1. Economic Influences on Business

2. The Economy
Economic Variable Present Rate Affect on the Economy Evaluation-Affect on
specific firms
Trade Cycle
Interest Rate
Exchange Rate
Inflation
Public Spending
Tax .

3. Present fallen to 3.0% Fairly high
The Economy
Economic Variable Present Rate Affect on the Economy Evaluation-Affect on
specific firms
Trade Cycle
Interest Rate
Exchange Rate
Inflation
Public Spending
Tax
Recession
Investment, consumer spending down. Unemployment high, business profits falling closure rising.
Little affect on necessities
Capital/luxury adversely affected
Slight increase for inferior
Low – base rate 0.5%
Encourages spending, borrowing and investment. Good for business.
Good for companies with high debt. More goods bought on credit.
£1: euro 1.2
£1: $1.5
£ weak
Positive for UK exporters
Detrimental for UK importers such as Matalan
Weak pound, generally good for exporters, imports more expensive.
Last year 5%
Present fallen to 3.0% Fairly high
Cut in peoples’ living standards, workers’ demand higher wages, higher cost of raw materials.
Particularly detrimental for firms where unions are strong or where goods are rising rapidly e.g. oil, hence transport
Large cuts
Reduced spending in the economy, unemployment, recessionary effect
It will hit construction hard and businesses dependent on public sector contracts
Increased to
VAT 20%
Reduces spending
Retail

4. Has been high at 5% now low at just over 0%
The Economy
Economic Variable Present Rate Affect on the Economy Evaluation-Affect on
specific firms
Trade Cycle
Interest Rate
Exchange Rate
Inflation
Public Spending
Tax
Recovery 2.5%
Growth
Investment, consumer spending increasing. Unemployment falling, business profits rising.
Little affect on necessities
Capital/luxury starting to pick up after recession
Inferior still doing well after rec.
Low – base rate 0.5%
Encourages spending, borrowing and investment. Good for business.
Good for companies with high debt. More goods bought on credit.
£1: euro 1.2
£1: $1.5
£ weak
Positive for UK exporters
Detrimental for UK importers such as Matalan
Weak pound, generally good for exporters, imports more expensive.
This has stopped eroding the value of peoples’ real wages. Allows firms to forecast and price more accurately.
There has been falling prices in oil that has hit the oil companies, but benefited most other companies e.g. airlines, even supermarkets
Has been high at 5% now low at just over 0%
Large cuts
Reduced spending in the economy, unemployment, recessionary effect
It will hit construction hard and businesses dependent on public sector contracts
VAT 20%
Reduces spending
Retail