Matter for Capital Allocation? An Empirical Analysis. An Empirical Analysis (January
22, 2020).
Sahai, I. M., 2020. Financial Market Operations. SBPD Publishing House.
Salemdeeb, R., Al-Tabbaa, A. and Reynolds, C., 2016. The UK waste input–output table:
linking waste generation to the UK economy. Waste Management &
Research. 34(10). pp.1089-1094.
Siddiqui, K., 2020. A Perspective on Productivity Growth and Challenges for the UK
Economy. Journal of Economic Policy Researches. 7(1). pp.21-42.
Xiong, H., 2020. Capital Allocation Efficiency Evaluation of Energy Conservation and
Environmental Protection Enterprises in the Yangtze River Delta of China. Nature
Environment and Pollution Technology. 19(2). pp.603-610.
Xu, M., David, J. M. and Kim, S. H., 2018. The fourth industrial revolution: opportunities
and challenges. International journal of financial research. 9(2). pp.90-95.
Online
FDI of UK. 2020. [Online]. Available through: < https://www.nordeatrade.com/en/explore-
new-market/united-kingdom/investment>.