Business & Finance Essentials Assignment Sample

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Introduction Of Business & Finance Essentials Assignment

Thread 1: Discussion about the impacts of Brexit on the availability and suitability of equity capital

Spending sharply dropped down

First, the UK's choice to leave the EU has caused a significant, widespread, and long-lasting increase in uncertainty. Second, it is projected that expenditure dramatically decreased by around 11% during the three years after the vote in June 2016 as a result of Brexit expectations. This decrease in spending was longer to materialize than was anticipated at the time of the referendum, suggesting those businesses' reactions to the Brexit outcome may have been delayed due to the magnitude and persistence of exactly these concerns (Bruno et al. 2021). Last but not least, it is predicted that the Brexit process decreased UK productivity by 2% to 5% during the three years after the election.

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Adversely impacted by domestic labour

Economic impact

Figure 1: Economic impact

(Source: Demiralay and Bayrac?, 2021)

Due in part to businesses committing several days per week of their personal best to Brexit preparedness, this decline is mostly the result of negative effects within the firm. Investors are finding evidence for fewer unfavourable infraclass repercussions because more productive, globally exposed firms have been negatively impacted relative to less productive domestic organizations (Quaglia, 2019). Exports from the Scottish manufacturer, a division of the Colorado springs Gateway Conglomerate that leveraged buyout behemoth Blackrock acquired in 2014 for £5.4 billion, will now be hampered by the need to fill out origin certifications and customs public statements at night before going to bed, as well as delays caused by new external borders. Moreover, the same regulations will apply in a different way to belts made at Windows' EU-based factories and imported into the UK as parts for the car sector.

Expand its global business

The UK equities market traditionally hinges on GDP growth and a company's capacity to enhance profitability; however, the impact of Brexit has recently emerged as a crucial factor to take into account when trying to outperform rivals in other countries. The Brexit decision is also helping the UK's income growth since trade-free rules are leaving the country. As per the opinion of Steinberg (2019), The GDP of the UK has been rising favourably. Result of Brexit the UK was given permission to increase its international business ties with non-EU countries, which boosted GDP growth further. The Brexit decision has increased stock market investment, which has benefited UK companies' equity capital.

Serious damage brought on by Brexit

GDP and contributes

Figure 2: GDP and contributes

(Source: Moloney, 2020)

While manufacturers on both shores of the English Channel sighed breaths of relief when the new treaty was published last month, the UK's construction sector, which compensates around 80% of the country's GDP and contributes to fifty percent of all exporters, has found little solace in this (Latorre et al. 2019). The most significant destruction caused by Brexit to the UK's financial services industry has so far been to the government's asset management and investments financial institutions, which, according to EY, have already witnessed 7,500 jobs and £1.2 trillion of holdings conveyed from the City to financial areas in Europe. Services are effectively being forced into a no-deal with both the EU, at least for the meantime.

Thread 2: The effects of Brexit on the availability and acceptability of debt capital

Commercial Operation certification

During Brexit, companies operated in a common trade zone where items could've been transported here between the UK and the EU without incurring tariffs, going through border inspections, or completing any documents. There are now functioning administrative borders between the UK and the EU on the site. They plan on providing issues that are being addressed to those who have no way to reach the UK marketplaces. These are some of the consequences that Brexit has on UK businesses, both good and bad, and how businesses may contribute (Demiralay and Bayrac?, 2021). Keep in mind that a number of the foregoing only applies to the United Kingdom and that the Republic Of Ireland has its own set of rules and regulations. A UK company would seek to apply for Accepted Commercial Operation certification if it has the means to do so. With the termination of mobility between the UK and EU as a consequence of leaving the EU, the industry has been hard hit.

Favourable impact on business operations

Debt market met the needs

Figure 3: Debt market met the needs

(Source: Latorre et al. 2019)

Brexit gave organizations more power in business expansion for international company operations, enabling them to expand into non-EU nations. Positively affecting company operations, the mortgage market provided UK businesses with the cash support they needed to continue working. Positively influencing business activity, the debt market met the needs of UK enterprises for financial resources, as banking organizations and institutions gave them enough money to keep their operations going (Moloney, 2020). After Brexit, the UK's debt market has grown excessively as a result of ongoing financing by UK businesses, which has given them an edge in booming commercial operations. Organizations need financial resources in order to continue operating, and non-levered firms can borrow money from debt that has added value to their company operations.

European Banking Association's limits

There might be a lot of structural reforms post-Brexit with no arrangement. Investment bankers must not just be prepared for the high-level impacts caused by Brexit, but also for unexpected circumstances. Given the amount of uncertainty, the majority of banks want to preserve all of their EU consumers. In light of the severe restrictions the European Banking Association has established earlier against shell firms, all of the bankers are planning on starting new companies within the EU with the essential management and structure (Samitas et al. 2018). According to Robert Mutually, government affairs head of the skillet trade body Invest Germany, before the agreement was revealed, the extra cost of these kinds of red tape, approx by the UK government at more of about £7bn per year, imposed on automakers will likely have the biggest influence on the portfolio of private equity companies.

Took care of the funding

Since Brexit, the UK's debt market has grown, which has had a favourable impact on the country's currency. UK businesses examined company development plans for international transactions during the post-Brexit period when the need for additional funding was handled by loan funds. Due to the UK companies' need for financial resources for business development, which is a driver for the demand for debt, debt capital in the UK concurrently increased following Brexit.

Thread 3: Opinion on the above statement

Debt financing offers the possibility of continuing economic activity, albeit it might be difficult for businesses to control the loan interest, which could have an impact on their profitability. The consequence of choosing debt vs equity as a source of funding is the consumption of financial burdens like loan interest (North et al. 2021). The result of employing debt as a source of capital as opposed to equity is the consumption of costs like loan interest. Debt financing gives businesses the option of continuing their operations, but it can be challenging for them to manage the loan interest, which could have an effect on their profitability. Organizations now have more freedom to extend their activities internationally and into non-EU countries thanks to Brexit. Due to this unique characteristic, businesses were able to continue functioning during a financial crisis without having to incur additional costs like interest or dividend payouts.

The fact that it took longer than expected for this expenditure decline to manifest at the time of the referendum suggests that companies' reactions to the Brexit result may have been delayed because of how serious and persistent these fears were. Funding is a method of managing financial resources in which the business must continue to bear financial obligations until debts are repaid. Companies in the UK have applauded the UK government's decision on Brexit, which has helped the equity market, where investors put money in firms for company expansion; flourish (Storm, 2018). These are a few of the effects that Brexit has on UK businesses, both positive and negative, as well as potential commercial contributions. Remember that some of the aforementioned restrictions only apply to the United Kingdom and that the Republic of Ireland has its own set of laws.

As trade-free regulations are leaving the UK, the Brexit decision is also contributing to the country's revenue growth. The UK's GDP has been increasing nicely. These are a few of the effects that Brexit has on UK businesses, both positive and negative, as well as potential commercial contributions. Remember that some of the aforementioned restrictions only apply to the United Kingdom and that the Republic of Ireland has its own set of laws. The fact that it took longer than expected for this expenditure decline to manifest at the time of the referendum suggests that companies' reactions to the Brexit result may have been delayed because of how serious and persistent these fears were (Morris et al. 2020). Businesses engaged in Brexit worked in a single trade area where goods may have been carried between the UK and the EU without being subject to tariffs, passing through border checks, or requiring any paperwork.

References

  • Bruno, R.L., Campos, N.F. and Estrin, S., 2021. The effect on foreign direct investment of membership in the European Union. JCMS: Journal of Common Market Studies, 59(4), pp.802-821.
  • Demiralay, S. and Bayrac?, S., 2021. Should stock investors include cryptocurrencies in their portfolios after all? Evidence from a conditional diversification benefits measure. International Journal of Finance & Economics, 26(4), pp.6188-6204.
  • Latorre, M.C., Olekseyuk, Z., Yonezawa, H. and Robinson, S., 2019. Brexit: Everyone loses, but Britain loses the most. Peterson Institute for International Economics Working Paper, (19-5).
  • Moloney, N., 2020. Reflections on the EU third country regime for capital markets in the shadow of Brexit. European Company and Financial Law Review, 17(1), pp.35-71.
  • Morris, J., Morris, W. and Bowen, R., 2022. Implications of the digital divide on rural SME resilience. Journal of Rural Studies, 89, pp.369-377.
  • North, S., Piwek, L. and Joinson, A., 2021. Battle for Britain: Analyzing events as drivers of political tribalism in Twitter discussions of Brexit. Policy & Internet, 13(2), pp.185-208.
  • Quaglia, L., 2019. European Union financial regulation, banking union, capital markets union and the UK. Diverging capitalisms: Britain, the City of London and Europe, pp.99-123.
  • Samitas, A., Polyzos, S. and Siriopoulos, C., 2018. Brexit and financial stability: An agent-based simulation. Economic Modelling, 69, pp.181-192.
  • Steinberg, J.B., 2019. Brexit and the macroeconomic impact of trade policy uncertainty. Journal of International Economics, 117, pp.175-195.
  • Storm, S., 2018. Financialization and economic development: a debate on the social efficiency of modern finance. Development and Change, 49(2), pp.302-329.
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