FACULTY OF BUSINESS ENVIRONMENT AND SOCIETY

Faculty of Business Environment and Society

Faculty of Business Environment and Society

Introduction

The Business Environment of UK has experienced a negative trend over the last few years. The Conservative-Liberal Democrat governing coalition has a solid majority in parliament. However, fiscal austerity, economic weakness, the threat of industrial action and the deepening euro zone crisis will increasingly strain relations. It would be a major gamble for either party to trigger an early election, but one cannot be ruled out given the gloomy medium-term outlook. Efforts to shrink the largest-ever peacetime budget deficit will dominate policy debate. A highly ambitious fiscal tightening programme will entail tax rises and the deepest sustained period of public spending cuts since the 1940s. Prolonged weak activity will cause without slippage from the deficit-reduction targets. Despite high inflation, the Bank of England (the central bank) will persist with highly accommodative monetary policy. More quantitative easing (QE), expected during 2012, but gains will be modest. No rate rise has a forecast before 2015. UK banks could absorb first-round losses from a restructuring of Greek debt, but strong contagion to other euro economies would trigger considerable financial and financial stress. After contracting by a cumulative 7.1% over five quarters during 2008-09, real GDP grew by 2.1% in 2010 and an estimated 0.9% in 2011. Economic activity has forecast to contract by 0.4% in 2012. Annual growth has a forecast to average 1.5% in 2013-16, amid considerable volatility.

Economic Outlook

After the duration of four years since global financial crisis took place, economic policy has not defined clearly with sizeable level of financial sector position. The happening of record low interest rates gave a rise to the instability of central bank also causes problems in creating fiscal policy. The expectation is that inconsistent economic trends are going to continue and might also get worse in the future. This is the reason why policymakers must take these issues seriously and should look towards preparing an appropriate strategy in this regard. In the past, record level of high debt ration and fiscal deficit, witnessed by the economists in UK which has caused huge concerns for the investors. These problems got worse around few years ago when a global recession even affected the major institutions of UK. It became necessary for the UK Government to diversify their economy and to encourage investors in making investments in those sectors that had a lot of potential for the whole country. The chance of steady progress looked possible when the investors took an interest in various sectors of UK that provided a good chance for them to earn a considerable amount of revenues. Though, the rate of foreign investment has always been quite high in the UK, and, there are several multinational companies that have their operations in UK (Barrell, 1992, 20).

The UK Government tried to introduce supply side economic principles that had major components like decrease in corporation tax, low level of regulation for new companies and relief on entrepreneurial ...