1. Assess the impact of ﬁscal and monetary policy on business organisations and their activities- 2. Evaluate the impact of competition policies and other regulatory mechanisms in place on the activities of business organization.
3. Critically evaluate how business and cultural environments would inﬂuence the behavior of a business organization.
4. Discuss the signiﬁcance of international trade to UK business organisations. 5. Analyze the impact of global factors on UK business organisation. 6. Evaluate the impact of policies of the European Union on UK business organisations (L04.3)
Impact of fiscal and monetary policy on UK business organizations What is fiscal policy?
Fiscal policy is country trying to influence its macro-economic activities by touching areas such as government income, government expenditure, budget and taxation. By that countries trying to fulfill its macro-economic objectives like full employment, economic stability, social equity, Economic growth, poverty eradication
What is monetary policy?
Monetary policy is the other way of government intervention to local economy. The main objective of deploying monetary policy is to regulate the money supply within the economy. This is mainly done through adjusting interest rates, exchange rates and controlling lending of local banking system How does fiscal policy affect to UK business organizations
When looking in to UK’s economic reports it is seemed to be the fiscal policy is set on in underlining with the’ Golden Rule’ states that over the full economic cycle, the government should borrow to invest only for future needs. Current needs should be met by tax revenues. However it can be seen two major tax components whose impact on business organizations is slightly differed, they are 1. Tax on corporate income
2. Tax on consumer goods(VAT)
How would corporate tax impact on business organization?
Increase on corporate tax means lower profit will be saved for shareholders to distribute as dividends. This pressures owners to find the way of cutting total cost of the organization. In short term they may tend to freeze the recruitments, block new investments, cease philanthropic contributions etc. In long term view point if the government is trying to continue on increased tax rates. Conversely reduction of corporate tax would reverse those decisions. Especially in high unemployment environment government may reduce corporate tax in order to motivate organizations to make more employment opportunities. In long term view point if the government is trying to continue on increased tax rates organizations will have to rethink on their production and other operational activities to eradicate non value adding activities and achieve full efficiency. How would consumer product tax impact on business organizations?
The changing of VAT rate is negatively correlated with the demand. Increment in VAT for particular product category will definitely reduce the level of sales and vice versa. This would mean company has to make an extra effort on selling their products and services .Also in UK there are different VAT procedures are available (standard rate, zero rated, etc) changing of procedures would require different ways of tackling them especially when accounting for the sales. Therefore continuous alert on those matters is essential. How would monetary policy impact on business organizations?
As mentioned earlier monetary policy basically involves in controlling money supply within the territory. Changes in monetary policy will produce both price (substitution) and income effects in return this is vastly affect operations of any organization. If monetary authorities begin a program of expansionary (easy) monetary policy or restrictive monetary policy sequence of events will occur with regard to the price effect. Change of interest rates