UK Economy Under Pressure: War in Ukraine and Lockdown Effects

This report examines the multifaceted impacts of the COVID-19 lockdown and the ongoing war in Ukraine on the UK economy. Utilizing the circular flow of income model, it assesses the lockdown's effects on labor supply, GDP, employment rates, and household expenditure. The report further analyzes the war's influence on trade, food prices, and fertilizer affordability, highlighting the disruptions in imports and exports. It provides economic suggestions for the UK government, such as diversifying energy sources, altering import/export modes, and building relations with other nations to mitigate negative impacts. Additionally, it offers recommendations for the central bank of the UK to remedy the economic consequences of the war. The report concludes with a summary of key findings and actionable recommendations for policymakers.

Contemporary Business Environment

Table of Contents
INTRODUCTION-..........................................................................................................................3
MAIN BODY...................................................................................................................................3
1- Using the circular flow of income, explain the main impacts of lock down on the UK’s
economy-......................................................................................................................................3
2- What are the (likely) impacts of the ongoing war in Ukraine on the UK’s economy?
Consider both the short-term and long-term economic impacts..................................................4
3- What economic suggestions if any can be provided to the government of United Kingdom
to remedy any negative impact of war in Ukraine on UK economy?..........................................5
4- Economic recommendations provide to central bank of UK to remedy negative impacts of
war in the Ukraine on economy?.................................................................................................7
CONCLUSION................................................................................................................................9
Recommendations- .....................................................................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION-
Contemporary business environment is vastly related with the natural environment,
cultural environment, political as well as economic environment. It is also known as a modern
business. The current report will base on the lock down impact which have a negative impact on
the UK's economy. UK has a highly increasing cultural market and businesses. It is listed in one
of the most widen economies and have a big financial industry. With the use of the circular flow
of income it will show the main impact of lock down on the UK's economy. It also included the
impacts of the ongoing war in Ukraine on the UK's economy, which consider both long term and
short term economic impacts. Moreover, it includes economic suggestions if any can be provided
to the government of UK to remedy any negative effects of the war in Ukraine on the UK's
economy. Along with the suggestions to the Central bank of UK as well.
MAIN BODY.
1- Using the circular flow of income, explain the main impacts of lock down on the UK’s
economy-
The circular flow of income mean that the perpetual flow of production of the such goods
and services the income and expenditure in an economy. With the help of this it will show the
lock down impacts on the UK's economy. It shows that the lock down reduces the labour supply
and create a negative impact which closes many businesses. The current situation reflected that
lock down also affected the GDP of the UK. It shows with the help of the circular flow of
income (Wardley-Kershaw and Schenk-Hoppé, 2022). There are three approaches which
measures the GDP level of business which include production, income and expenditure.
Jobs at risk- In the time of lock down the main consequences reported is the
employment rates where the jobs were at the risk. The production level in the UK is lower than
compare to before lock down. It is due to the demand of the goods and services are not likely to
be that much which creates the reason for the falling in sales and have a negative impact because
of the closure of such industries. It also reduces the employment productivity and their working
hours because of staying at home. The production process in the many businesses were advanced
in the international economy and with the lower production rate in the supply chain of business.
The UK's economy have a very large financial service industries. Any kind of impact on the
output of financial industries will reflect the change whether it is explicit or implicit.

Income- the lock down creates a positive as well as negative impact on the supply and
demand of such good and services due to the lock down. (Gordon and Recio, 2019). It means
that, it creates a fall in the employment and working hours of them which creates the lower
compensation on the individuals, it counted in specifically in the wages. It has an impact on the
UK's economy which will have an exceptional power to use the lower labour and the another
inputs which is counted in the production process (Inegbedion, 2021). This occurs the reduction
reason which directly impact the Gross Operating Surplus which shows the company's profits
decreases. It also has the lowest income regions which faces many big challenges due to the
Pandemic. It shows that the lower level of areas are more at the risks due to this.
Expenditure- It includes the household consumptions which directly reflects the
unnecessary expenses rates which will be the lower. Due to the COVID-19 and the closure of
some businesses, it creates some limitation on few changes are due to measure on some
unnecessary type of spending by the industries (Pedauga, Sáez and Delgado-Márquez, 2022).
The pandemic have created the impact on the global level of the business which is had a
consequence of their gross trade flows. Whereas, it reflects the lower demands for any kind of
reduction process which shows the reflection on the import volumes of the businesses.
2- What are the (likely) impacts of the ongoing war in Ukraine on the UK’s economy? Consider
both the short-term and long-term economic impacts.
The ongoing war in Ukraine has created an impact on UK's economy because it has some
economic connection to the Ukraine. The international value of such trade is fell down by the
2.8% in between the February and March because of war and creates a negative impact on the
UK's economy (Verschuur, Koks and Hall, 2021). The European Union exports also dropped in
the March by 5.6% and their imports by the 3.4%. In the UK the food price is hit by the 4.3%
which refers to the highest in compare to other country.
There are physical impact on the obstruction and the devastation of the same productive
capacity which have a direct impact on the trade and production activities. As the Russia counted
as big exporter amongst the world which exports the wheat, pig iron and natural gas, it is an
important supplier of the fertilizers. Ukraine is counted as a key trade good of the food industry
which ist include the wheat and sunflower oil (Mardones, 2022). Due to the war the imports of
organic chemicals from European union is decreased by the 1011.62 GBP millions in the month
of May from the 1170.79 Million in the month of April in 2022. As well as the such imports of

the Iron and Steel also decreased by the 2.01 GBP million by the April 2022. The actual impact
of the war in Ukraine on the trade good markets were happened in two ways:
Dependence on the Ukraine food imports- The war in Ukraine creates a reason to break
out the Russia's energy exports. Many countries have banned the Russian energy products
including EU and UK. Due to the war it creates a negative impact on the UK's economy because
of this there is not proper import and export from the Ukraine (Prohorovs, 2022). Many of the
big oil company in UK has announcement to cease the product operation in Russia while many
are boycotted its products.
Fertilizers affordability- The wheat transport from the Ukraine is stopped due to such
shut-downs of the Ukrainian seaports on the Black sea which is about 90% impact Ukraine's
export. This hold-up is due to the obstruction which counted as a less range in the recreation of
the products to the import and export. There are some wheat exports who started using the rails
and road passageway which started in the March 2022. But the Ukraine is supposed to do the
impact on the Russian's economy but could not create a way to create it. No exportation of the
wheat from the Ukraine already affected the UK's economy which have a major negative impact
on it.
3- What economic suggestions if any can be provided to the government of United Kingdom to
remedy any negative impact of war in Ukraine on UK economy?
There are several factors business environment encompasses that impact a nation
economy and their growth. The war between Russia and Ukraine is considered as the best
example of external factor that put negative impact on UK economy, which is important for
governmental bodies to overcome by applying key techniques, and taking right decisions (Liadze
and et.al., 2022). It can be said that economies of both Ukraine and Russia are acquiring sharply
as a strait outcome of war and sanctions imposed on Russia that stands again Ukraine (Kammer
and et.al, 2022). Government of United Kingdom can adopt key suggestions and these are;
 Energy sources from other countries- the best suggestion that provide in the context of
UK government to overcome the adverse impact of war in Ukraine is current one.
According to this recommendation, they can take initiative to develop effective plan of
receiving energy source from other nations, as Ukraine is the key centre from where, UK
obtain energy source, but this flow has broken because of the war between Russia and
nation (Anayi and et.al., 2022). It impacts negatively upon UK economic growth and

because of this reason the current recommendation is relevant and suitable. It may drive
the attention of government body toward taking decision to build good relation with other
nations, where the energy sources accessible in bulk. In 2021, United Kingdom imports
electrical and electronic equipment from Ukraine. Thus, this import process has been also
impacted due to the war. They can build up the relation with Germany, US, Japan and
other countries, which falls under the category of the biggest energy sources in the world.
In the recent time, Norway is considered as the biggest clean energy producer, as it e
Centproduce more than 98.4 percent of energy from renewable sources. Without
choosinge Cent appropriate energy source the nation will not been able to survive for
longer as it lead to decrease the economic progress.
 Change import and export modes- another strategic suggestion that can be provided to
the government of UK is existing. It drives their concentration toward changing the
modes or ways of importing and exporting goods, such as iron, steel, cereals, oil seed,
grain and other items, which earlier they obtain from Ukraine, that is the biggest sourcee
Cent of whole goods supply (AMUTHA and KRANTHY, 2020). Ukraine is the place
where all these and other products are accessible in the bulk, and supplied throughout the
trustable suppliers all over the world. Therefore, the war in this nation destroy everything,
and because of which UK economy survive a lot. The growth of economy is slow down
and individual person will suffer more than any other nation's population. It is important
for management to take right action and decision, before the situation get worst, and out
of control from anyone. There are different types of modes available in the world of
business, that government body can select according to suitability, which enable them to
enhance the growth of economy, when better than last few months that impact further in
similar manner.
 Build relation with other nations- due to war in Ukraine, EU take strict action as it
banned supply of oil products from Russia. This action impacted negatively upon UK as
European Union supplies the same goods to the nation, after receiving from Russia. So,
in that case it is essential to build good relation with those nations such as Bangladesh,
etc. where the supply process or flow of iron and steal is appropriate (Vijayaprabhakar
and et.al., 2021). As this state cover in the India, where more region accessible who
supply the same and other goods as well, which UK can utilize to grow rapidly and boost

the progress of their economy. This form of relation will provide further benefits to
United Kingdom in term of making trade quite easier and simpler, which helps to
increase GDP and sales. For example, the supply of aircraft, spacecraft and related parts,
also supplied in the UK from EU through Russia that has been banned, because of war
(Mbah and Wasum, 2022). The economic relation between two or more countries plays
significant role in the context of improving and increasing economic condition of the
nation. Before considering this suggestion, it is essential for management to focus on
areas that cover under that. There are varied progressive and developing nations in the
world available, that attempt to build political and related relation with those countries or
regions that want to grow, but unable to do that because of several reasons. It may put
direct impact on their progress and success in the competitive world.
 Policy formation- more actions that can be provided to the UK government that enable
to mitigate the impact of war between Russia-Ukraine is policy formation. According to
that term, authority can take action to develop a policy according to which organizations
can build or make their relation with other nations companies stronger. Furthermore, they
can take a policy according to situation and by analysing the circumstance appropriately,
without making any change that outcome adversely.
All above suggestions can play significant role in the context of UK economy, in term of
increasing its progress, for which government can take actions in varied terms. It is fact that the
Russian invasion of Ukraine, began on 24th February 2022, that has devastating impact on the
nation and whole world (The impact of the Russian invasion of Ukraine on the UK economy,
2022). Due to the issue petrol or fuel and oil price had reached 120 a barrel, which means just
double price a year ago, which impact individual person living standard. The war emerges the
situation of high inflation that also impact economy negatively, which is not suitable for UK. By
considering above three suggestions provided, government can take attempt to handle the
situation, which impact might be positively upon nation's growth.

4- Economic recommendations provide to central bank of UK to remedy negative impacts of war
in the Ukraine on economy?
In the recent time central banks in the United Kingdom can play important role, to
mitigate the adverse impact of war in the Ukraine upon economy, in term of considering key
recommendations that are defined below;
 SMEs impacted negatively due to increasing energy price as outcome of war between
Ukraine and Russia. As this war had increased economic uncertainty in the United
Kingdom and also put high pressure on borrowers. At this moment, Central bank of UK
can consider the key suggestion as it can take action to provide loan facilities to
borrowers, which enable them to pay back money to whom from which they borrow
money. It can attempt to develop a scheme, according to which individual loan applier
can pay less amount of interest, that is the best idea they can introduce in the nation that
make business running process quite easier for small organizations.
 It is fact that Russian entrance poses the worst risk to the UK as it fuels the nation cost of
living crisis. It impacts negatively upon those poor families, that struggle to survive and
live a normal life in the UK, which is more challenging because of war between above
two nations (War leaves central banks with tough choices, 2022). This situation can drive
the attention of Bank of England toward setting tighten monetary policy in term of a
supply shock. This policy can face trade off when authorities tend to maintain real
economic activity and progress, appropriately that will risk or challenge setting off an
inflation. It can be said that central Bank of UK face varied issues, after taking initiative
to recover from pandemic. Their monetary and other types of policies can help
individuals to live their life appropriately with less impact of war in the Ukraine that
impact the way they live.
 Along with above suggestions, organization can take more actions, according to the
overall situation, which it attempts to consider effectively and appropriately. As their
decisions impact economy growth in the UK, regarding which their actions and responses
are valuable. Their policy and rules can allow a person to stress free, and focus on living
a normal life, by fulfilling their basic needs and requirements, for everyone works harder
and in competitive manner, to reach desire outcomes. Central bank can take out the UK's
monetary policy and power with its supply of money which they can do mandatory to

maintain the low rising prices and fast growing Gross domestic product. They can supply
the foreign currency to keep the UK's market at the stable situation, it can buy the local
currency support as well which create its value and prevent their inflation. The central
bank can monitor the breaches for the sanctions which are applicable for the European
union which help to enforce the penalization if they are essential as well.
CONCLUSION
From the above discussion, it has been concluded that with the utilization of the circular
flow of income which shows the impact on the United Kingdom's economy due to the Lock
down. It concluded the consequences which is occurred after the lock down. It implies the both
short term and long term influences which is used to conduct which include the flow rate of
import and export in the UK's economy. This includes the job risks, incomes and expenditures
which has a reflection over the also concluded that the major negative impacts affected UK's
economy during the war of Ukraine. Furthermore, it included the recommendations for the
government to reduces its efficiency which helped the UK's economy. It included some
suggestions which can be used by the central banks to reduce the negative impact from the war
in Ukraine in the UK's economy.
Recommendations
Lock down create a negative impact on the UK economy. To prevent this situation
government of UK can use the employment scheme which will target those who are at the high
risk for the long term unemployment. They can start the pensions for the people who loosed their
jobs in the lock down. Government can also prioritize the placement process for the youngsters
whose year is wasted due to the COVID-19 pandemic as well as the Ukraine war has majorly
affected the UK's economy. Government and Central Bank of UK can take step ahead to stop
exporting and importing from the Russia, government increase their connectivity with other
countries such as US and India. They can increase the rate of import and export with these
countries so will help to gain stable economy of UK, also they can change the mode of importing
and exporting. Government can make new policies regarding the use of the products which are
previously imported from the Russia it can help to reduce the Russia's productivity. It is
important for management to take right decisions on time before the economy of UK get the
worst day by day because of the war between Ukraine and Russia.

REFERENCES
Books and journals
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Anayi, L and et.al., 2022. The impact of the war in Ukraine on economic uncertainty. VoxEU.
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Gordon, A.J.G. and Recio, L.A.H., 2019. External Effects of the War in Ukraine: The Impact on
the Price of Oil in the Short-term. International Journal of Energy Economics and
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Inegbedion, H., 2021. Impact of COVID-19 on economic growth in Nigeria: opinions and
attitudes. Heliyon. 7(5). p.e06943.
Kammer, A and et.al, 2022. How war in Ukraine is reverberating across world’s regions.
Washington: IMF, March. 15. p.2022.
Liadze, I and et.al., 2022. The economic costs of the Russia-Ukraine conflict. NIESR Policy
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Mardones, C., 2022. Economic effects of isolating Russia from international trade due to its
‘special military operation’in Ukraine. European Planning Studies. pp.1-16.
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Pedauga, L., Sáez, F. and Delgado-Márquez, B.L., 2022. Macroeconomic lockdown and SMEs:
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Prohorovs, A., 2022. Russia’s War in Ukraine: Consequences for European Countries’
Businesses and Economies. Journal of Risk and Financial Management. 15(7).
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Verschuur, J., Koks, E.E. and Hall, J.W., 2021. Global economic impacts of COVID-19
lockdown measures stand out in high-frequency shipping data. PloS one. 16(4).
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Vijayaprabhakar, A and et.al, 2021. Study on residue management options in combine harvested
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Online
The impact of the Russian invasion of Ukraine on the UK economy. 2022. [Online]. Available
Through: <https://voxeu.org/article/impact-russian-invasion-ukraine-uk-economy>
War leaves central banks with tough choices. 2022. [Online]. Available Through:
<https://www.ft.com/content/c57ae319-07fc-4817-af1f-39bb9314afaf>

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