The Impact of Globalization on the UK Economy: Challenges and Opportunities

Introduction Of The World’s Economies, & Cultures Through Inter-country Trade Of Goods & Services

Globalization is the growing interdependence of the world’s economies, and cultures through inter-country trade of goods and services, information and technologies, and so on. It aims to increase connectivity between the nations and improve trade relations with each other. The pandemic COVID-19 had a great impact on the economy of the UK as well as the whole world. Common people, businesspersons, students, and people of all social groups were affected by this pandemic. All groups of people had to face various problems to run their daily lives.

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Features of the global economy

Globalization is the word used for describing the world's economics, culture, and population. Countries have built economic relations to make a globalization chain which directly or indirectly helped the other country. A wider effect of globalization is politically charged. Globalization is a systematic chain in which every connected country get benefits from the others(Maital and Barzani, 2020). The global economy has changed day by day. The global economy is basically the sum of three parts, one is Globalization, and the other one is international trade and the last is global investments. Every part of the global economy is complementary to others. The feature of the global economy helps to understand the state of globalization.

The global economy has so many key figures that happen in a country or more different countries. Every country has a different way to develop its economy. The financial market, resources, and good environment are different from other countries. Globalization is damaged many countries' economies (Diamond, 2018). The global economy is decreasing day by day after the Pandemic. The main features of the global economy-

• Many facilities for new production: Global economy depends on many new products in the market. New products create a good level in a specific company so the economy of every country is increasing day by day (Carlsson-Szlezaket al. 2020). The production process is not important, the company services are important. Therefore, many facilities should be the path of production and it is growing the economic situation of a country.
• Opportunities to make new markets: In the 21st century, the world economy has so many new opportunities that help to grow a country's economy. It is an opportunity to increase a market or a business or many industries also. Some entrepreneurs take unique ideas to develop the country's economy (Farrell and Newman, 2020). An investor also invests money in the market to create stability in the country. Day by day, entrepreneurs are following so many new ideas and it is a new facility to all the people so people are personally stable in their economy.
• Little organizations can think broadly: Global economy is increasingly big business, which helps to develop a country's economy. Small organizations can think big so their businesses grow fast (Ozili and Arun, 2023). International business is growing if some unique ideas work. Multinational corporations shall be many facilities for small organizations that develop gradually and create big organizations.
• Importance of networking: Good organizations can build with the help of networks. The company has increased its business if a good network is built. Because the company economy is not increasing with the help of the people. Many new people are the main part of any company or industry or business (Global.Martinet al. 2018). In the 21st century, networking is the best option to create the next generation's bright future.
• Constraint culture: An organization have some barrier to creating a big business. An organization should not speak the language that is the same (P?unic?et al. 2018). Different culture is the main barrier for a new consumer. In building a big business, cultural differences are the main barrier.
• More fields are played: Many new ideas are working on new economic features, and new science and technology are used that ensure the company market and country's economy (Khan et al. 2020).

Shifts of economic power, as well as FDI, trends

Shifts of economic power refer to the shift in the structure, policy, and growth of the economy. It includes the influences on the market, bargaining, and also over policy debate. The economy of the UK is not the same as it was earlier because due to various reasons it got changed (Bose and Kohli, 2018). On the other hand, many developing countries like China and India are making market as they are increasing their productivity and going toward the western market. Investors are always aware of the small risks that they might face while growing their businesses but these days they need to take care of the macro risks too (pwc.co.uk, 2022). That is why the investors are well aware of the problems and focus on the long-term growth of the economy.

Foreign Direct Investment (FDI): Foreign Direct Investment (FDI) is a category of inter-border investment where the investors residing in one country invests in the economy of another nation. Investment in FDI is generally done in an open economy (Koçak and Bar??-Tüzemen, 2022). FDI has positive features as it brings money to a nation and along with that, it brings skills, knowledge as well as technologies from other nations. It provides adequate training to increase their knowledge and expands human capital to boost the economy of the nation (Huy et al. 2021). It has a positive effect on the economy of the UK as the digital investment project was significant for the FDI of the UK. It helped to give new jobs and increased per capita income and savings.

The world economy is going through various issues for the last few years. The pandemic COVID-19 affected the economy of the complete world and the Russia-Ukraine war also affected the world economy (worldinvestmentreport.unctad.org, 2022). Due to the pandemic, food and finance were scarce all over the world, then after this huge economical crisis, the Russia-Ukraine war took place. This war also led the economy down as there was a crisis for food, fuel, and so on.

The economy of the UK shows that its FDI in the year 2019 was 1109 but the pandemic brought it down to 975 in the year 2020, but in 2021 it slightly increased to 993. This shows that the economy of the country got down but still the nation had succeeded to take the economy upward (gov.uk, 2022). The UK got positive outcomes in various fields, that includes health, pharmacy as well as medical devices. The country has positive performance in manufacturing traits as it had got 145 projects in the year 2021. From 2021 to 2022, there were 1589 FDI projects and among those projects, 596 were done by new investors, and the remaining 993 were done by the old investors of the UK.

In the financial year 2020-21, the total number of projects in the UK was 1538, and it increased by 3 percent and got 1589 projects by the next financial year. The economy of the country got involved in 1131 projects in the year 2020-2021, but it turned 1174 in the year 2021-22, which shows a four percent increase (gov.uk, 2022). The impact of the estimated economy on the projects in which the UK is involved was 3875 in the financial year of 2020-2021 and it increased by 82 percent between the years 2021-22 and reached 7034. The UK got 84759 new jobs in the financial year 2021-22 which was 55319 in 2020-21, which shows a growth rate of 53 percent.

This shows that the economy of the UK was affected by various reasons but it still maintained the growth rate of its FDI. Along with the existing industries it came with many new firms to strengthen its economy (Eppinger et al. 2020). Both new and old industries are equally important to grow the economy, as they attract many new jobs for the nation and boost its economy.

Trade models of the UK (with company example)

The trade model is the structure based on step-by-step rules to govern trade activities. The use of trade models helps to make proper decisions neglecting emotions. There are various trade models like the classical model and the gravity model. Every country follows different models whereas the UK maintains the classical trade model. The classical trade model is based on the criteria to lead in a perfectly competitive market (gov.uk, 2022). It assumes that the market has various trade barriers, the same transportation cost all over the world, and all the industries are free to enter the industrial market, hence the model helps to take decisions accordingly and bring the products. Under this model, the factors of supply and productivity determine the size of different sectors of that country. For example, the use of the classical model has helped hotel company like Premier Inn to extend their business in the international market. During the Brexit situation, this model has been very impactful in maintaining the overall business in the competitive market.

The output of the classical model is the product that can be used as the input of final goods. The market is always competitive thus the UK follows the method which can help the nation to become more productive among the competitors. It maintains the strategy to grow its productivity as well as sell. UK market supplies products for all kinds of customers it manufactures goods for both perfectly and imperfectly competitive markets, but along with that, it supplies products that have particular brands to keep customers switched to that branded product only (Keogh-Brown et al. 2020). The classical trade model helps the nation to make a perfect market in this competitive business world and run business smoothly with profit-making strategies. The country has to keep in mind various things to make a good place in the business world, which are transportation costs, tariffs, price of the products, labour, and so on. The use of a classical model of business is thus helpful to the UK to exist in the competitive business world.

UK's role in the world economy

In the world’s economy, the United Kingdom is highly increasing its social market. The UK country is a major part of the built global economy. The UK country is the sixth largest economic country in the world.

• Board of the UK: In the UK, the Directors of the Board decide on a principal goal that helps to protect and to build a strong economy. The Directors contain a different group of business leaders to grow the country's economy (Fahad and Naushad, 2020). After Covid-19, a huge change becomes in the world economy many business turnovers were reduced this situation. The global economy is reduced day by day because many world problems affected this.
• Affected the UK trade market: In 2008, a financial catastrophe affected the economic condition of the UK. Other countries’ policies can change in a year and that is another problem to reduce the UK trade market and tourism also.
• Type of economy: In the 21st century, many UK Company follows some unique idea that helps a company’s economy. It is an advanced level economy to open the market that follows the United Kingdom (Mishra, 2020). The price of the open market is low-rate and their goods and services are good for the consumers.
• Importance of the UK economy: In the world economy, the economy of the UK is a strong history that is lowly diversified and its quality is high. Company services, manufacturing, and construction are managed in a specific sector that works with most of the UK’s GDP.
• Biggest service industry: The UK is a well-known country in their business industry that develops the economic conditions of this country. The economy of the UK is known for its all services, and it is called the services industry (cashfloat.co.uk, 2022). The UK has many retail industries that are known for their good services. In the UK, the retail industry is mostly a part of the global economy 5% of the world economy includes the retail industries of the UK. Mostly, three million people are engaged in this industry and it is higher than any other industry in the world.
• Effects on the UK economy: After the Covid-19 pandemic and the war in Ukraine are the major part of the loss of the economic market. Many bad effects are facing the industry and that is fallen the company growth (business.uq.edu.au, 2022). Rising inflation is one of the parts of the bad economy.
• Inflation of the UK economy: In the economy of the UK, markets are inflation high day by day for their good price and good services. The normal value rises daily so every bit of the currency buys many goods and services. The expectations of inflation and cost-push are the two main causes of inflation.
• The present situation in the UK economy: In the present situation, the rate of growth is slow because jobs are limited right now but the demand for workers is high. So, it is a great problem in those days but it tries to overcome all the issues and solve the economic problem.
• Critical analysis of overall implication: British government have a long struggle with its relationship with other countries. Economically and financially the UK has lost the faith in globalization. Being the biggest service industry all over the world the UK have to play a huge role in the global economy(Ionescu, 2018). After covid-19 the UK faced a slow growth rate of not being eligible to give jobs. Increasing the value of the market may cause decreasing the affection of the consumer. Maintaining the relationship with other countries the UK have to take an effect on its economy. After slow growth in the economy of the UK, they made a board to handle the economic pressure.

Conclusion

In this study, it is known that many difficulties and many challenges are damaged the UK economy. After the covid situation, the economic condition of this country is affected. The global economy is affected also by the Ukraine war. FDI is a category of investment that follows the growth of the UK economy. A small organization is built into a big organization if the organizations are powerful and its thought process is different from the others. Many new ideas are created by some entrepreneurs to increase the economy. In the current situation, the growth rate is slow but the economic management group overcomes all the difficulties.

References

Journals

Bose, S. and Kohli, B., 2018. Study of FDI trends and patterns in BRICS economies during the period 1990–2015. Emerging Economy Studies, 4(1), pp.78-101.

Carlsson-Szlezak, P., Reeves, M. and Swartz, P., 2020. What coronavirus could mean for the global economy. Harvard Business Review, 3(10), pp.1-10.

Diamond, P. ed., 2018. The crisis of globalization: democracy, capitalism and inequality in the twenty-first century. Bloomsbury Publishing.

Eppinger, P., Felbermayr, G.J., Krebs, O. and Kukharskyy, B., 2020. Covid-19 shocking global value chains.

ESCAP, U., 2021. Foreign direct investment trends and outlook in Asia and the Pacific 2021/2022.

Farrell, H. and Newman, A., 2020. Will the coronavirus end globalization as we know it. Foreign Affairs, 16(3), pp.1-4.

Huy, D.T.N., Nhan, V.K., Bich, N.T.N., Hong, N.T.P., Chung, N.T. and Huy, P.Q., 2021. Impacts of internal and external macroeconomic factors on firm stock price in an expansion econometric model—a case in Vietnam real estate industry. In Data Science for Financial Econometrics (pp. 189-205). Springer, Cham.

Keogh-Brown, M.R., Jensen, H.T., Edmunds, W.J. and Smith, R.D., 2020. The impact of Covid-19, associated behaviours and policies on the UK economy: A computable general equilibrium model. SSM-population health, 12, p.100651.

Khan, N., Hassan, A.U., Fahad, S. and Naushad, M., 2020. Factors affecting tourism industry and its impacts on global economy of the world. Available at SSRN 3559353.Khan, N., Hassan, A.U., Fahad, S. and Naushad, M., 2020. Factors affecting tourism industry and its impacts on global economy of the world. Available at SSRN 3559353.

Koçak, S. and Bar??-Tüzemen, Ö., 2022. Impact of the COVID-19 on foreign direct investment inflows in emerging economies: evidence from panel quantile regression. Future Business Journal, 8(1), pp.1-12.

Mishra, M.K., 2020. The World after COVID-19 and its impact on Global Economy.

Ozili, P.K. and Arun, T., 2023. Spillover of COVID-19: impact on the Global Economy. In Managing Inflation and Supply Chain Disruptions in the Global Economy (pp. 41-61). IGI Global.Martin, R., Tyler, P., Storper, M., Evenhuis, E. and Glasmeier, A., 2018. Globalization at a critical conjuncture?. Cambridge Journal of Regions, Economy and Society, 11(1), pp.3-16.

P?unic?, M., Manole, A., Motofei, C. and T?nase, G.L., 2018, May. The globalization in the actual context of the European Union economy. In Proceedings of the international conference on business excellence (Vol. 12, No. 1, pp. 739-750).

Maital, S. and Barzani, E., 2020. The global economic impact of COVID-19: A summary of research. Samuel Neaman Institute for National Policy Research, 2020, pp.1-12.

Ionescu, I.G., 2018. The First Industrial Revolution and general features of the world economy between the 16th century and 1780. SEA–Practical Application of Science, 6(17), pp.183-186.

Websites

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gov.uk, (2022),international trade inward investment result Available at: https://www.gov.uk/government/statistics/department-for-international-trade-inward-investment-results-2021-to-2022/department-for-international-trade-inward-investment-results-2021-to-2022-html-version [Accessed on: 29th October, 2022]

pwc.co.uk, (2022), Shift in global economic power, Available at: https://www.pwc.co.uk/issues/megatrends/shift-in-global-economic-power.html [Accessed on: 29th October, 2022]

worldinvestmentreport.unctad.org, (2022) World investment report, Available at: https://worldinvestmentreport.unctad.org/world-investment-report-2022/#:~:text=Global%20foreign%20direct%20investment%20(FDI,exceptionally%20low%20level%20in%202020 [Accessed on:29th October,2022]