Introduction

Arup Group LTD

The Arup Group are an independent firm of designers, planners, engineers, consultants and
technical specialists offering a broad range of professional services. The Arup Group does
work on a huge scale on all the different continents, undertaking massive projects that take
many years to complete. Through their work, they make a positive difference in the world.
The UKs first international high speed railway, High Speed 1, also known as the Channel
Tunnel Rail Link, is just one example completed on time and on budget. Arups business
report shows a very good performance in the last year (2013) with continued growth and
strengthening profitability. The firms turnover reached 1,048.3m, generating positive pretax profits of 40.4m. The results reflect a positive performance in Asia, America and
Europe.

P1: Explain the effects, of changes in the economic environment on a selected business.

Business cycle

Business cycle - When GDP rises, economic activity is increasing. This is called economic
growth. The level of activity fluctuates over time. Periods of high growth are followed by
periods of slow growth. Sometimes the economy experiences negative growth where there is
a fall in Gross Domestic Product. These fluctuations are known as the business cycle.

Boom
This is when the economy grows quickly. Demand is high as consumers have enough money
to pay for the products/services. Supply and production is also high because of high demand.
During this stage Arup Group can increase building designers who are very creative and
innovative

who

will

design

new

projects

and

buildings.

Downturn
Growth starts to slow down. Consumer spending decreases and businesses invest less in

capital

equipment.

During this stage Arup Group will make some workers redundant as Arup Group will find it
problematic

to

pay

salaries

while

consumer

spending

are

decreasing.

Recession
If downturn last for a long time it can lead to a recession. Supply and demand is low as
consumers dont have much money to spend, recession can seriously harm some businesses.
This is a worth part because demand on Arup Group as investors don't want to lose their
money which means that Arup Group projects will be slow downed during this stage. Apart
from low demand, Arup Group will also have to pay taxes which are quite high in the UK.

Recovery
GDP starts to rise again as consumer spending increases and business produce more goods
and

services.

During recovery stage the economy growth stabilizes which means supply & demand
increases again. At this stage Arup Group will increase employees again to ensure that all
planned projects have been started. Arup Group will increase sales as well as investors are
ready
The

to
changing

levels

of

invest.
Demand

across

the

cycle

Arup Group can be affected by the different cycle stages. During the Boom, Arup Group will
increase their demand by planning more building designs, economics planning, infrastructure
and etc, as a people, organizations or even governments have enough money to afford Arups
services. During the Downturn, Arups Group demand will be decreased as consumers spend
less. Throughout the time, downturn will lead to Recession, Arup can be seriously harmed
because their services are very expensive and during the recession fewer and fewer
organizations are ready to spend large amounts of money. The final stage is Recovery, Arup
Groups sales will be increased again as GDP and firms spending increase again.

Ripple Effects
Unemployment - could cause some serious problems for Arup Group. The reason is that
during the recession caused by the banks in 2009. Some governments and organizations
cannot afford Arups services which cause employment problems for Arup as they have to cut
down wages and make workers like architectures redundant.
Unemployment
Unemployment
Indicators of Recovery

The leading indicators goes after recession which means GDP increases, Arup Group will be
able to design new private houses or office buildings because demand will grow again, it
means that people will have money to spend again as their salaries grow. Aron Group may
also be able to afford new plant and equipment to design buildings or infrastructures. Aron
group could also employ more workers in different regions as the demand could also grow
after
How

recession
the

changing

in

employment

levels

specific
at

the

stages

regions.

will

affect

the

firm

Arup Group will employ more people who specialize and have academic knowledge in
engineering area. More regions will have money to invest into infrastructure, building design
and culturally-appropriate businesses. To do these Arup will need more employees who can
plan

and

structure

offered

services

well.

The likely impact of periods of high and low inflation. If the actual inflation is higher than the
target

rate

of

2%,

it

is

high

inflation,

below

2%

is

low

inflation.

During the low inflation, Arup Group may predict the future of economy, thus providing a
climate that is more favourable to sound, sustained economic growth and job creation. Arup
Group can make long-range plans because they know that the purchasing power of their
money

will

hold

and

will

not

be

steadily

eroded

after

year.

However, high inflation is less beneficial. High inflation can cause the populations
confidence in their own currency and economy to decline. High inflation therefore often has a
harmful effect on economic growth. If inflation gets too high, Arup Group will have to
increase

prices

P2:Identify

how

on

services

government

they

offer

policies

to

impact

maintain
on

profit

margin.

selected

business.

Policies
Industrial Policy - This is a policy which helps guide the total strategic effort of the country.
It influences the development of different sectors and it also helps create a stronger portfolio
of national industry. Overall, Industrial Policy is about building the countrys future and is
done by creating new jobs and new industries. Arup Group can help to plan infrastructure, or
they

can

also

help

to

design

new

manufacturing

factories

and

etc.

Regional Policy - The UK Government split the UK into a number of different regions to
develop policies for their different needs. In 2004 a guide known as the Regional Spatial
Strategy was contracted and contained 3 main sections. Phase 1 consisted of the development
of a long term strategy for the Black Country. Phase 2 consisted of developing housing,
employment land, urban capacity, transport and waste, and water policies, together with
overcharging policies relating to climate change and sustainable development. Phase 3
consisted of the development of rural services, gypsies, travellers and travelling, showpeople,

culture,

sport

and

tourism,

the

environment

and

minerals.

Transport Policy - This policy covers many different areas and links with not just economic
policy but also links with environmental policy. The areas that the policy covers are; road, air,
train and shipping. These all affect the levels of crime, taxation and congestion. this ensures
that they can operate as effectively and efficiently as possible, this is why it is considered at a
national and regional level so goods and people can be transported easily. It;s important for
Arup Group that transport links are good in the UK because Arup needs to be supplied with a
different goods. In case, of poor transport links Arup Group will not be able to operate as
efficient

and

effective

as

possible.

Competition Policy - This policy puts businesses under constant pressure to offer the best
possible range of goods at the best possible prices, because if they don't, consumers have the

choice to buy elsewhere. The Government regulate competition because it makes good use of
the economys resources through enterprise and efficiency and good performance on pricing,
quality and choice. They also make sure that one of two businesses are not dominating the
market. Competition policy let smaller business to operate in the same market as Arup does.
However, this policy tells that bigger companies cannot takeover smaller ones. Competition
policy also benefits Arup Group because they can offer many different services which can be
different

from

the

rest.

Educational Policy - The government policy on education has a very large impact on the
way that businesses operate and the level of skills in the population. Education and training is
linked with industrial policy to make sure that people are being trained for employment in
areas that will help the economy. Education policy dictates the type of qualifications that are
studied and which qualifications money is invested in. It also supports different types of
training, such as literacy and numeracy skills as well as funding for students wanting to study
in

higher

education.

Environmental Policy - Government policy with regards to the environment is closely

linked with transport and industry policy because these areas need to complement one
another. Environmental policy is led by the Department for Energy and Climate Change
(DECC). The Acts targets are that a UK-wide climate change risk assessment must be
completed every five years, a programme must be put in place to reduce climate change risk,
public authorities and some companies must report on what they are doing to reduce climate
change risk and a climate strategy has to be established. Environmental policy impacts on
Arup Group by telling them that Arup Group should produce minimum pollution as it harms
environment and people national habitats. Pollution also contrubites to global warming which
is

another

impact

covered

by

this

policy.

Social Policy - This policy means that the UK government put in place welfare and social
protection. It relates to social services and the welfare state. It directly links to the economic
environment because it relates to issues such as health, employment, community care,
housing, crime and social disadvantage. Social policy affects businesses that are given to
people, whether they are means-tested or universal (given to everyone), such as hospitals, and
investment in programmes for housing and crime prevention. Social policy affects businesses
because it ensures that employees are treated equally in terms of their age, gender, race,

sexual orientation, disability, religion or belief. The National Minimum Wage is part of social
policy and it sets the minimum levels at which employees must be paid. Arup Group must
ensure that employees are fairly paid, no discrimination is allowed and etc.

P3:Identify the impact of government spending on a selected business

Multiplier Effect
Arup Group offer services which benefits government because they work on infrastructures,
economics and plannings, building designs and etc. Basically, Arup Group offer services
which are there to sustain economy and increase GDP. The United Kingdom has enough
funds to invest them into different areas. For example, the UK Government and Arup Group
are planning to build high-speed rail line between London and the West Midlands. The route
is expected to be 400kph high-speed line which would be designed to international standards.
High-speed offers a sustainable, progressive means of managing the economic and
environmental cost of road and air travel, as well as offering fast connectivity and a positive
passenger experience. If government finally decide to build an HS2 there, employment rate
will be increased the country because people will be given jobs around the UK. Government
will be able to increase money from HS2 as people will have to pay for using HS2 service.

Two Government Policies

Arup Group Ltd has been impacted by the Transport Policy. This is because it covers many
different areas and links to economic policy and the environmental policy. Transport policy
covers the road, train, air and shipping. The Arup Groups have to consider the transport
policy at a national and regional level to ensure that the UK has good transport systems that
help businesses to operate as efficiently and effectively as possible. Arup Group have
responded to this by creating innovative solutions and having a good technical understanding
of their engineering field. Arup Group needs good and reliable transport links which can be
found in the UK. The UK has good economic situation, nevertheless, Government is still
considering HS2 which can be found in the most developed countries in Europe such as:
France and Germany. However, it will take time and money as well. Some farmers might lose
their land as HS2 requires it. Government has to consider all the pros and cons before starting
the project. Nevertheless, If government wants to cooperate with Arup, it will certainly

benefit them as they will improve relations with the UK government by building HS2 links
across the country. It also means that government will invest money which will increase
productivity of Arup Group. As productivity increases, Arup will employ more workers
which

will

then

lead

to

an

expansion.

Arup Group has also been impacted by the Competition Policy. The UK has quite a lot of
organizations which are there to offer same or at least similar range of services. The UK
government to encourage businesses to improve the quality of the services, if services are not
good enough. Competition gives a choice for government and investors, Arup Group will
have to make their services different from the rest to out stand from the competitors. If
competition is high, there is a possibility that Arup Group might reduce a price to win the
competition. Arup Group has responded by increasing range of services to ensure that only
them can offer the service for an optimum price. Competition policy gives a chance for Arup
Group to out stand from other competitors or organizations which offer similar services.
However, there might be more innovative firms which offer better services than Arup Group
which means Arup is going to lose sales. This policy decreases Arup's sales as there are many
firms

which

offer

similar

services.

Decreased sales will make some employees redundant as Arup will not be able to pay wages
and salaries. Furthermore, reduced sales will block a chance for expansion. Arup Group is
dominating the market as they are monopoly and have over 25% of the market, the
competition policy stop them and gives a chance for a smaller firms which might find it hard
to compete with an organization like Arup Group.
P4:Explain how both fiscal and monetary policy decisions have affected a selected
Business.

Arup Group like every business will be affected by Monetary and Fiscal policies, whether
this be directly or indirectly Arup Group will be affected more indirectly by these policies
and in this report I will explain how Fiscal Policy involves the Government changing the
levels of Taxation and Government Spending in order to influence AD (Aggregate Demand)
and therefore the level of economic activity. Monetary Policy involves using interest rates or
changes to money supply to influence the levels of consumer spending and Aggregate
Demand.

Fiscal Policy
Fiscal policy is a policy that allows a government to increase its tax rates and spending levels
to help the economy grow. Fiscal policy helps decrease unemployment and control inflation
by lowering tax rates to increase economic growth. Fiscal policy was created by the ideas of a
British economist called John Maynard Keynes. Fiscal policy influences in government
borrowing from banks and the rates of debt. If the UK government increase tax they will be
able to squeeze out money from the economy. Fiscal policy impacts on businesses like Arup
Group because they have to pay income tax every year in order for the government to raise
revenue and also enables it to discourage various activities and to encourage other people
who are suffering from low rates in tax and subsides. Taxation affects Arup Group when they
make their profit.
Direct Taxation
Direct taxation is when tax is paid directly to an organisation. Direct taxation has a huge
effect on businesses as this will increase their income and profit Businesses can be able to
invest money inside their business. Examples of direct taxation are:
Income tax- This is a tax that governments receive from businesses' growth on sales. This
benefits those businesses because it will increase their income and profits. They will receive
more money which they can be able to invest inside the business Businesses have to file a tax
return every year to see if they are owed any taxes or they organised a tax refund. Income
taxes increases public spending such as bus services, library services, schools, and hospitals.
The current basic rate for 2014-15 by 20% is 0-31,865. The current higher rate by 40% for
2014-15 is f31,866-150,000. The current additional rate by 45% for 2014-15 is over
150,000. Income taxes affect business like Arup Group because it will affect the amount of
profit they make.
Corporation Tax- This is a tax on company profits that they earn. This applies mostly on
their operating earnings and expenses such as vehicles, repayment of loans, office equipment
such as pens, pencils, desks and computers. Many businesses tend to pay their corporation
taxes at smaller amounts to be able to reinvestment more in their businesses at a later time.
Taxable profits that associate with corporation tax are trading profits & investment profits
which both of them are linked to businesses' taxable income. The current corporation tax rate

for businesses in 2014 is 20% for the profit 300,000 or less. The current corporation tax rate
for businesses in 2014 for profits above 300,000. The rise in corporation tax increases
inflation. Corporation tax impacts on Arup Group because demand & sales will decrease due
to the increase of prices.
National Insurance contributions-This is a tax that involves heavily on a business's
income. National insurance contributions are funded for the ill and unemployed and it is later
paid in state pensions. National insurance contributions are made through income taxes &
payrolls. This benefits government spending because the government can spend more money
on public services for consumers. Contributions are unlimited as they are removed from
upper income levels allowing the process of the contributions to function successfully. The
current rate for the contributions below 111 (lower earnings unit) is 0%. The current rate for
the contributions by 111- 153 (primary threshold) is 0%. The current tate for the
contributions by 153.01-805 (upper earrings unit) is 12%. The current rate for the
contributions above 805 is 2%. National insurance contributions impacts on Arup Group
because Arup Group can invest more money in their business. Arup Group will use their
profits to pay for their national insurance contributions. Consumers will have to pay their
contributions which will reduce their disposable income. They will not be able to afford Arup
Group s products which sales & profit will decrease for the business.
Indirect Taxation- Indirect taxation is when taxes are taken indirectly from consumers and
added to prices on products by businesses which will be charged to the consumer. It allows
the consumer to pay more for products as prices have increased. Examples of indirect
taxation are:
Value Added Tax (VAT) - This is a tax that is charges on the goods and services produced
by businesses in the UK. VATs are also added to goods and services that are produced in the
European Union. VATs covers business gifts, staff meals, and sales. Arup Group are implied
to pay VATs in order to increase their tax revenue. The UK's VAT is 20%. The VAT changed
in january 2011. This will impact on Arup Group because prices will increase by 20%.
Demand and sales will decrease.
Excise duty- This is an indirect tax that the government does not directly apply too. Excise
duty involves on goods, services, tobacco, alcohol, and fuel. Excise duty is usually involved
with luxurious goods which can be harmful to the environment. Excise duty can raise
government revenue and to reduce demand also.

P5:Describe the impact of international factors on a selected business.

Businesses are affected by an external environment as much as they are affected by their
internal actions and decisions. The business environment is greatly influenced by global
forces and trends that tend to define how organisations supposed to exists and participate in
business world in future. International events, both economic and political, can have
significant effects on the activities of businesses in the UK and worldwide. Understanding of
the nature of these factors and events taking place worldwide is important while developing a
business strategy and is extremely curtail to secured development of any business
organisation.
European Factors
The European Union - can be described as a group of European countries that participates in
the world economy as one economic unit and operates under one official currency, the euro.
EU is a politico-economic union of 28 member states that are located primarily in Europe.
The EU operates through a system of supranational institutions and intergovernmental
negotiated decisions by the member states.
Through factors such as laws, regulations, directives, taxation, spending, etc... EU has a
power to influence any business operating within the territory of the EU. Similar to UK
Parliament EU can regulate its taxation and spending, which may affect on UK businesses
just like fiscal policy by the central government. Thus, Arup Group feels a significant impact
of EU's actions.
For example if next year, EU decides to spend most of the fluids raised from taxes for Italy's
agriculture, construction of the UK may experience a significant squeeze. The 2020 Carbon
Budget plan implemented by the EU has a huge impact on Arup Group operations as well:
regulation of carbon emission forces the company to shift towards producing more
sustainable and ecologically-friendly cars, which involves replacing production lines within
most of the factories and looking for new sources of supply for the eco-friendly materials to
be used
Due to the influence of the European Union on the UK, the directors of Arup Group are
responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations. Company law enforced by the EU requires the directors to

prepare financial statements for each financial year. Under that law the directors have elected
to prepare the financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. Under Company law the directors
must not approve the financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the company and of the profit or loss of the Jaguar Land
Rover for that period. In preparing these financial statements, International Accounting
Standard 1 requires that the senior management of Jaguar Land Rover:
Properly select and apply accounting policies: present information, including accounting
policies, in a manner that provides relevant, reliable, comparable and understandable
information.
Provide additional disclosures when compliance with the specific requirements in IFRS are
insufficient to enable users to understand the impact of particular transactions, other events
and condition on the entitys financial position and financial performance.
make an assessment of companys ability to continue as a going concern.

References:
Gillespie A Business in Action (Hodder Arnold, 2002) ISBN 0340848200
Marcouse I et al Business Case Studies, 2nd Revised Edition (Hodder Arnold, 2003) ISBN10 0340811102
Sawyer M The UK Economy, 16th Revised Edition (OUP Oxford, 2000) ISBN-10
0199266514
Whitakers Almanack 2009 141st Revised Edition (A & C Black Publishers Ltd) ISBN-10
1408104229
Websites
www.britishchambers.org.uk the British Chambers of Commerce site for exporting
www.businesslink.gov.uk the Business Link site for importing and exporting
www.direct.gov.uk