Contemporary Business Environment: UK Economic Analysis Report

This report evaluates the contemporary business environment in the UK, focusing on the impact of the COVID-19 pandemic and the economic responses implemented by the government and the Bank of England. It examines the circular flow of income, highlighting the disruptions caused by lockd...Read More

Evaluating the contemporary
business environment

EXECUTIVE SUMMARY
Due to pandemic, many businesses has faced lot of challenges such as low productivity,
low performance of employees and many more. In this report t is described about the circular
flow of the income of UK and responses taken by the UK' s government in order to overcome
from COVID. In order to overcome with this problems bank of England has taken different types
of steps such as reduced service charges to banks, reduced interest rates, and provided many
schemes. By doing so, the bank of England has supported many businesses, industries and
households. Before making any important decision the company in UK, needs to focus on
immediate and future impact of Brexit on the UK's economy. This includes, unemployment,
poverty, recession, Growth and development and using advanced technologies.

TABLE OF CONTENTS
1. INTRODUCTION.......................................................................................................................4
2. Discussion and Analysis .............................................................................................................4
2.1 Circular flow of income and impacts of lock down on the economy of UK.......................4
2.2 Major economic responses of the government of the UK and its impact on circular flow of
income ........................................................................................................................................5
2.3. Analysing the major responses of the Bank of England and their implications on the UK's
circular flow of income...............................................................................................................7
2.4. The impacts of Brexit on the UK's economy.......................................................................9
3. CONCLUSION .........................................................................................................................11
4.RECOMMENDATIONS ...........................................................................................................12
5. REFERENCES..........................................................................................................................13

1. INTRODUCTION
Contemporary business environment plays a vital role in today's business and it can
influence on company's performance. Due to changing in business environment, the company
can also experience lot of challenges. It is vastly related with political environment, economic
environment, cultural and natural environment. This may include policies made by government,
economic policies, economic conditions, system related to economy. It is very important for
every company to know about the economic and non-economic environment of the country
because it will be helpful to top management team so that they can make the right decisions. By
using right and an effective strategy the company can easily access a lot of information about
market research.
The present report will be based on the main impacts of lock down on the UK's economy
by using circular flow of income. In addition to this, the report will provide detailed information
about major responses taken by bank of England in order to deal with lots of challenges.
Furthermore, it will also highlight the impacts of Brexit on the UK's economy.
2. Discussion and Analysis
2.1 Circular flow of income and impacts of lock down on the economy of UK
The global coronavirus that is COVID– 19 pandemic has affected the whole world in
terms of GDP and their flows of income as well. The forecasters have forecasted that this
coronavirus will lead to have effect the UK's economy as well as the global economy. With
happening of this there was a great reduction and contraction in the demands of the product and
services (Kim and Asbury, 2020). This as affected the profitability of the business and decreases
the flow of income in the markets of the UK. Having response to the pandemic it is seen tat it has
great impact on the statistics of the UK. There has ben unpredicted impact on the circular flow of
income and the expenditure In the economy of the UK which also include and have effect on the
businesses and households (McClure and Thomas, 2019). Due to social distancing there has been
decreases in the pandemic and the businesses were again have a great comeback with the help of
the government in the country.
The recession is caused with the happening of the COVID and has affected the GDP as it
was reduced by 9.7 % in the year 2020. In the first lock down in the country the GDP of the
country was reduced by the 25% and have affected the markets a lot (Keogh-Brown and et.al.,

2020). The decline in the 2020 was much lower than the decline the first lockdown as economy
has accepted the change and maintain its market. There was a good and speedy recovery of the
economy and maintain the GDP of the country. It has affected the factors like which are
described as below:
Unemployment: With the sudden happening of the COVID it as affected the jobs of many
people. Due to lock down the jobs o the people were getting lost and workers were getting fired
from their jobs (Unemployment rate: How may people are out of work? , 2022). By having the
furlough schemes, it as protected the jobs of the workers in the pandemic but there wee still some
workers who have lost their jobs and not able to meet his daily basic needs at the time of
pandemic.
Collapsing of business and increasing debt: The economist used to believe that the
companies were struggling and were not able to pay off their debts and rents. This is because of
happening of the endemic and the government has supported the business in order to have
comeback in the market (Loomba and et.al., 2021). Many business in the UK has collapsed and
started the work together n order to have god working in the market. This makes the business to
pay off their taken debts and earn the profits after the opening up of the markets in the economy.
Many companies have an impact on the outbreak of the COVID- 19 and affected the many
sectors like hospitality and travel sectors. By collapsing with the business and pay off the debts
helped the economy a lot.
2.2 Major economic responses of the government of the UK and its impact on circular flow of
income
2.2.1 Furlough scheme
As the world is suffering from the coronavirus the government of UK has launched this
furlough scheme. This helps the business and retail sector workers and labours a lot. As due to
COVID the whole country was locked up and the workers are not having the jobs this scheme
helped them a lot. Many businesses in the UK has responded to this pandemic by placing their
workers on furlough. This scheme has protected the many jobs at the time of COVID and it is
ended up at the end of September (Chen and et.al., 2020). Furlough means the temporary leave
given to the employees because of the special wants and needs of the organization or the
employer, which is granted with the happening of some economic conditions of the employer or
as the country as whole. This leave to the employee can be granted for short- term or for long-

term, as its depends on the economic condition of the country or organization. The employers of
the UK have offered grants to the government in order to cover 80% of the salary and wages on
their payroll as those who are not working due to happening of the pandemic. In this scheme
there was no limit that how any staff will get furlough for the business. In 2020, the U K
government has response to the Coronavirus and introduced the furlough scheme in order to
support and help the workers and employees (Crick and et.al., 2020). As this scheme was
launched earlier only but the workers and employees were not known about this and helps them a
lot in the time of pandemic.
2.2.2 Eat out help out scheme
Eat out help out is the scheme that is launched by the UK's government in order to
measure and support the business of the hospitality, pus, hotels, etc. This is launched after the
opening of the market and when the lock down are over. This scheme helps to protect the jobs in
the sectors of hospitality by making the customers to eat out. It used to help the business after the
COVID lock down. In this scheme the government used to provide 50 % off or discount on the
food and soft drinks which are consumed by the customers in the markets of UK (Perelli-Harris,
Chao and Berrington, 2020). This scheme is basically applied from Monday to Wednesday and
this scheme was having the time limit that was from 3 August to the 31st August. This discount is
given to the £10 per person. This scheme has made the increase in the demands from the
customer side and increases the market share of the hospitality sector (Bell, Gardiner and
Tomlinson, 2020). In this scheme there was no minimum spending cost given or the minimum
customers are provided in order to avail the services. The main aim of the scheme is to increase
the revenue of the hospitality sector which has gone down with the happening of the COVID all
over the world. This scheme was announced on the July 2020 and was launched in the August
2020.
2.2.3 Job Retention scheme
The job retention scheme was launched on the 1st March and this was valid up to 30th
September. This scheme used to provide the employees the grants which helps them to retain in
the job and continue to have pay during the lock downs due to happening of the pandemic that is
coronavirus. This makes the employees to have their pay at the time of have money and job
during the pandemic. As the employees were fired from the job with the happening of the
pandemic the UK's government launched this scheme which helps them to make the have pay in

the lockdown. It is clearly seen that many labours and workers were taken out from the job so
UK's government has launched this scheme in the pandemic time. This scheme used to provide
safety to the staff and the employees, so they should retain in the job and have their basic pay at
the time of lock down also which makes them to feel relax and heps to fulfil their basic needs.
These pays are given to the employees who were furlough and in UK there were 80% of the
wages are given to the employees. This job retention scheme has supported around 50 million
jobs in the United Kingdo
2.2.4 Self-employment Income support Scheme
In this scheme, the government used to provide and support the self- employed with
having the outbreak due to the coronavirus. This scheme has paid grants that are taxable of
having worth of 80% of the person average monthly profits. It has two grants which helps the
self- employed a lot at the time of pandemic (Stuart and et.al., 2021). The first grant was
launched on November 2020 and second was on February 2021. The government of UK has
announced that there will be many grants and the government introduced the fifth and last grant
which was covering the months from May to September. This scheme used to provide the
extension and also provides the support to the self-employed. In this fifth grant the government
has announced the 40% trading profits to the 80% of trading profits in for the November 2020. If
the business and self- employed persons are affected with the happening of the COVID they can
have money from the UK' s government (Salonen, Koskinen and Nummi, 2020). They employer
an avail up to 80 % of their average profits for the three months from the UK' s government. The
person has not to pay tat money back to the government, but he has to pay the tax on that take
money. In order to avail this scheme the person can apply online and have the benefits of this
scheme. This makes the workers to have the jobs in the time and after the opening of the lock
down in the UK.
2.3. Analysing the major responses of the Bank of England and their implications on the UK's
circular flow of income
Due to Covid-19 pandemic, every business has faced a lot of challenges such as low
productivity, low performance of employees and unemployment. To overcome with such issues
bank of England has taken major steps so that UK's economy can be managed properly. The
bank has provided various policies and announced a comprehensive package of measures in
order to help companies and industry and especially households requirements (Caraiani and

Gupta, 2020). The major role of bank of England is to help UK businesses and managing
households through an economic shock. By providing various types of facilities to keep
companies in business and people in job role, bank of England has supported everyone. The
measures taken by the bank of England help UK's economy to be in as stable stage. The
monetary policy committee says to decrease bank rate by 50 basis points to 0.25 percentage.
2.3.1 Reduced interest rates-
The bank of England has supported the policies made by government of UK' based on
interest rates and new loans schemes at low cost. They ensure that businesses have access to new
facilities related to low cost loans and insurance. They have reduced the interest rates in order to
support the economy of UK. By taking this step, they have decided to support the market for UK
government bonds continue to function in a really smooth way. Also, they were more focused
towards low interest loans rates. In the year 2020, march 11 the base rate was cut and announced
from 0.75 to 0.25 percentage, then to 0.1 percentage in the same year on march 19. This step has
supported businesses and households so that they can avail the facilities of lower borrowing
costs. In the year 2020 on march 19, monetary policy committee held meeting where they
decided to reduce the rates (Haas, Neely and Emmons, 2020. ). If the organization follow this
scheme they will be able to avail loans at low cost for households and businesses.
Term funding scheme- In the same year this scheme was announced to help ensure that its
lower base rate fed through to lending to different companies, the bank of England has
announced a new scheme to provide facility to banks at base rate of 0.1 percentage. They have
offer varieties of facilities such as additional incentives for medium scale and small sized
company. This major steps have provided support to industries a lot in order to come back at
market position after Covid-19 pandemic.
2.3.2. Reduced service charges to banks-
The bank of England take major step in order to support UK's economy such as they
reduce the service charges to the banks. The company and households can avail the benefits and
facilities provided by the bank. They provide offers of service charges at cheaper rates which the
people of UK can afford, hence they can easily avail the advantages provided by them. The
management team of bank has announced that they are going to provide the long term funding at
good interest rates. By taking this step, the government of UK has supported company so that

they can grow their business in the competitive market with the help of funding (Coronavirus
actions taken by the bank of England during the first lockdown, 2022). Bank of England offers
more lending and loans with reasonable service charges. In this way they have provided
additional support to UK's economy in order to develop the growth of small scale and medium-
sized organization. They have provided insurance against adverse effect or condition of business
in markets.
2.4. The impacts of Brexit on the UK's economy
2.4.1 Immediate impact
The year 2020 was the challenging or difficult year for UK economy, as in this year
people have suffered a lot due to pandemic and another decision made by government that is
Brexit. On 31st December 2020, the government of UK has decided to withdraw its name from
the European union, hence it is known as British exit. The UK believer that trade benefits were
not enough to offset the costs of free movement related to immigration. Companies in the UK
were frustrated by paying more fees and many of them felt leaving the EU would offer jobs for
them. But nothing has happened as they were paying more into the European union rather than
receiving. According to Bloom and et.al., (2019), there were total 17.4 million vote in favour of
leaving European union. This decision has shattered that people of UK and their daily business
activities. Although, Brexit has creates new trade restrictions between the united kingdom and
the EU and it has also limits the ability of British people so that they can move as freely around
the European union.
Brexit impacts the US
After Brexit, the currency market were decreased by 2 percentage to $1.11. The currency
rate which is pound has fallen by 8 percentage to $1.36 which has increased the dollar value. The
people in UK has believed that this decision has made the shares more expensive which they
cannot afford to buy and it has impacted many big and important decision of foreign investors
related to investment (Latorre, Olekseyuk and Yonezawa, 2018). On the top of that, this decision
makes exports to the united kingdom more expensive which has impacted many business
functions, although that has not slowed down the process of exports (Crafts, 2022). It has
impacted business growth for firms that operate in European countries and also the investors who
have already invested in the year 2019. In addition to this, insurance and finance sector was also

impacted due to trade and tax policies. Also, non financial services and manufacturing and
transportation facilities were also impacted because of Brexit.
2.4.2 Future impact
Due to Brexit many companies in UK, has suffered the challenges and also impacted the
business decision related to trade agreements that allows zero tariffs on products or services.
This has put a big strain on the relations of UK people with its neighbourhood countries (Martill
and Staiger, 2021). On the top of that custom duty and regulatory policies has also impacted the
organization in the UK (Seferidi and et.al., 2019). Furthermore, it has also affected the
agriculture field because farmers were concerned about cheaper agriculture goods or services as
this decision was putting them out market.
Jobs- Due to Brexit young generation or employees working in the company of UK has suffered
a lot (Freedman and Loutzenhiser, 2022). Already Many people were not having job due to
corona virus pandemic and then Brexit has also impacted the unemployment rate and increase
labour shortage in the year 2020. The companies need to focus on future challenges while taking
any important decisions such as recruitment, selection, hiring and retention rate.
Growth and development- The major drawback of Brexit is its damage to the economic growth
and development of UK. Due to this decision, the UK growth fall from 2.4 percentage in the year
2015 to 1.6 percentage in the year 2019. It has negatively impacted the export and imports of
product or services, manufacturing process, supply chain management, trade and services.

3. CONCLUSION
To conclude, the Covid-19 pandemic has caused major economic and social disruption all
over the world. Due to pandemic, the circular flow of income has also affected and increased the
unemployment rate, impacted national debt and shutting down many companies. In order to deal
with such situation government of UK has taken major steps to support businesses and
households for the betterment of economy of UK. They have put in place a series of financial
support to handle the critical situation which can impact the growth of UK in short term.
Furthermore, it has summarized that the government of UK's has taken major steps by
offering various schemes such as monetary policy, fiscal policy and job retention scheme. In
addition to this, the report has also concluded that bank of England have provided direct support
to businesses so that they can have access to low interest loans and reduce interest and services
charges. By taking this step they ensure that the markets for UK government bonds continued to
function in a smoothly and achieve its economic position back.

4.RECOMMENDATIONS
The government of UK should create an emergency response that can be beneficial for
domestic and international actions and provide immediate responses to global health security for
the betterment of citizens (Bloom and et.al., 2020). It is suggested to build public health capacity
in middle income and low income areas to respond to public health emergencies and crisis like
Covid-19.
It is recommended to increase employment so that employees in the UK can satisfy their
necessities. They should announce various types of benefits to workers in order to avoid shortage
of workers or labour in the countries. They should expand training and development programs
for labour, workers and employees in order to cope up with challenges. Government also need to
develop and improve new framework for handling the social and economic impact of the
pandemic, financial crisis and Brexit. By doing so, they will be able to recover things in the
future and implementing a range of bold measures to avoid any uncertainty.

5. REFERENCES
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Loomba, S. and et.al., , 2021. Measuring the impact of COVID-19 vaccine misinformation on
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McClure, J. E. and Thomas, D. C., 2019. The Impact of New-Product R&D on the Circular
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Perelli-Harris, B., Chao, S. Y. and Berrington, A., 2020. Couples in crisis: how the government's
furlough scheme has protected relationships during the Covid-19 pandemic.

Salonen, J., Koskinen, L. and Nummi, T., 2020. The risk of under‐insurance in the Finnish
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Online
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<https://www.bbc.com/news/business-52660591>