Syllabus: 3.2 Influences on Business
Module: 3.2.2 Ethical and Environmental Considerations
Lesson: 3.2.3 The Economic Climate on Businesses

Introduction

This article unpacks section 3.2.3 of the AQA GCSE Business syllabus: The Economic Climate on Businesses. Positioned within the wider theme of “Influences on Business,” this section challenges students to link macroeconomic indicators to real business impacts — a vital skill for students preparing for exams and, more importantly, for life in a world where inflation, interest rates and economic growth are constant headlines.

Aligned to the AQA specification, this lesson helps students understand how external factors affect decision-making and strategy in business. It’s also a strong point of connection to wider careers, particularly those in finance, economics, and enterprise.

Key Concepts

AQA outlines the following as core areas students must cover:

• The impact of the economic climate on businesses: including how variables like employment, consumer income, interest rates, exchange rates, and inflation affect business costs and demand.

• How these changes influence business decisions: students should be able to explain how businesses may respond to changes in the wider economy, such as raising or lowering prices, adjusting production, or changing investment plans.

• Examples of economic influence:

  • A rise in interest rates increasing borrowing costs.

  • A fall in consumer income reducing demand for luxury goods.

  • A fall in exchange rates making exports cheaper and imports more expensive.

These topics are tightly linked to real business behaviour and macroeconomic conditions — giving students tools to explain the “why” behind the news.

Real-World Relevance

This topic gives you ample opportunity to connect learning to the real economy. For example:

• Inflation in the UK (2022–2023): With inflation peaking above 10%, many businesses saw increased costs for raw materials and had to raise prices, reduce packaging sizes (shrinkflation), or renegotiate supplier contracts.

• Interest rate rises by the Bank of England: Higher borrowing costs have hit SMEs especially hard, influencing whether they can afford to grow, invest or even survive.

• Exchange rate fluctuations: UK exporters have benefited from a weaker pound making their goods more affordable overseas, while import-heavy businesses have had to manage higher input costs.

A simple classroom discussion prompt: “How might Greggs or Tesco respond differently to rising inflation?” brings these examples to life.

How It’s Assessed

Students will encounter these concepts in Paper 1: Influences of operations and HRM on business activity, with likely question formats including:

• 1–2 mark questions testing knowledge recall (e.g. “State one way a rise in interest rates affects businesses”)

• 3–6 mark explain or analyse questions using context (e.g. “Explain how a fall in consumer income may affect a business selling luxury products”)

• 9 mark questions requiring evaluation, often framed as: “Justify whether X should expand operations during a period of high inflation.”

Command words include:

• Explain: show cause and effect

• Analyse: develop a logical chain of reasoning

• Evaluate: weigh up arguments and make a supported judgement

Teachers should encourage structured responses using frameworks like BLT (Because, Leads to, Therefore) to build reasoning.

Enterprise Skills Integration

This topic is a natural home for decision-making and problem-solving:

• Business Simulations by Enterprise Skills can immerse students in economic decision-making, where they must manage a business through an inflationary period, weigh up the risks of borrowing, or respond to shifting consumer demand. This “learning by doing” helps students internalise the consequences of economic change.

• Scenario tasks: Students might be tasked to advise a small business whether to expand operations during a recession — building critical thinking and resilience.

• These experiences also foster commercial awareness — understanding how external events impact strategy — a key skill for the modern workforce.

Careers Links

This topic connects directly to Gatsby Benchmarks 4, 5, and 6, supporting career-linked learning across the curriculum.

Relevant career pathways include:

• Economist: analysing macroeconomic trends and advising government or business.

• Financial Analyst: understanding market conditions to advise investment.

• Business Consultant: helping companies respond to economic changes.

• Marketing Manager: adjusting campaigns based on consumer income trends.

• Entrepreneur: navigating uncertainty, interest rates, and consumer demand.

A simple task: “Find a job advert that mentions interest rates, inflation, or consumer confidence.” This helps students see the topic’s career relevance immediately.

Teaching Notes

Common pitfalls:

• Students often confuse interest rates and inflation — be explicit with definitions and use clear visual examples.

• Misunderstanding exchange rates — practice currency conversions and use case studies of import/export firms.

Suggestions:

• Use current news clips to prompt discussion: e.g. BBC News or Bank of England updates.

• Embed active tasks: e.g. “If you were CEO of a coffee chain, what changes would you make in a recession?”

• Rehearse exam questions with scaffolding: “State → Explain → Evaluate”

• Incorporate Enterprise Skills’ Business Simulations as a plug-and-play enrichment or module reinforcement activity. These are curriculum-aligned and reduce prep time.

Stretch and Challenge:

• Ask students to research a UK business and present how it’s responding to current economic trends.

• Use mini case studies or enterprise tasks: e.g. plan a product launch when consumer incomes are falling.