Impact of COVID-19 on UK Economy: Government and Bank Responses

This report examines the profound impact of the COVID-19 pandemic on the United Kingdom's economy, highlighting disruptions to the circular flow of income, increased unemployment, business collapses, and escalating national debt. It evaluates key economic responses from the UK government, including the Furlough Scheme, Job Retention Scheme, Self-Employment Income Support Scheme, and the Eat Out to Help Out scheme, detailing their consequences and effectiveness. Furthermore, the report analyzes the Bank of England's critical interventions, such as reducing interest rates and service charges, and their implications for stimulating economic recovery. The study concludes by summarizing the overall effects of the pandemic and the measures taken to mitigate its impact on the UK economy.

Contemporary
Business Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Impact of pandemic (COVID) on UK's Economy......................................................................3
Important Economic responses of the government of the UK and its consequences ................4
Various important responses of the Bank of England and its implications on UK's economy...6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Contemporary business environment are the environment of the business that are
increasingly competitive and dynamic. The companies have to develop and cope up with the
changes in order to survive in the competitive market. It is important for the economy in order to
cope up with the plans. This project will outline the impact of the pandemic on the economy of
United kingdom by describing the income circular flow and other factors. Further it will be
evaluate the major economic factors of the UK's government and their implications. At last this
project will outline the various important response of the Bank of England and its consequences
on UK's economy.
MAIN BODY
Impact of pandemic (COVID) on UK's Economy
The economic impact of the COVID- 19 pandemic on the economy of the UK has been
largely disruptive. This pandemic leads to the several recessions, which was followed by the
strong recovery in the market of UK (Keogh-Brown and et.al., 2020). By the first lock down, the
GDP of the UK was get lower by 25% in April 2020. The economic activity of the company was
lift up and has reflection the opening up of the economy of the country. The pandemic has
affected the various sectors of the economy to the different degrees.
The circular flow of income basically forms the basis of the models of the economy and
used to explain the circular flow process in the national economy (Alradhawi And et.al., 2020).
There was a great impact on the circular flow of the economy. The income flows on the economy
of the country has affected the national income of the country.
There are some factors which has affected by the COVID- 19 pandemic are as follows:
Unemployment: This is the situation when the people who are wiling and able to work
are not getting the jobs in the market. Due to pandemic there was a great effect the employment
of the people (Ozili and Arun, 2020). As many people used to get affected na take out from the
jobs due to lock- downs. The organization used to take out their employees due to no work in the
economy as the whole economy was locked up. This pandemic has affected the jobs of the
people and make them unemployed.
Collapsing of business: The various business groups has been collapsed as the business
were not having the adequate capital in order to run their organizations separately. Business

groups was in the risk of the bankruptcies due to COVID and lock- down, so they used to
decided with winding up or collapsing the business with another (Flynn and et.al., 2020). This
makes the business to be in continuation although they were not earning the adequate profits as
earlier.
Increasing national debt: Due to happening of the COVID- 19 pandemic there was a
great rise in the public debt levels across the economy's of the United Kingdom. In UK the gross
debt was around £ 2,223.0 billion which was at the end of the financial year of 2021 (Jallow,
Renukappa and Suresh, 2020). This has a great impact on the national economy of the UK.
Important Economic responses of the government of the UK and its consequences
In order to have great response with the happening of the COVID- 19 the UK
government has introduced the different types of public health and economic measures in order
to mitigate the impact (Bloom and et.al., 2020). The government of the UK has developed the
various pandemic plans in order to response the pandemic in the economy. British government
has began lifting the national wide stay home orders and policies between the four nations. The
economic support has been provided to the employees in order to mitigate the economic impact
on their work. There are some important economic responses by the government of the UK and
its consequences are as described below:
1. Furlough Scheme: Furlough means the temporary leaves granted to the
employees by having some special needs of the organization or may be due to the
changes in the economic conditions (Harris and et.al., 2020). This leave may be
for the short term or may be for the long- term. In the year 2020, in order to
response to the pandemic the government has introduced the furlough schemes
which used to support the workers and the employees of the organization. This
scheme was previously introduced but was had focus at the time of pandemic and
popularized to the many people in the United Kingdom. It is funded businesses in
order to pay 80% of the employee's salary for those who have been unemployed
(Vallejo Jr and Ong, 2020). In this scheme there was no limit that how many
employees will be furlough, and the employees has to be agreed to it as this
scheme was only last for the 3 months. The self-employed people are not valid for
this scheme for the financial help during the lock- down as they have their another
scheme.

2. Job Retention scheme: on the 24th September, the government of the UK has
developed a second scheme in order to retain the jobs of the employees that are
called job retention or job support schemes. This act has been introduced in order
to provide the wages and provide the proper working hours to the employees at
their working (Gupta and et.al., 2020). This scheme was basically commence on
the 1st November 2020 when the CJRS withdrawn at the end of the October 2020.
The another extensions to the CJRS and its implications was used to postponed
and as the September 2021, the scheme was not yet implemented (Boudet, 2019).
The sachet was intended to open for basically 6 months and its eligibility was
reviewed after the 3 months. In the starting the employees must have worked for
at least 20% of their contracted hours. For the businesses that are legally required
to closed, the UK' government has subsidized 66.67 % of the employee's wages
which was up to the limit of the £20833.33 per month. This scheme is the one of
the important policy tools in order to contain the employment and social fall out
due to COVID- 19 pandemic (Hendry and Muellbauer, 2018). This helps the
employees to have and retain their jobs and wages at the tome of the pandemic
time as well (Dell'Ariccia, Rabanal and Sandri, 2018).
3. Self- employment income support scheme: In the March the scheme has
developed that is self employment income support scheme was introduced. This
scheme has paid a grant worth of almost 80% of the profitability that was around
£2500 per month to the self- employed people who used to have trading less than
£50000 and who has suffered a loss of income (Altig and et.al.,2020). The UK's
government has also announced the six- month delayed payments n the tax which
helps the business a lot in the pandemic time. The people who were self-
employed and who used to pay salary to themselves were not covered under this
particular scheme and this self- employed has to applied for the job retention
scheme. In order to support the self- employed through the happening of the
pandemic the UK's government has announced this scheme in order to protect the
self- employed people in the economy (Lorusso and Pieroni, 2018). This scheme
has grant the extension which used to provide the critical support to the self-
employed in the next grants and the grant has been extended from the 1st

November 2020. The statistics shows the fifth grant of this scheme which has
opened the claims on the 29th July and will be closed on the 30rd September 2021.
4. Eat out to help out scheme: Ear out to help out was the important scheme that
was announced by the British government on the 8th July 2020. This scheme was
introduced in order to support and create the jobs in the areas of hospitality
industry. The governing body used to subsidize the food and drinks at the cafes,
pubs and restaurants up to 50 % that is around £10 per person. These offers are
basically available from the August 3 to 31 on Monday to Wednesday per week of
every month. Overall, this scheme has subsidized almost £849 million meals and
some of them used to consider this a successful scheme in the industry of
hospitality. According to the study it has been found that this scheme used to help
in the rise in the COVID- 19 infections. This scheme is basically the economy
recovery measure that is introduced by the UK's government in order to support
the industries of hospitality reopened after the pandemic lock- down in the
country. In this scheme, there was no limit on the minimum expenditure and the
customers as the customers can avail the offers many times, as the aim of this
scheme is to encourage a return to dining in the hotels. This is one of the
important scheme that is designed by the UK in order to help the food services
sector and the hospitality sectors. It was introduced as the food sector was the
main sector which was affected by the pandemic and thereafter the lock- down
across the globe.
Various important responses of the Bank of England and its implications on UK's economy
1. Reduced the rates of interest: In the special Monetary policy committee meeting
on the 19th March 2020, the Bank has reduced the rates of interest that hey used to
call the bank rates. These bank rates are basically the UK's Official interest rates
for the customers in economy (Baker and et.al., 2020). This rate is the most
important rate in the economy of the UK as this rate is base for all the sorts of the
other financial products in the markets. The lower interest or bank rates used to
show the cheaper loans for the businesses and for the households. By this it will
reduce the costs that faced by the organizations and the households in the UK. It

was almost cut to the interest rates of around 0.1 % and have a great implication
son the economy of the UK (Bloom and et.al., 2019). This used to provide the
loans to the business and households at a very cheaper rates which helps the
industry a lot in order to come back after the happening of the pandemic in the
economy as a whole.
2. Reduces the Service charges: The Bank of England has reduced the service
charges to the banks so that organizations and households can avail the services at
the cheaper rates as compare from the previous rates in the banks. By this the
banks used to provide the long- term funding at the interest rates. This helps the
lenders to have less interest rates as bank charges previously (Miles, Stedman and
Heald, 2021). This helps the economy's of the United Kingdom in order to grow
in the market. These banks used to provide more lending to the banks in UK
which will used to provide more loans to the business dan households and charge
less service charges (COVID-19 in the United Kingdom: assessing jobs at risk
and the impact on people and places, 2022). The England's Bank had a great
response and have additional support to the banks in economy in order to lend
more to the small and medium- sized company.
CONCLUSION
From the above done project it is evaluated the consequences of the COVID- 19
pandemic on the economy of the United Kingdom and has affected the circular flow of income,
taken many jobs of many employees and causes unemployment, taken national debt among
others and collapsing of the business in the economy. Further, it has evaluated the major
economic responses that are done by the government of the UK that are furlough schemes, eat
out help scheme, self- employment income support system and job retention schemes. At last this
project has evaluated the various different responses that the Bank of England has responded
with the effect of COVID and its implications in UK's economy.

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