With reference to organisations or industries that you know, to what extent do you think that recent changes in the UK economy will have inevitably damaged the long-term profits of businesses that operate in this country?
Long-term profit is the amount of money a business makes (revenue minus costs) over a long term period. In this case it is referring to the profitability of a company and how much money it will be able to make in the future. There have been many ...view middle of the document...
British Airways is a UK based company that has been affected by the recent changes in the economy, in particular it has affected the demand for its products and also the costs of the business.
The UK economy is in recession, so the Bank of England have decided to keep interest rates low in order to encourage spending in the economy to try and get us out of the recession. The impact of low interest rates on a business such as British Airways is that their borrowing costs decrease significantly. With British Airways operating in such an expensive market, this is a very positive thing. Airplanes are an expensive good and borrowed money is needed to purchase such goods, therefore low interest rates for British Airways would mean a decrease in the costs of this firm and could also mean an increase in their supply if they choose to invest further. So in this case British Airways long term profits will not have been damaged, in fact if they were to invest then long term profits would likely increase. In this recession the Pound Sterling has decreased in value against other countries such as the Euro and the Dollar. A weak pound means an increase in the price of imports and a decrease in the price of exports