Impact of COVID-19 and Brexit on the Contemporary Business Environment

This report examines the impact of the COVID-19 pandemic and Brexit on the UK's economy. It analyzes the effects of lockdowns on the circular flow of income and discusses the government's economic responses, including various schemes and loans designed to support households and businesses. The report also explores the Bank of England's measures, such as reducing interest rates and sustaining government bonds, and their implications. Furthermore, it assesses the likely impacts of Brexit on the UK economy, highlighting the challenges and potential consequences for businesses and overall economic growth. The analysis provides a comprehensive overview of the economic challenges faced by the UK and the measures taken to mitigate their effects.

Contemporary
Business Environment

EXECUTIVE SUMMARY
The economy of United Kingdom is the fifth biggest economy all over country and it is a
market oriented concept and also highly developed social market. This country is a fifth biggest
exporter and importer in world and the main motive for preparing this report is to analyse the
effects of COVID 19 pandemic on the company's economic growth in UK. Then after the
analysis of COVID 19 pandemic organizations are able to take effective measures and actions for
overcome these impacts. According to purchasing power this company comes under the category
of twenty first and ninth biggest in aspect of GDP as per capital. In this report various valuable
and beneficial schemes are implemented by Bank of England for supporting the household and
small businesses in the pandemic situations effectively. The incident of Brexit also effects the
economic growth of company and UK in negative way which are described in this report.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRDUCTION..............................................................................................................................4
TASK...............................................................................................................................................4
Using the circular flow of income, explain the main impacts of lock down on the UK's
economy.......................................................................................................................................4
What are the major economic response of the UK's government and their impact on the UK's
circular flow of income................................................................................................................5
Analyse the major responses of the Bank of England and their implications on the UK's
circular flow of income................................................................................................................7
What are the likely impacts of Brexit on the UK's economy......................................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRDUCTION
Business environment is defined as the work atmosphere or work culture which is essential for
increasing the potentiality, ability and productivity of organization at maximum level. Due to
maintaining business environment in positive manner strong relationship are developed with
various suppliers, customers and others. In aspect of COVID 19 it is basically a dangerous which
was founded in Wuhan, China in December 2019. The COVID 19 pandemic is highly
responsible for developing financial loss, loss of employee loss in each sector globally. This
report will cover using a circular flow of income, explain the main impact of lock down on UK's
economy. It also covers the major economic response of the UK's government and their effect on
the UK's circular flow of income, Analyse the major responses of the Bank of England and their
implications on the UK's circular flow of income.
TASK
Using the circular flow of income, explain the main impacts of lock down on the UK's economy
During the time of COVID pandemic both small, medium and large scale enterprises faced
lot of difficulties for run their business activities smoothly (Anggraeni, 2021). Because at that
time in UK various types of restrictions are initiated by government in the form of Lock-down
for controlling the COVID. But due to lock down economy are totally disturbed and damaged of
UK and other countries and it also create negative impact on the performance and goodwill of
company in various ways. It includes closing of whole business, increasing unemployment,
reduction in GDP and reduction in importing and exporting of various products. Due to
decreasing in production level lower demand of service and products leads to decreasing the
overall growth and productivity of business which majorly impact the economy of United
Kingdom. The sectors include hospitality industry, tourism sectors and others which are directly
connected with COVID 19 barriers has also been impacted by it.
The low demand and supply of services and products results that utilization of employees
and capital inputs are very less in the production which leads to decrease the profit and capital
income of many organizations at higher rate. Uncertainty occurred only when the capital expense
of organization is effectively reduced and their previous orders are cancelled. During the time of
COVID pandemic it is calculated by office for budget responsibility that GDP may decrease up
to 35%.

The overall working time of furlough employees will be decreased at Zero level but they
are categorised as remaining in employment. In aspect of employee’s organization must expect
that they would be an impact on both unemployment and employment rate. In COVID pandemic
it is also understand by top level management that due to the impact on gross trade flows chances
are increased for reducing level of external demand effectively. For overcoming this type of
problem and protecting the economy government made lot of investment in their various projects
and schemes. Due to the bad impact on the overall economy in UK country are easily reduced
within short duration.
Due to initiating lock down restriction major impact are produced on various
organization’s in UK (Budler, M., Župič, I. and Trkman, 2021). For example, in year 2020 in
hospitality industry had lost around 660,000 jobs. According to the research of national statistics
it represents that in their timely informs that one out of seven businesses which are responsible
for their destruction at the last week of October. Around 22% of the employed populace had
been furlough because of COVID. Around 73% are from food services and accommodation
where 46% whereas from construction industry. Due to the huge pandemic and restriction
various sectors of organization are faced major impact in their production, operational activities
and services which leads to decrease the overall economy of country at maximum level.
What are the major economic response of the UK's government and their impact on the UK's
circular flow of income
Due to the increasing case of COVID 19 pandemic in United Kingdom, government initiated
various restrictions like ban on travelling, social restrictions, entertainment industry, increased
testing of viruses etc. In 2020 the economy of United Kingdom is shrunk accurately by 9.8%.
There was a reduction in business investment and household consumption even after taking
various measures by government for supporting the economy effectively. The government has
initiated various types of various types of tax and spending measures form supporting the
household and families effectively such as -
 In the category of universal credit scheme by expanding the payments of vulnerable
people.
 Actions to support businesses that includes tax holidays, repayment for sick leave and
grant for small businesses.

The government also organized three different loan schemes and the name of these loans are
Coronavirus Large British interruption loan scheme, Coronavirus business interruption loan
scheme and British business bank. A package which is related to develop a job was organized in
July 2020 and it includes facilitating £1,000 per furlough workers to companies, facilitating
minimum cash for six months for 25 hours per week to young workers. During second lock-
down the government initiated new strategies in November 2020 which includes expansion of
Coronavirus job retention scheme until the end of March 2021 and also increasing of self-
employment income support scheme until the end of January 202. There are some other types of
different measures also which is initiated by banks and government such as Furlough Scheme,
Tax Payment Referrals, Bounce Bank Loans, Self-Employment Income Support, Job Retention
Scheme, Increment of Universal Credit which are described below –
Eat Out Help Out Scheme – In 8th July 2020, this scheme is introduced by government for
supporting hospitality industry effectively and also for run their activities smoothly. In this
scheme government are facilitating up to 50% funds to all non-alcoholic drinks and healthy food
at every restaurant in UK from Monday to Wednesday in every week of August. In this scheme
discount is £10 per head but it is not applied on event catering or take away. Due to this effective
scheme customer easily buy the products of organization in large number (Gaspars-Wieloch,
2021). But the ultimate purpose of this scheme is to motivate all categories of customers
effectively and when peoples are motivated then definitely people increase the visits in the
restaurants for long time. In this scheme overall £849 million was claimed across 78,116 outlets.
Bounce Bank Loans scheme – The main motive of developing these scheme by the
government and bank is to provide effective support to medium and small scaled organization for
run their activities smoothly. In this scheme various types of benefits are also involved for public
which includes Coronavirus Business Interruption Loans, Coronavirus Large Business
Interruption Loans, and COVID Corporate Financing. This scheme is designed for those SME
businesses and sole trader who run their business activities successfully before COVID situation.
But right now they are facing lot of problems lot problems in their business in various aspects
such as decreasing profit, disruption to cash-flow as a result of current situations. The banking or
finance sector is honestly contributing their support to the organization in these uncertain times.
The bank facilitates their loans to customers between £2000 to £50,000 up to maximum of 25%
annual turnover to the citizens of UK. In this scheme government covers interest for the first 12

months and the rate of interest set up by it was 2.5% as well as it provides a 100% guarantee to
the lender
Self-Employment Income Support Scheme – This scheme is introduced by the government
of United Kingdom on 26 March, 2020 for those people who are in partnership or self-
employees. These scheme is beneficial for those people also who lost their business income due
to COVID pandemic (Hategan, 2021). According to this scheme people those who are earned
profit on yearly basis not less than £40,000 and gathered half of their income with help of self-
employment can claim taxable grant worth 80% according to their monthly profit for the period
of three years up to accurately £2,820 for three months. The second phase of this scheme is
initiated by government on 29th May for those who are highly effected from this pandemic on
after 14 July 2020.
Job Retention Scheme – This scheme is introduced by the UK government on 20th march
2020 and with help of this scheme company owners are able to claim a grant or funds for their
businesses. In this way small and medium enterprises are able to handle any type of difficult
situations easily and also able to run their departmental functions smoothly. The reimbursement
on each employee which an employer could seek was limited. According to this scheme the
payment of all categories of employees is not less than 80% of their regular monthly salaries or
up to £2,500 a month. This scheme is planned initially in between 1 March 2020 to 31 May 2020
but right now it is postponed to until September 30, 2021.
Analyse the major responses of the Bank of England and their implications on the UK's circular
flow of income
The Bank of England play the crucial role during the time of COVID 19 in the form of
helping various organizations, assist in reducing the damage caused by economy and working
population. The bank always contributes their work with HM government which leads to
maximizing the effect at higher rate. For reducing the impact of COVID 19 Bank of England
initiated several steps which are described below –
Sustenance of government bonds – The Bank of England is doing their various work
with help of HM government for providing good support to large scale businesses with help of
facilitating them for their debt. Due to this organization are able to provide payment and salaries
to suppliers in time without any delay. The COVID 19 business interruption loan scheme is also
developed or initiated by Bank of England for supporting the all medium and small sized firms,

this scheme also helped the company with a turnover of around £45 million to take government
backed finance accurately up to £5 million. In this scheme the government will provide 80%
guarantee to all lenders which leads to develop strong support for all medium and small sized
organizations. The bank also motivates other banks for supporting SMEs through with help of
Term Funding Scheme for medium and small Sized Enterprise (TFSME) Scheme.
Reducing interest rate – The Bank of England has reduced their interest rate to 0.1%
which shows that loans are very cheap and beneficial for households and business in UK (Lo,
M.F., Tian, F. and Ng, 2021). In march 2019 meeting monitory policy committee take a decision
for enhancing the corporate bonds by £200 billion and decreasing the rate of bank to 0.1% and
also holdings of government of United Kingdom. For supporting household and small businesses
effectively, three different types of policies are announced by the committee of bank on 11th
March but at the same day chancellor of exchequer initiated various measures for handling this
situation. All this measures are merge into specific package which was developed by HM
treasury announcement of COVID 19 Corporate Financing on 17th March. With help of buying
commercial papers, CCFF is facilitating funds to non-financial businesses for providing them in
the form of support in the form of paying rents, salaries etc. On March 19th Monetary Policy
Committee organized a meeting and in this meeting bank rate are reduced by 15 basis points to
0.1% to enhance the holdings of sterling non-financial investments and Bank of England of UK
government bonds by £200 to £645 billion.
What are the likely impacts of Brexit on the UK's economy
When the British get leave from the EU and at that time nickname is developed for this
incident and the name of this incident is called as Brexit. In year 2016 United Kingdom decided
to leave the European Union due to some conflicts. The consequences which are faced by
various countries or the organization due to the Brexit incident are –
Future impact – According to various surveys in year 2016, it is calculated incident of
Brexit is highly responsible for decreasing the level of per capita income of United Kingdom.
According to the current scenario it is calculated in year 2018, that overall economic growth of
country is declining by around 2.8% for minimum at least 15 years. During the time of no deal
scenario the GDP of United Kingdom is adversely affected and shrank considerably enough to
affect remarkably. In aspect of contract terms, it is calculated for generating negative aspect by
0.5% GDP in year 2022 and some 2.25% for UK. In aspect of United Kingdom, it is not a part of

European Union's in custom union and single market, it is free to add trading deals with various
countries. This also supports the for bringing new controls, custom formalities, and also
developed strong positive relationship between EU and UK for long time. Due to this citizens of
Europeans Unions did not have any type of right to settle and do work in UK. In aspect of
foreign investment, it is concerned with a good effect on host country and also quite large in long
term (Malesev, S. and Cherry, 2021). But in case of United Kingdom and European union about
half of their foreign investment are lies with European Union and then after Brexit incident
definitely going to lose some share from that 50%.
Immediate impacts – The major incident which is raised due to Brexit incident on the
growth of UK's economy are. Firstly, uncertainties around final result on Brexit represents that
the development is slowed down the economic growtrh from 2.4% in 2015 to 1.0% in 2019. The
government of United Kingdom are effectively analysed that the overall development of the
country is less by up to 6.7% in year 2015. There are different types Brexit risk which is
associated with the economy of United Kingdom and its different sectors also which includes
foreign investment, migration, tourism, GDP, trade relations with EU countries and non EU
companies. Here goods imports are plunged by 29% and exports by 41% and during the time of
separation of UK from European Union unexpected taxes and cost are raised in market
effectively. Due to raising uncertainties Brexit incident is highly reduced business investments
by accurate 6% and unemployment are effectively increased 1.5%. The other fact is that GDP is
not dependable only on the supply and demand for increasing the overall growth of company at
higher rate but also more on reliable and actual information which directly impact on trade,
export and import which is less in present scenario. The incident of Brexit also results that
increase in fair of travel agencies, requirement of longer password and visa as a result of change
in immigration rules.

CONCLUSION
From the analysis of above data, it is concluded it is concluded that COVID 19 put a diverse
effect on their activities and services on organization. Due to this dangerous pandemic the loss
such as financial or job loss are highly increased for organization and also to their employees.
This report represents the effect of COVID, restrictions on the development of company and
reduction in GDP has been discussed. For reducing the problems of COVID pandemic the
government of UK and Bank of England are taken various measures to support the households
and businesses in various countries. This type of support is done with help of providing various
beneficial schemes and loans to customers.

REFERENCES
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