University of Suffolk BABS: Contemporary Business Environment

This report evaluates the contemporary business environment in the UK, focusing on the economic impacts of the COVID-19 pandemic and Brexit. It outlines the UK government's and the Bank of England's responses to the pandemic, including job retention schemes, interest rate cuts, and quantitative easing. The report analyzes the effects of these measures on employment, GDP, and various sectors of the UK economy. Furthermore, it discusses the implications of Brexit on the UK economy and suggests strategies to enhance the country's economic position. The analysis covers various sectors like health, technology, hospitality, and education, highlighting both the challenges and potential opportunities for sustainable and inclusive growth. Desklib provides access to similar solved assignments and past papers for students.

EVALUATING THE
CONTEMPORARY
BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION.........................................................................................................................3
TASK..............................................................................................................................................3
Economic impact of COVID-19 on UK economy......................................................................3
Major economic response of UK government and their economic implications........................4
Major response of Bank of England and their implications to UK economy..............................7
Impacts of Brexit on UK economy..............................................................................................8
Recommendations......................................................................................................................10
CONCLUSION............................................................................................................................10
REFERENCES............................................................................................................................12

INTRODUCTION
Business environment is the composition of people, business and other forces within an
industry which can create an impact on the operations and functions of business. Business
environment involves internal and external factors which are responsible for influencing the
operations of business (Business environment, 2021). Business environment encompasses
various factors which are responsible for driving opportunities and can possess threat against the
functioning of business. Understanding and evaluating business environment is helpful as this
helps in managing all resources effectively, identifying opportunities, involves in strategic
planning, enhance business performance and profitability. This project report will outline the
impact of global pandemic, COVID-19 on the economy of UK. The study will define the
responses of UK government and Bank of England and their implication of strategies in UK. The
research will also highlight the impact of Brexit on the economy of UK and will suggest some
strategies which will be helpful in enhancing the economic position of the country.
TASK
Economic impact of COVID-19 on UK economy
Economic impact of global pandemic on UK has been highly destructive as this has
created an impact on employment, financial market, travel and other industries. The global
pandemic has been a cause of market instability, increased unemployment, decline in
government income, collapse of many industries and reduction in consumer activities. The
economy of UK has been highly disruptive since the global pandemic and has faced recession
which has been the effects of lockdown. Economy of UK has seen a 2.3% fall in output in
November due to partial lockdown. The bank of England has forecasted that the economy will
fly by 4% in first prime trimester of 2021 due to imposition of protocols which has been
followed in lockdown and due to Brexit disruptions. The GDP has been declined by 11 % which
led to poor economic performance (UK economy after COVID-19 Hit, 2021). Unemployment has
been increased in various sectors as crisis adversely influenced the overall economy.
The impact of covid-19 on the economy of UK faced long term consequences in various
sectors such as- health, accelerated spread of technology, acquisition of skill and led to highly
uncertain economy. The pandemic has not only affected the economy, it has created an adverse

impact on the political climate which have led to many disputes and chaos in UK. The global
pandemic covid-19 has given economic shock to world economy and this has led to fall in
economic position of UK by 3.5% in 2020 (International economic cooperation, 2021). The
magnitude of recession due to pandemic in modern times is unprecedented. The GDP has seen a
large decline in 2020 by around 9.8 %. The pandemic has affected different sectors of the
economy of UK at different degrees sectors such as social contact which includes hospitality and
entertainment services are also badly affected due to pandemic.
COVID-19 has made the economy face huge breakout challenges which are based on
health, industrial organization, macroeconomics, finances, history, development, political
economy and public finances. As a consequence, economy of UK has seen dramatic hit and fall
where service industry has compromised 79% of UK economy while production and
construction company has seen a fall at 13.9% and 6.4%. education has fallen by 1% in
December 2020 which has been a long-term adverse impact om the economy of UK.
Major economic response of UK government and their economic implications
Government has adopted a variety of public health and economic initiatives in response
to the COVID-19 pandemic in the United Kingdom. The COVID-19 pandemic began in January
2020, prompting the UK to issue travel warnings for tourists from affected countries in late
January and February 2020, as well as to begin contact tracing. As the virus spread throughout
the country in the following weeks, officials progressively placed further social restrictions on
the public, first rejecting harsher measures adopted elsewhere in Europe and Asia. Due to a
growing number of limitations, a number of economic aid measures that were set to expire have
been extended until the new year, including another national lockdown in England from
November 5 to December 2 (Measures in response to COVID-19, 2020). In addition to dealing
with the health and economic consequences of the COVID-19 pandemic, the UK government is
negotiating with the EU to extend the Brexit transition period until December 31.
Government initiatives to invest in infrastructure, boost housing availability, and enhance
women's involvement in the labor market will also contribute to more sustainable and inclusive
growth. The UK government has responded by announcing a number of new initiatives and
policy reforms aimed at ensuring stability in the country's pandemic scenario (Barua, 2020).

Some of the response of government of UK for the global pandemic, COVID-19 are- COVID-19
epidemic evolution, travel restrictions, sanitary measures, restrictions on import and export,
recovery plan for economy, support plan for exporters and support plan for businesses
(Economic and political review, 2021). On May 10, 2020, the government announced a proposal
to lift the lockdown in England. (Scotland, Wales, and Northern Ireland) have their own set of
regulations. The reopening process began on May 13 and was completed in July, with
educational facilities resuming in September.
The government proclaimed actions to defend people's right to life (Article 2 ECHR) in
reaction to the Covid-19 issue, with further processes to come in the next days, weeks, and
months. The government is likely to develop emergency legislation, which will give it new
powers to aid in the containment and management of the pandemic in the UK, among other
things (COVID-19: UK government response, 2020). The following are some of the actions
taken by the UK government to manage the impact of COVID-19:
JOB ROTATION SCHEME
 The JRS was established to help firms who are unable to retain their current employees
due to the COVID-19 pandemic.
 Eligible firms can apply to HMRC for a subsidy to cover the costs of employing eligible
persons who are unable to work or can only work part-time as a result of the epidemic
and agree to be "paid minimum wage."
KICK START SCHEME
 A job-assistance programme for Universal Credit applicants aged 16 to 24 who are at
danger of being unemployed for an extended period of time.
 The government will pay the first six months of an employee's salary for each
"Kickstarter" placement, based on 25 hours of work per week at the appropriate
minimum wage. Employer National Insurance payments and minimum automatic
enrolment pension contributions will also be covered by the government.
 Applications must include at least 30 placements; however, organisations who are unable
to meet this requirement on their own may collaborate to do so.

APPRENTICE SCHEME
 Between August 2020 and January 2021, firms that employ a new apprentice aged 16 to
24 will get £2,000, while enterprises that hire a new apprentice aged 25 and above will
receive £1,500.
 This bonus will be in addition to the £1,000 government incentive for new apprentices
aged 16 to 18.
TRAINEESHIP SCHEME
 Businesses will be paid £1,000 for each new traineeship position they create, with the
government sponsoring about 30,000 new training positions.
STATUTORY SICK PAY
 On February 28, 2020, businesses with less than 250 workers may be eligible for a
government reimbursement for SSP paid for up to two weeks of COVID-19 absence
(Ferreri and Sanyal, 2018).
 This also includes absences due to public health advice (i.e., when an employee is not
sick or has COVID-19 symptoms but has been advised to self-isolate and is unable to
work as a result) and, from August 26, 2020, absences due to public health advice (i.e.,
where an employee is not sick or has symptoms of COVID-19 but has been advised to
self-isolate and is unable to work as a result).
 Employers can request repayment of relevant SSPs via HMRC's online service.
RELAXATION OF ANNUAL LEAVE RULES
 Employees who did not use all of their yearly leave due to the coronavirus will be able to
transfer it over to the next two leave years (Blundell and et.al, 2020). As a consequence
of the adjustment, employees will be allowed to continue working on the national
COVID-19 response without losing their annual leave entitlement.

 The regulations allow employees to carry over up to four weeks of unused vacation time
for a two-year period. Currently, all firms are invited to participate in the endeavour,
which is focused mostly at "important persons."
 The restrictions are implemented by modifying the Working Time Regulations, which
apply to nearly all employees, including agency workers, those who work irregular hours,
and those who are on a zero-hour contract.
Major response of Bank of England and their implications to UK economy
The Bank of England has managed to plan various plans and policies which are more
favorable for the people amid the tough times caused due to global pandemic, COVID-19. There
are several measures which has been taken by the Bank of England to help business to maintain
their pace and ensure people find jobs which will be helpful for their financial stability. Bank of
England has planned various measures and worked with HM Government which will help them
in ensuing that their plans and policies are impactful and can be an advantage for people and
business to cope due to the effects of the global pandemic, COVID-19.
The Bank of England's mission is to assist companies and individuals in the United
Kingdom in coping with a severe but temporary economic shock. The Bank's three policy
committees are publishing a comprehensive and timely set of actions to assist UK firms and
citizens in dealing with the economic turmoil brought on by Covid-19. These efforts can assist
keep businesses afloat and individuals employed, as well as prevent a short-term economic loss
from turning into a long-term one (Bank of England measures for COVID, 2021). Interest rates
were cut to 0.1 % in two parts, the lowest they've ever been.
They were reduced from 0.75 % to 0.25 % on March 11, 2020, and subsequently to 0.1 %
on March 19, 2020, where they have stayed ever since. Since the outbreak, the MPC has
increased its quantitative easing (QE) programme by £450 billion, bringing its total asset
holdings to £895 billion (Economic indicators, 2021). The Bank creates new money
electronically (as central bank reserves) and then invests it in financial assets, mostly government
bonds, as part of its quantitative easing programme. Throughout the epidemic, the MPC
implemented a number of additional programmes, including one to improve banks' lending
capacity.

There were several strategies and policies planned by the Bank of England as their
response towards the implication and impact of global pandemic, the implication and response
has been discussed below:
 Decline in interest rate to 0.1% - In MPC meeting, the Bank of England planned to
reduce the interest rate which will offer cheaper loan for business and households. They
will be offering banks and building societies in term funding at interest rate and this will
be helpful in supporting people in difficult times.
 Supported business pay their staff and suppliers- Bank of England worked
collaboratively with the Government through which they can offer support to business for
their corporate debt (Response to COVID, 2021). This also helped the banks and building
societies to use funds for supporting small and medium sized companies.
 Supported banks to expand lending- Bank of England reduced the number of financial
resources and agreed for not paying any dividend to shareholders in 2020. This also
helped in temporarily minimizing the regulatory burden.
 Release of UK Countercyclical Capital Buffer- The Financial Policy Committee (FPC)
has cut the UK countercyclical capital buffer rate to 0% of banks' exposures to UK
borrowers with immediate effect in order to strengthen banks' capacity to provide credit
required to navigate through a potentially difficult period. The rate had previously been
1%, but by December 2020, it was expected to have risen to 2%. The FPC aims to keep
the rate at 0% for at least a year, so any future increases would not take effect until March
2022 at the earliest.
Impacts of Brexit on UK economy
Brexit is the withdrawal of UK from European union. Brexit has created economic effects
on the economy of UK which has been highly disruptive and such impact has been for medium
and long term. Due to Brexit, the per capita income has been reduced. The United Kingdom's
"exit" from the EU, the economic and policy union in which it had been a member since 1973,
was labeled "Brexit" (Pollard, 2018). When the United Kingdom decided to leave the EU on
June 23, 2016, that changed. Citizens came to the conclusion that the benefits of free trade were
insufficient to compensate for the negative effects of mass immigration. 17.4 million voted to
leave the EU, while 16.1 million voted to stay.

The economic growth of UK has been stunted by 2-8% for 15 years after Brexit. EU
membership has created a strong influence in trade. There are several positive as well as negative
impacts on economy of UK which has been caused due to Brexit, where positive influence can
be seen in the wages in low skill service sector and negative impact can be seen through decline
in UK GDP per capita income. The significant decrease in U.K. goods exports to the EU,
especially when contrasted to non-EU trade, is a disturbing signal of the harm caused by the
current border disruption to post-Brexit trade with the EU.
Exports fell 19.3%, while imports fell 21.6 %, the worst monthly drop since records
began in 1997 (What was Brexit, 2021). The Brexit referendum resulted in a 0.6 % reduction in
national British revenue, respectively. Brexit reduced business investment by 6% and resulting in
a 1.5-point margin reduction in employment. Brexit-induced uncertainty about the UK's future
trade policy reduced British overseas trade from June 2016 forward. Following the Brexit
referendum, British businesses increased their exports to the European Union, while European
companies reduced their new investments in the UK.
Brexit would be harmful for the British economy since it would be denied the benefits of
single market membership and pushed to close down, resulting in lower productivity growth and,
in the short term, even lower potential growth. Lower interest rates and exchange rates have
helped to minimize the negative impact of Brexit on investment and exports.
Impact of Brexit on Jobs- Employers are having difficulty finding capable candidates.
One explanation for this is that EU-born workers have been migrating in massive numbers, with
their numbers dropping by 95% in 2017. The jobs with the lowest and medium levels of
competence have suffered the most.
Impact of Brexit on trade- The UK must negotiate new trade agreements with countries
outside of the European Union, which presently has over 40 trade agreements in effect with over
70 countries (Latorre, Olekseyuk and Yonezawa, 2020).
Impact of Brexit on growth- The impact of Brexit on the UK's economic growth is the
most significant consequence. The majority of this is due to the eventual outcome's unexpected
character. In 2019, the UK's growth rate decreased from 2.4 % to 1.0 %. This has something to
do with the uncertainty surrounding Brexit. Brexit, according to the UK government, will reduce

growth by 6.7 % over the next 15 years. It was built on current free-trade principles with
immigration restrictions.
Recommendations
Some of the recommendations which will be helpful for the business in managing their
operation and maintaining their competitive position post Brexit and Covid-19 are listed below:
 Enhancement in trade policies- This will be helpful in driving growth, promoting
efficiency and ensuring sustainable production (Recommendation’s post Brexit, 2020).
This will also help them in driving innovation in business through which better value and
fine experience can be offered to consumers. This will be helpful in promising value,
safety, choice, quality and balance between priorities and availabilities of goods to their
customers through which business profitability can also be met.
 Strengthen supply chain management- Business must focus on their suppliers and
supply chain activities, it will be helpful for them to manage the inventory and avoid
situation of shortage of products (How business can prepare for Brexit, 2019). Such
activities will be helpful for business to meet customer demands and earn higher
revenues.
 Use of energy efficient products- Business must start using energy efficient resources
which will be helpful for them in reducing the cost which has been incurred by them.
Such practices will be helpful in enhancing the profitability of business.
 Update operating procedures- Business must plan and update their operating
procedures due to implication of new laws and programs (How to thrive in next normal,
2020). Business must ensure they follow all new rules and standards which has been
imposed by the authorities in order to successfully continue their operation in the
industry.

CONCLUSION
From the above report, it can be concluded that business environment is created with the
composition of various internal and external factors which are highly dynamic and uncertain.
Such factors can create a huge impact on the business operations and profitability. It can be
understood that business environment can be complex and can bring various opportunities for
business growth and profitability. Whereas, business environment can be highly complex which
can possess threat to the business where such factors can hamper functions and continuity of
operations of the company. It can be seen that global pandemic has created a huge adverse
impact on the economy of UK which has been a devastating factor for many businesses of
different sectors and industries. Therefore, the global pandemic COVID-19 has been responsible
for slowing down all business and increasing the unemployment rate which has been responsible
for medium- and long-term impact on the whole economy of UK. The economy of UK has seen
a pitfall due to Brexit which has been responsible for hindering the industries and their position
within the economy.

REFERENCES
Books and journals
Barua, S., 2020. Understanding Coronanomics: The economic implications of the coronavirus
(COVID-19) pandemic. Available at SSRN 3566477.
Blundell, R and et.al., 2020. COVID‐19 and Inequalities. Fiscal studies. 41(2). pp.291-319.
Ferreri, M. and Sanyal, R., 2018. Platform economies and urban planning: Airbnb and regulated
deregulation in London. Urban Studies. 55(15). pp.3353-3368.
Latorre, M .C., Olekseyuk, Z. and Yonezawa, H., 2020. Trade and foreign direct investment‐
related impacts of Brexit. The World Economy. 43(1). pp.2-32.
Pollard, J. S., 2018. Brexit and the wider UK economy. Geoforum.
Online
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