Economic Analysis: UK Unemployment and Inflation during Pandemic

This report provides an in-depth analysis of the economic challenges of unemployment and inflation in the United Kingdom, with a specific focus on the impact of the COVID-19 pandemic. The report begins with an executive summary and an introduction that outlines the scope of the analysis. The main body of the report provides background information on the UK's economic context, including pre-pandemic trends and the impact of the pandemic on unemployment rates. It examines the relationship between unemployment and inflation and explores the measures taken by the UK government to address these issues, including financial support packages, job retention schemes, and investments in infrastructure. The analysis utilizes statistical data to illustrate trends and government interventions, and it discusses the implications for businesses in the UK. The report concludes with a summary of the findings and a list of references.

Business Economic

EXECUTIVE SUMMARY
The unemployment rate in all over world has got increased with a heavy percentage. As
specific taking the economy of UK the unemployment rate has started to increase after a decade.
The major reason behind it is the cause of Pandemic. This report discusses about the economic
problem of unemployment and the inflation. Inflation is the state where the prices of the
commodities get increase to an extreme level which causes the people unaffordable. The
measures was taken by the government which has been mentioned in the report. These measures
will help the UK economy in curbing their economic problem of unemployment and inflation.

Table of Contents
EXECUTIVE SUMMARY ............................................................................................................2
INTRODUCTION...........................................................................................................................5
MAIN BODY...................................................................................................................................5
Background of the topic along with the country.........................................................................5
Economic Context.......................................................................................................................5
Measures taken by the Government:...........................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
.........................................................................................................................................................1

INTRODUCTION
Unemployment is the state where the people are not working and are in a search of work.
Increase in unemployment rate in a country can result into many consequences like poor living
standards of people, decrease in literacy rates, increase in crimes and much more. Whereas
inflation is the state where the prices of commodity goes extremely high (Aldrich and et al.,
2020). The increase in the prices of the commodity impacts the economy to an extreme level as
the people of the state becomes unable to purchase the products. This report discusses about the
economic problem which are caused by unemployment and inflation. Apart from this the role of
government in curbing these problem has also stated in the report.
MAIN BODY
Background of the topic along with the country
United Kingdom is considered in the category of developed country. Here the rules,
infrastructures, technologies, economic stability and etc. are all advanced as compared with other
economies. The increase in unemployment rate in UK has caused a major issue in the country.
Due to pandemic of COVID- 19 heavy percentage of people has lost their jobs in which majorly
the labours. When the unemployment rate before pandemic was high, the government took the
advanced and good steps and measures to curb this problem. These measures where so effective
that the country's unemployment rate actually gone down resulting into high economic growth
(Chambers, 2020). Apart from this the inflation when it arises in year 2007-08 had hit the UK
economy very hard. Due to that majority of people lost their jobs because the companies could
not afford the work. Inflation did put impact upon the growth rate of UK as people lost their jobs
resulting into decrease in disposable income, poor living of people, increase in crimes rate and
much more. Apart from this the greatest hit in the UK economy has been caused due to
pandemic. In this Lock down where the production of all the economies where zero, majority of
people or industry would not afford to hire and retain employees that's why they have opted for
reduction in their work force.
Economic Context
Unemployment in modern global scenario is a huge challenge before all the major
economies of the world, be it USA, UK, CHINA or INDIA, & each one has its own reasons. In
the respect of United kingdom, recent statistics by Office for National Statistics (ONS) in months

of August to October the Unemployment rate stood at 4.9 %. means 1.69 people stands
unemployed the major reason behind this is considered Pandemic and lock down, which resulted
in closure of many business activities and slow growth in those who operated in this time as well.
Demand for the products and services too declined as income declined. It left economies
worldwide in a vicious trap (Coibion, Gorodnichenko and Weber, 2019).
In current economic scenarios globally. The inflation rates seems falling. In United
kingdom, the inflation saw a sharp fall of 0.3%. this attributed to low demand for goods and
services. As we know the economic factors correlate with each other, therefore since
unemployment is rising, people are left with few income in hand and they intend to fulfil just
their basic needs like food, rent, basic groceries, oil and petrol for vehicle, medicines etc. and
that also in a reasonable quantity. Demand for other products and services, especially those
related to luxuries has declined and prices for these goods and services fell. The producers of
these goods and services are offering them at low prices to attract buyers and maintain at least
their basic continuity.
Impact upon economy
Both the above stated factors implies a considerable effect on the economy of a country.
As the demand falls, the producers decides to cut down production, also prices for goods and
services are cut. This situation may push economy in deflation, where prices runs in negative
territory and businesses starts incurring losses. To revive the business, producers tends to take
other steps as well such as termination of existing workforce, reducing salaries and wages and
stops hiring additional workers (Ezzy, 2017). The businessmen then seems taking every step that
brings cost of production down. These steps further lowers purchasing power of people and thus
they demand lesser and lesser for goods and services.
Thus, it becomes very clear that, these circumstances creates a vicious trap in economy.
Where, unemployment results in low income means low demand in economy, low demand
induce low production and cut down in production further pushes unemployment in economy.

Source: Office of National Statics, 2020
From the chart presented above, the unemployment rate in the UK economy over the
previous 10 years has been presented. It can be observed that the unemployment rate was the
highest in the year 2011 but later the government releases the need to curb and control these rates
they come up with various control measures. These control measures may include encouraging
the entrepreneurship in the economy through which the jobs may get create, generation of jobs
by the government, giving the training and learning programs to people so that they can develop
the required skills and knowledge and much more (Faust, 2018). From all these measures the
unemployment rate in the economy did went down to a great percentage. From the year 2011,
year by year the percentage regarding the unemployment rate went down which provides the
great economic growth to the UK. This fall down was due to reasons this may include the
measures taken by the government with respect to control the unemployment rate in the
economy. But in the year 2020, there was seen a rise in the line graph related with the

unemployment in the economy. This rise is due to the pandemic. Due to the pandemic the
production of all industries and work in all the offices were shut down. There was no scope for
making money for the business due to which a heavy percentage of people lost there jobs.
Majority of them were the labours who worked in the industries (Hijzen and Salvatori, 2020).
As the production system in all these industries got shut these businesses stopped provided the
wages to the labours. This has caused them more severe problem as they did not have the money
to purchase even the basic amenities to lead their living. After the lifting up of the lock down the
economy come back to this real speed but it is a quite time taking process. The economy will
take its phase with time. At current the problem of the unemployment cannot get solve
immediately but surely it will reduce and take is previous minimum in the following years.
Measures taken by the Government:
Such situations in the economy calls for greater involvement by the Government. The
Governments are needed to spend more and more to revive growth in the economy, and build
trust factors of people as well as international investors. It calls for more liberal approaches
towards revival. UK government presented its recovery strategy from pandemic “Our plan to
Rebuild” in May, 2020, emphasising on health, economic and social outcomes. As UK registered
lowest annual growth rate in 300 years, government approached for opening up the economy and
followed inclusive policy (Sage, 2019). Government provided funding and charities for those
working with vulnerable population. Enabled single adult households to form support bubbles,
for soaring unemployment figures, government has spent 27.4 billion pounds, to protect, create
and support jobs. Investments were made in green schemes worth $3.76 billion. A VAT cut of
5% on tourism and hospitality was offered till January 2021. Also, a “job retention bonus” for
firms that re-employ furlough workers was offered worth 9 billion pounds.
A package of 5 billion pounds to create homes and infrastructure was bought by the
government, that will boost demand and employment together in economy. This package focused
on multiple areas like roads and bridges, hospitality, schools and colleges, affordable houses,
local projects in England, transports etc. The government believed that this will open more
opportunities inn economy (Zirgulis and Šarapovas, 2017). The government support to the
businesses shows a New-deal style rhetoric. To increase purchasing power, tax cuts were

introduced, the VAT payment could be deferred at the option of taxpayer and also on which to
interest and penalties were levied.
CONCLUSION
The rate of unemployment has got increased majorly because of COVID 19. Due to this
pandemic the rate of unemployment rate has gone up very much. Along with it inflation is also a
problem for the people as their level of income does has gone low which results in decrease in
the disposable income of them. Decrease in the income will make the prices for the products
costly for the people. To establish a curb to the problem there are various measures taken by the
government. These measures includes putting the maximum value or price to the product costs in
which they limit the prices for the commodity and the shop keeper or the businesses could not
charge more from this limit. This has helped the economy to curb the inflation. The government
has also imposed the various laws that banks have to exempt the people from giving the loan
instalments during the lock down period. They also have given much relaxation to the industries
in terms to tax so that they can more concentrate on making their situation better like before.

REFERENCES
Books and Journals
Aldrich, R. M., and et al., 2020. Centering the complexity of long-term unemployment: Lessons
learned from a critical occupational science inquiry. Societies. 10(3). p.65.
Chambers, R. J., 2020. Accounting for Inflation (pp. 268-303). Routledge.
Coibion, O., Gorodnichenko, Y. and Weber, M., 2019. Monetary policy communications and
their effects on household inflation expectations (No. w25482). National Bureau of
Economic Research.
Ezzy, D., 2017. Narrating unemployment. Taylor & Francis.
Faust, A., 2018. State and unemployment in Germany 1890–1918 (Labour exchanges, job
creation and unemployment insurance). In The emergence of the welfare state in Britain
and Germany 1850–1950 (pp. 150-164). Routledge.
Hijzen, A. and Salvatori, A., 2020. Designing fair and work-oriented unemployment benefits:
The case of Belgium.
Sage, D., 2019. Unemployment, wellbeing and the power of the work ethic: Implications for
social policy. Critical Social Policy. 39(2). pp.205-228.
Zirgulis, A. and Šarapovas, T., 2017. Impact of corporate taxation on unemployment. Journal of
Business Economics and Management. 18(3). pp.412-426.

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