uk pestle analysis final

8/10/2019 Uk Pestle Analysis Final

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KEY FACTS

UNITED KINGDOM - KEY FACTS

COUNTRY AND CAPITAL

Full name United Kingdom of Great Britain and Northern Ireland

Capital city London

GOVERNMENT

Government type Parliamentary constitutional Monarch

Head of state Queen Elizabeth 2

POPULATION Approx. 63 million

CURRENCY Pound sterling (GBP)

GDP PER CAPITA PPP $ 36,510.80

DEMOGRAPHIC DETAILS

LIFE EXPECTANCY

80.17 years (total population)

78.05 years (men)

82.40 years (women)

ETHNIC COMPOSITION

(2001 CENSUS)

White (of which English 83.6%, Scottish 8.6%, Welsh 4.9%,

Northern Irish 2.9%) 92.1%, black 2%, Indian 1.8%, Pakistani

1.3%, mixed 1.2%, other 1.6% (2001 census)

MAJOR RELIGION (2001

CENSUS)

Christian (Anglican, Roman Catholic, Presbyterian, Methodist)

71.6%, Muslim 2.7%, Hindu 1%, other 1.6%, unspecified or

none 23.1%

COUNTRY AREA 243,610 km2

LANGUAGE English, Scots, Scottish Gaelic, Welsh, Irish and Cornish

EXPORTS

Nuclear reactors, boilers, machinery and mechanical

appliances (including parts thereof), Mineral fuels, mineral oils

and products of their distillation, bituminous substances and

mineral

IMPORTSMachinery, chemicals, vehicles, metals, agricultural products,

textiles


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PESTLE ANALYSIS

SUMMARY

When companies are looking to invest in different countries or locate offices in those countries,

their management will often seek to run a PESTLE analysis of that country. PESTLE stands for

political, economic, social, technological, legal and ecological elements within what is called an

"external macro-environment," which can range in size from a major city to an entire country.

The UK comprises Great Britain (England, Wales and Scotland) and Northern Ireland.

Politically UK follows a constitutional monarchy and parliamentary system where monarchQueen Elizabeth is Head of State and Prime Minister David Cameron is the head of

Government. The Great Britain countries are associated with UK but not constitutionally part of

it. Currently UK is politically stable and there is less military involvement in government

decisions.

UK is one of the largest economies in the world. As in most other developed countries the

manufacturing sector has been declining while services sector is inclining in growth. The UK

was hard hit by the global economic crisis in 2008-09 and again by the Euro zone crisis. UK is

also a member of United Nations Security Council and European Union.

Socially UK has a wide selection of people from different social backgrounds. In the UK,

generally there is a high education level, meaning that people will be more demanding.

Religion and culture are also considerations within the social section. In the UK there are a

variety of religions and cultures including Christians, Muslims, Hindus, Jews and many more.

Technologically UK is a place of innovation and research. UK government allows tax credit

for those companies who are investing in Research and development. Universities of UK are


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top listed universities and are known for their research program. The Internet is becoming

more widespread within the UK, with millions of people using it every day within the UK alone.

United Kingdom has three laws in it. First is English law for England and Wales, second is

Northern Ireland law and third is Scottish law. TheSupreme Court of the United Kingdom is thehighest court in the land for all criminal and civil cases in England and Wales and Northern

Ireland, and for all civil cases in Scots law. According to the crime statistics report criminal and

civil crimes in England and Wales has decreased by 48% because of the strict legal system.

Environmentally, the UK is clean and green and worried about CO2 emission. They have

made some of the most ambitious pledges about going even greener. UK bodies have

achieved their target of 15% reduction of greenhouse gases and now their target is to reduce it

by 20%. UK bodies are also working on lowering the industrial waste disposal and want to

recycle the household wastes.
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POLITICAL ANALYSIS

OVERVIEW OF UK POLITICAL SYSTEM

Great Britain is a constitutional monarchy. This means that the official head of the State is the

monarch (a king or a queen) but his or her powers are limited by the constitution. For years it

has been Her Majesty Queen Elizabeth II.

Parliament:

The UK Parliament is the supreme legislative body in the UK and British overseas territories.

The parliament is a bicameral assembly, with an upper house, the House of Lords, and a lower

house, the House of Commons. At its head is the Sovereign, Queen Elizabeth II. The House of

Commons and the House of Lords are both involved in passing legislation, scrutinizing the

work of the government and debating current issues. Members of the House of Lords are

mostly appointed by the

Queen. The House of Lords

acts as a chamber of review

for legislation passed by the

lower house.

The Supreme Court of the

United Kingdom is now the

highest court for all matters

under English law, Northern

Irish law and Scottish civil

law. Members of the House

of Commons are publicly

elected. Members of the

Commons alone are

responsible for making

decisions on financial Bills,

such as proposed new

taxes. The Lords can consider these Bills but cannot block or amend them.
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Government:

As far as formation of government is related the political party or coalition that wins the mostseats in a general election forms the new government, led by its party leader, who then

becomes the Prime Minister. At the general election held on 6 May 2010, the Conservative

Party, led by David Cameron, won 306 of the 650 seats in the House of Commons. The Liberal

Democrats, led by Nick Clegg, won 57 seats. Following the election, the Conservatives and the

Liberal Democrats announced a coalition Government with David Cameron as Prime Minister

and Nick Clegg as Deputy Prime Minister.

Crown:Along with the House of Commons and the House of Lords, the Crown is an integral part of the

British Parliament although the Queen's modern role has become largely ceremonial. The

Queen is only a formal and symbolic head of State. Generally, the day after a general election

the Queen invites the leader of the party that won the most seats in the House of Commons to

become Prime Minister and to form the government. The Queen opens Parliament through the

State Opening. She also dismisses Parliament before a general election at the request of the

Prime Minister. In reality, the Queen acts only on the advice of her ministers.

Devolution:

Parliamentary reforms in the UK referred to as "devolution", have created a number of national

assemblies, including a national Parliament in Scotland, a national Assembly in Wales and a

national Assembly in Northern Ireland. Scotland, Wales and Northern Ireland all held

successful referendums on devolution in the late 1990s. This led to the establishment of the

separate national assemblies and the democratic election of officials. The Scottish Parliament

and the National Assembly for Wales took responsibility for their devolved powers on 1 July

1999, the Northern Ireland Assembly on 2 December 1999. The Northern Ireland Assembly

was suspended at midnight on 14 October 2002. Power was restored to the Assembly on 8

May 2007.

Europe:


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The UK is one of 27 member states of the European Union (EU) and is subject to EU

legislation. One of the roles of the UK Parliament is to scrutinize EU draft legislation and other

EU documents and to change UK law to reflect agreed EU legislation and treaties. In the UK

the Scrutiny Reserve Resolutions provide that no UK minister should agree in the European

Council of Ministers or the European Council to a proposal that is still 'subject to scrutiny' in the

UK Parliament , and if they do, requires them to explain their reasons. The UK Parliament

receives copies of EU documents, together with an Explanatory Memorandum prepared by the

relevant government department. Documents are considered by the Scrutiny Committees in

both the Commons and the Lords.

ELECTION, POLITICAL PARTIES IN UK AND THEIR CURRENT

REPRESENTATION

The UK political system is a multi-party system. Since the 1920s, the two largest political

parties have been theConservative Party and theLabor Party.Before the Labor Party rose in

British politics the Liberal Party was the other major political party along with the

Conservatives. There are six types of elections in the United Kingdom: United Kingdom

general elections, elections to devolved parliaments and assemblies, elections to the

European Parliament, local elections, mayoral elections and Police and Crime Commissioner

elections. General elections have fixed dates, and must be called within five years of the

opening of parliament following the last election. United Kingdom general elections are held

following, dissolution of Parliament. All the Members of Parliament forming the House of

Commons of theParliament of the United Kingdom are elected. Following theParliament Act

1911,parliamentary sessions last a maximum of five years, and are ended by the dissolution

of Parliament. Traditionally the dates of general elections are not fixed in advance, and the

time is chosen by the governing party to maximize political advantage. The2010 election was

held on 6 May 2010.

Candidates aim to win particular geographic constituencies in the United Kingdom. Each

constituency elects one MP by the first past the post system of election. At the 2005 general

election, there were 646 constituencies, thus 646 MPs were elected to Parliament. The party

with the most seats usually forms the government, and the second largest party forms Her
http://en.wikipedia.org/wiki/Multi-party_systemhttp://en.wikipedia.org/wiki/Conservative_Party_%28UK%29http://en.wikipedia.org/wiki/Labour_Party_%28UK%29http://en.wikipedia.org/wiki/Liberal_Party_%28UK%29http://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/European_Parliamenthttp://en.wikipedia.org/wiki/Police_and_Crime_Commissionerhttp://en.wikipedia.org/wiki/Dissolution_of_the_Parliament_of_the_United_Kingdomhttp://en.wikipedia.org/wiki/Members_of_Parliamenthttp://en.wikipedia.org/wiki/British_House_of_Commonshttp://en.wikipedia.org/wiki/British_House_of_Commonshttp://en.wikipedia.org/wiki/Parliament_of_the_United_Kingdomhttp://en.wikipedia.org/wiki/Parliament_Act_1911http://en.wikipedia.org/wiki/Parliament_Act_1911http://en.wikipedia.org/wiki/United_Kingdom_general_election,_2010http://en.wikipedia.org/wiki/List_of_United_Kingdom_Parliament_constituencieshttp://en.wikipedia.org/wiki/First_past_the_posthttp://en.wikipedia.org/wiki/Official_Opposition_%28United_Kingdom%29http://en.wikipedia.org/wiki/Official_Opposition_%28United_Kingdom%29http://en.wikipedia.org/wiki/First_past_the_posthttp://en.wikipedia.org/wiki/List_of_United_Kingdom_Parliament_constituencieshttp://en.wikipedia.org/wiki/United_Kingdom_general_election,_2010http://en.wikipedia.org/wiki/Parliament_Act_1911http://en.wikipedia.org/wiki/Parliament_Act_1911http://en.wikipedia.org/wiki/Parliament_of_the_United_Kingdomhttp://en.wikipedia.org/wiki/British_House_of_Commonshttp://en.wikipedia.org/wiki/British_House_of_Commonshttp://en.wikipedia.org/wiki/Members_of_Parliamenthttp://en.wikipedia.org/wiki/Dissolution_of_the_Parliament_of_the_United_Kingdomhttp://en.wikipedia.org/wiki/Police_and_Crime_Commissionerhttp://en.wikipedia.org/wiki/European_Parliamenthttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Liberal_Party_%28UK%29http://en.wikipedia.org/wiki/Labour_Party_%28UK%29http://en.wikipedia.org/wiki/Conservative_Party_%28UK%29http://en.wikipedia.org/wiki/Multi-party_system


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Majesty's Loyal Opposition. In 2010The election took place in 650 constituencies across the

United Kingdom under thefirst-past-the-post system.

The table below is showing the political parties in UK and their current representations.

Party UK

House of

Common

Scottish

Parliament

National

Assembly

for Wales

Northern

Ireland

Assembly

London

Assembly

European

Parliament

Conservative

Party

306 15 14 - 9 25

Liberal

Democrats57 5 5 - 2 11

Labor Party 257 37 30 - 12 13

Democratic

Unionist Party8 - - 38 - 1

Scottish

National Party6 69 - - - 2

Sinn Fein 5- -

29-

1

Plaid Cymru

Party of

Wales

3 - 11 - - 1

Social

Democratic3 - - 14 - 0

Alliance Party

of Northern

Ireland

1 - - 8 - 0

Green Party

of England1 - 0 - 2 2

Respect Party 1 0 0 - - 0

Ulster

Unionist Party0 - - 15 - 1

Scottish 0 2 - - - 0
http://en.wikipedia.org/wiki/Official_Opposition_%28United_Kingdom%29http://en.wikipedia.org/wiki/Elections_in_the_United_Kingdomhttp://en.wikipedia.org/wiki/United_Kingdom_constituencieshttp://en.wikipedia.org/wiki/First-past-the-posthttp://en.wikipedia.org/wiki/List_of_political_parties_in_the_United_Kingdom#cite_note-SNP-PC-3http://en.wikipedia.org/wiki/List_of_political_parties_in_the_United_Kingdom#cite_note-SNP-PC-3http://en.wikipedia.org/wiki/List_of_political_parties_in_the_United_Kingdom#cite_note-SNP-PC-3http://en.wikipedia.org/wiki/List_of_political_parties_in_the_United_Kingdom#cite_note-SNP-PC-3http://en.wikipedia.org/wiki/First-past-the-posthttp://en.wikipedia.org/wiki/United_Kingdom_constituencieshttp://en.wikipedia.org/wiki/United_Kingdom_constituencieshttp://en.wikipedia.org/wiki/Elections_in_the_United_Kingdomhttp://en.wikipedia.org/wiki/Official_Opposition_%28United_Kingdom%29


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Green Party

UK

Independence

party

0 0 0 1 0 13

GENERAL ELECTION OF 2010

The last general election was held in May 2010 to elect House of Common members. In 650

constituencies election took place under first past the post system. Conservative party led by

David Cameron won the election but could not able to get majority that is 326 seats in order to

create overall majority that is why it resulted in hung party. The coalition partner ofConservatives was Liberal Democrats. Before this general election Labor party ruled in House

of Common for 13 years. Mr. David Cameron then becomes the Prime Minister of United

Kingdom and representative of House of Common.

This Election happened because the Prime Minister at that time Gordon Brown of Labor party

asks the Queen Elizabeth to dissolve the parliament and call for re-election. Brown asked the

Queen to dissolve Parliament because in the UK it is the Prime Minister who chooses when to

hold an election. The only limitation is that he must call an election within 5 years of the lastone. Brown stepped down because, regrettably, his party lost the election. No party won a

majority in the election, so at first there was no winner and so Brown remained as the Prime

Minister until a stable government could be formed.

CURRENT STRENGTH AND OPPORTUNITY

Political stability

The United Kingdom (UK) is a CRT-1 country with very low levels of risk across all three

categories one is political risk, second is economic risk and third is financial system risk.

Parliamentary sovereignty is a key convention, so it is part of the constitution; it states that

parliament is the supreme law making body, therefore in ensures a clear centre of authority.

Parliament can make, amend and repeal laws, they are the supreme law. Furthermore there

is less of military influence in the UK political and constitutional system.


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Flexibility of constitution

The UK constitution is uncodified which is in itself is a strength. Unlike a codified constitution

(the USA), the UK has flexibility and is able to adapt to new circumstances. For example in

1998 the Human Rights Act was introduced to UK law. In the USA this would be a lengthy

procedure as they would have to amend the rigid constitution, as a result there have only

been 27 amendments since the constitution was written. Whereas a simple act of parliament

can change the UK constitution. Flexibility is strength within the constitution because power

is not rigidly set. It can be distributed across the three branches of government: the

legislature, the executive and the judiciary.

European Union Member

Being a part of the European Union, makes you a part of the single market, which is a common

market and customs union between the member countries. The single market involves the free

movement of the following 3 important aspects:

1. Free movement of goods: goods can be moved freely throughout member countries. The

only restriction that may be placed on a good is when there is a risk, such a public health risk,

environment, or consumer protection.

2. Free movement of capital: allows investments to move between countries without any

additional cost. These investments include things such as property purchases and buying

shares between countries. In 2005 the Commission of the EU completed the legislative phase

of an action plan aimed at developing a true European-wide market in financial services and is

now trying to put a new strategy in place to deepen financial integration and deliver further

benefits to industry and consumers alike among England and the other countries.

3. Free movement of services: allows citizens to move, work, live, and retire in any member

country that they wish. This was introduced in 1993 with the concept of Community Citizenship

amongst the countries of the EU.

Along with the free movement of these things, the countries of the EU all instill the same

external tariff on all the goods entering their market. Once the goods are in the target market,

they cannot be taxed any further than they already have."


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Bilateral relationship

UK has a strong bilateral relationship with many developed economies of the world. These

bilateral relationship is based on both Political and economic relationship. UKs most important

strategic partners are United States of America, France, Australia, New Zealand and some

Asian countries.

New Banking Regulations

New banking regulation has increased the power of the Bank of England to oversee financial

stability, phasing out the FSA. Targeted changes include a banking tax, limiting bonus, and

curbing high risk behavior. This will allow many new industries to set up.

UK Code of Governance

United Kingdom code of cooperate governance code is currently too robust and flexible. It has

a principal based approach which allows the companies to follow code and if they found any

difficulty in following any code they companies are allowed to do that but they have to give

reason in their financial statement which is to be certified by the auditor. This robust code of

governance was implemented after the liquidation of many financial industry sectors which

cause the economic crisis. This will increase the shareholder confidence.

Price Control policies

The government either directly or through regulatory bodies has permanent price control

powers over most public utilities which discourage the monopoly and allow the free and fair

competition. This will allow many small and new private and public entities to setup.

Tax Incentives

Expenditure on certain energy efficient assets qualifies for 100% tax deduction in the year of

acquisition. The annual investment allowance also provides for a full tax deduction for the first

GBP 100,000 each year. Tax incentives on research and development are available for all

large and small entities. In 2011-2012 government announces to setup or invite 21 new entities

to create new business activity in economically declining areas of UK. Also UK has tax treaties

with many countries.


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CURRENT WEAKNESS AND THREATS

Relationship with EU

Currently UK relationship with European Union is in danger and David Cameron has currently

called for a referendum to be done between 2015 and 2017 in which public will decide whether

they want UK to exit European Union or not. Currently European countries are in crisis which

directly or indirectly is depreciating the value of United Kingdom, its economy and its currency.

Exchange Controls

There are no exchange controls in UK. No currency considerations affect the remittance of

profits, dividends, interest and royalties or of licensing, management and patent fees.

Nevertheless the UK tax authorities may challenge the level of transfer if they suspect

corporate tax avoidance or evasion. In short UK tax authorities have to work on their Exchange

control program so that tax avoidance and evasion can be stop.

High Tax Rates

The UK has the ninth highest tax burden for people earning over 125,000 in a list of 26

countries, according to a poll by accountants UHY. For the very top earners - classed aspeople earning 950,000 a year or more Britain has the sixth highest tax rate. As well as

being hit by high levels of income tax, Britons have been affected other tax rises relating to

National Insurance and changes in allowances and reliefs. UHY found that people earning

over 125,000 keep 60.8 per cent of their income after personal taxes and social security

contributions. This means that they take home less money than people earning the equivalent

amount in countries including Uruguay, China, India, Romania and Brazil. People earning over

950,000 keep half their salary, UHY said. The only countries with worse tax rates are France,

Italy, the Netherlands, Ireland and Spain. This will discourage the FDI in UK in future.

Protection for Individual Rights

Finally, the UK constitution provides weak protection for individual rights and civil liberties. This

is, in part, a consequence of elective dictatorship but the fact is that there is nothing that forces

the government to respect individual freedom and basic rights. For instance, the Human Rights


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Act passed in 1998 was largely ineffective as it stops well short of being an entrenched bill of

rights. Its provisions have been set-aside in the past by Parliament, for instance, over terrorism

legislation in 2001.

Over-centralized System of GovernmentCriticism has been that the UK has an over centralized system of government with weak or

ineffective checks and balances. One of the key features of liberal democracy is that

government power is limited through internal tensions between and amongst government

bodies. However, UK government is characterized more by the concentration of power than its

fragmentation. This can be seen through the way in which the PM tends to dominate cabinet,

how the executive usually controls Parliament and how central government usually controls

local government. However, this has been controlled relatively well since 1997 with Blairintroducing a number of constitutional reforms. For example, the devolution of power in

Scotland and Wales transferred a degree of central power from Westminster and distributed it

on a local level.

Massive Defense cuts

British Prime Minister David Cameron announced defense cuts today that will completely

fundamentally change British military capabilities. As part of the cuts the flagship of the Royal

Navy, the aircraft carrier HMS Ark Royal and its fleet of Harriers will be immediately scrapped.

That will leave the UK without an aircraft carrier capable of years. Cameron said massive

budget deficits made completely reshaping the British military a necessity. Also to be cut,

7,000 Army personnel, 5,000 Navy personnel, another 5,000 from the RAF, and 40% of the

country's tank force.

Fiscal Austerity Programs

Many governments around the world will have to cut spending and increase taxes to avoidfiscal deficits that increased during the financial crisis. These programs will decrease

government spending in the economy, which will slow growth rates. Additionally, citizens will

have less money and benefits to use in case of emergencies. The fear is that cuts might be so

drastic that they hurt the economy. "Fiscal Austerity programs" has a significant impact, so an

analyst should put more weight into it.


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ECONOMIC ANALYSIS

OVERVIEW OF UK ECONOMY

The economy of the United Kingdom is the sixth largest national economy in the world

measured by nominal GDP and eighth largest as per Purchasing power parity and the third

largest in Europe measured by nominal GDP. The British economy encompasses the

economies of England,Scotland,Wales and Northern Ireland.In 18thcentury UK was the first

country in the world toindustrialize and during the 19th century possessed a dominant role in

the global economy. From the late 19th century theSecond Industrial Revolution in theUnited

States and Germany presented an increasing economic challenge to Britain. Despite victory,

the costs of fighting both the First World War and Second World War further weakened theaccountability of UK's public finance and resulted in the collapse of the British Empire,and by

1945 it had been superseded by the United States as the world's dominant economic power.

However, it still maintains a significant role, such as the area of financial industry in the world

economy. The UK has one of the world's most globalised economies. London is the world's

largest financial centre and has thelargest city GDP in Europe. As of December 2010 the UK

had the third-largest stock of bothinward andoutwardforeign direct investment,

TheBank of England is the UK'scentral bank and itsMonetary Policy Committee is responsiblefor settinginterest rates.The currency of the UK is thepound sterling,which is also the world's

third-largest reserve currency after the U.S. dollar and the euro. The UK economy has been

weak in recent years following the late 2000s recession with growth largely flat since 2010. The

UK experienced a double dip recession which was the longest and deepest in 50 years

between Q4 2011 and Q2 2012; however recent figures have shown the UK economy

improving, unemployment fell to 7.6%. UK economy started to grow again in Q3 2012, growing

by 1.0% - the fastest rate of GDP growth since Q3 2007. Latest unemployment statistics from

the ONS show unemployment falling at its fastest rate since 2001.

Economic Indicator Current statistics

GDP (%) QOQ

GDP

-0.3%

$ 2.4 trillion

Interest Rate 0.5%
http://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29http://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/Economy_of_Englandhttp://en.wikipedia.org/wiki/Economy_of_Scotlandhttp://en.wikipedia.org/wiki/Economy_of_Waleshttp://en.wikipedia.org/wiki/Economy_of_Northern_Irelandhttp://en.wikipedia.org/wiki/Industrialisationhttp://en.wikipedia.org/wiki/Second_Industrial_Revolutionhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/German_Empirehttp://en.wikipedia.org/wiki/World_War_Ihttp://en.wikipedia.org/wiki/World_War_IIhttp://en.wikipedia.org/wiki/Public_financehttp://en.wikipedia.org/wiki/British_Empirehttp://en.wikipedia.org/wiki/Financial_industryhttp://en.wikipedia.org/wiki/Globalization_Indexhttp://en.wikipedia.org/wiki/List_of_cities_by_GDPhttp://en.wikipedia.org/wiki/List_of_countries_by_received_FDIhttp://en.wikipedia.org/wiki/List_of_countries_by_FDI_abroadhttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Bank_of_Englandhttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Monetary_Policy_Committeehttp://en.wikipedia.org/wiki/Official_bank_ratehttp://en.wikipedia.org/wiki/Pound_sterlinghttp://en.wikipedia.org/wiki/Reserve_currencyhttp://en.wikipedia.org/wiki/U.S._dollarhttp://en.wikipedia.org/wiki/Eurohttp://en.wikipedia.org/wiki/Eurohttp://en.wikipedia.org/wiki/U.S._dollarhttp://en.wikipedia.org/wiki/Reserve_currencyhttp://en.wikipedia.org/wiki/Pound_sterlinghttp://en.wikipedia.org/wiki/Official_bank_ratehttp://en.wikipedia.org/wiki/Monetary_Policy_Committeehttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Bank_of_Englandhttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/List_of_countries_by_FDI_abroadhttp://en.wikipedia.org/wiki/List_of_countries_by_received_FDIhttp://en.wikipedia.org/wiki/List_of_cities_by_GDPhttp://en.wikipedia.org/wiki/Globalization_Indexhttp://en.wikipedia.org/wiki/Financial_industryhttp://en.wikipedia.org/wiki/British_Empirehttp://en.wikipedia.org/wiki/Public_financehttp://en.wikipedia.org/wiki/World_War_IIhttp://en.wikipedia.org/wiki/World_War_Ihttp://en.wikipedia.org/wiki/German_Empirehttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Second_Industrial_Revolutionhttp://en.wikipedia.org/wiki/Industrialisationhttp://en.wikipedia.org/wiki/Economy_of_Northern_Irelandhttp://en.wikipedia.org/wiki/Economy_of_Waleshttp://en.wikipedia.org/wiki/Economy_of_Scotlandhttp://en.wikipedia.org/wiki/Economy_of_Englandhttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29http://en.wikipedia.org/wiki/United_Kingdom


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Unemployment Rate 7.7%

CPI 2.7%(124.4 index)

PPI -0.3%

Balance of trade (total)

Goods

Services

$(5.6) billion

$(14.83) billion

$9.19 billion

Budget deficit $189.4 billion

Retail sales 0.3%

Industrial production (2.4) %

Debt $ 2115.21billion.

Foreign exchange reserves $104.8 billion

TYPE OF ECONOMIC SYSTEM

The United Kingdom operates a

diversified economy that is one of the

largest in the world. The British

economic system exhibits the

characteristics of a mixed system,combining market based features with

some socialist characteristics. UK has a

distinct private sector, where resources

are allocated primarily by market forces, such as the grocery sector of the UK economy. Mixed

economies may also have a distinct public sector, where resources are allocated mainly by

government, such as defense, police, and fire services. In many sectors, resources are

allocated by a combination of markets and panning, such as healthcare and, which have both

public and private provision.

The CIA World Fact book reported that the United Kingdom's economy had a total gross

domestic product (GDP) of nearly $2.34 trillion in 2012; making it the world's seventh largest.

Service industries account for 75 percent of the U.K.'s economic output, according to the CIA.

Industry accounts for 23.8 percent of output while agriculture represents 1.2 percent. Overall,
http://www.economicsonline.co.uk/Managing_the_economy/Introduction_to_managing_the_economy.html/The_public_sector.htmlhttp://www.economicsonline.co.uk/Managing_the_economy/Introduction_to_managing_the_economy.html/The_public_sector.html


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the United Kingdom's mixed economy has mostly free market features but retains some

socialist characteristics, such as the government owning a stake in some industries.

The British capital, London, is an important center of world financial activity. It is home to the

London Stock Exchange, founded in 1801 and one of the world's largest stock exchanges. Inaddition, more than 100 of Europe's largest companies have their headquarters in London.

Since the 1980s, under Prime Minister Margaret Thatcher, the British government privatized

many industries, including British Rail, British Petroleum and British Airways.

The world economic crisis of 2008 pushed the British economy into a recession, leading to a

series of stimulus and reform measures by the government, including nationalization of part of

the country's banking industry.

GOVERNMENT INTERVENTION IN MARKET

UK government intervene in free market in some areas and this is a justified rational for

government intervention.

Identify the set of policy goals to be achieved. This involves an assessment of the

Government's strategic goals and objectives, and the way in which they are translated to

individual policy areas. The Government intervenes when there is lacking of perfect competition in the market, in

case of Externalities effects, when there is a information failure by the market and in the

case of rare public goods.

Where there is an issue of equality amongst the citizens. It is the case of health services,

distribution of income etc issues.

Equity, which is to do with the delivery of social or distributional objectives. Even where

markets are working efficiently, they may result in a distribution of income that is

unacceptable to society. This will often arise through a lack of incentives to improve

equity, or because the necessary information is available only to government.

Whether the costs of government intervention are justified. This is concerned with the

cost analysis of the intervention both positive and negative and the cost of not

intervening.


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COMPARATIVE ADVANTAGE IN UK

Foreign Investment:

Foreign Investment is the biggest driving force of International economy. Direct investment by

multinationals has increased by 25% in United Kingdom according to the United NationsConference on Trade and Development. The UK doesn't discriminate between foreign

individuals and nationals in formation and operation of private companies. The British

Government defends the rights of any British registered company in the EU without giving any

importance to nationality of ownership. Also, it doesn't discriminate between UK firms or

foreign nationality owned firms.

US firms prefer investing in the UK due to factors such as common language, similar business

cultures and legal heritage. Japanese firms prefer the UK as an investment destination

because it acts as an export platform to export manufacturing goods to other European

countries. Long term economic and political stability, regulator stability coupled with relatively

low taxation rates and inflation make the UK an attractive destination for foreign investors. The

government is committed to economic reform which includes deregulation, privatization and

support for healthy competition.

Simple Tax System:

The tax system of the UK is simple. Corporations are taxed 28 percent on profits over 1.5

million GBP while small companies pay tax at a rate of 21 percent on profits up to 300,000

GBP. Small companies are given marginal tax benefits on profits ranging from 300,001-

1,500,000 GBP. This tax system also allows tax deductions on expenditures and depreciation

of assets used for trade. The assets over which tax deductions are accepted are industrial

buildings, machinery, plant equipment and assets used for research and development

purposes. Unit trusts and open ended investment companies are required to pay 20 percent

tax on profits earned.

Services Industry

Theservice sector is the dominant sector of the UK economy, and contributes around 73% of

GDP. Thecreative industries accounted for 7% GVA in 2005 and grew at an average of 6%

per annum between 1997 and 2005. In 2008 the education, health and social work sector had

a total gross value added of around 170 billion, of which around 145 billion was
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compensation to employees. In 2008 health and social work had a gross value added of

around 93.7 billion. This industry added gross value of 86,145 million to the UK economy in

2004.The UK's exports of financial and business services make a significant positive

contribution towards the country's balance of payments. London is a major centre for

international business and commerce and is one of the three "command centers" ofthe global

economy. There are over 500 banks with offices in London. London's financial services

industry is primarily based in the City of London and Canary Wharf. The City houses the

London Stock Exchange, the London International Financial Futures and Options Exchange,

theLondon Metal Exchange,Lloyds of London,and theBank of England.Several other major

UK cities have large financial sectors and related services. Edinburgh has one of the large

financial centers inEurope

London Stock Exchange

The London Stock Exchange or LSE is a stock exchange located in London, United Kingdom.

Founded in 1801, it is one of the largest stock exchanges in the world, with many overseas

listings as well as British companies. The London Stock Exchange is at the heart of global

financial markets and is home to some of the best companies in the world. The Exchange

provides a highly active and efficient market for trading in a wide range of securities, including

UK and international equities, debt, covered warrants, exchange traded funds (ETFs), fixed

interest, contracts for difference (CFDs) and depositary receipts.

Economic and Financial Risk

The United Kingdom (UK) is a CRT-1 country with very low levels of risk

across all three categories (economic, financial and political). Despite its

excellent risk profile, the UK was hit particularly hard by the global financial

turmoil, partially due to its sizeable financial sector. The UKs service

industries, including financial services and real estate activities, represent

three quarters of economic production. With inflation contained and growth

stubbornly sluggish, the Bank of England is expected to maintain low

interest rates until mid-to-late 2014 as well as pursuing further quantitative

easing.

While positive economic growth has resumed in the 3Q of 2012, driven

largely by the Olympic Games, it is only very slight. The financial sector has generally
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-60

-40

-20

0

20

40

60

80

100

UNITEDSTATES

GERMANY

NETHERLANDS

FRANCE

IRISHREPUBLIC

BELGIUM

CHINA

SPAIN

ITALY

SWEDEN

RUSSIA

SWITZERLAND

UAE

HONGKONG

INDIA

JAPAN

CANADA

SOUTHKOREA

SINGAPORE

AUSTRALIA

TURKEY

SOUTHAFRICA

NORWAY

POLAND

DENMARK

% Change 2012/ 2011 % Change 2012/ 2011

stabilized, following government intervention and increased supervision in the wake of the

financial crisis. Banks have agreed to increase lending to businesses in 2012. UK has very low

risk rating as compare to other EU countries.

UK Trading Partners

UK currently have budget deficit of GBP 3.5 billion. The main reason behind this is the UK

Industrial sector which has decline after 19th century but UK services industry has a trade

surplus of about GBP 5.7 billion. The chart given below show the UK major trade partners

0

2,000

4,000

6,000

8,000

10,000

12,000

UNITED

GERMANY

NETHERLAN

FRANCE

IRISH

BELGIUM

CHINA

SPAIN

ITALY

SWEDEN

RUSSIA

SWITZERLA

UAE

HONGKONG

INDIA

JAPAN

CANADA

SOUTH

SINGAPORE

AUSTRALIA

TURKEY

SOUTH

NORWAY

POLAND

DENMARK

Trade Year to date 2012 Trade Year to date 2012


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0.5039

0.6864

0.62140.6472 0.6436

0.6183

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2007 2008 2009 2010 2011 2012

Exchange Rate Exchange RateLinear (Exchange Rate)

EXCHANGE RATES & STABILITY OF UK CURRENCY

Pound sterling is the official currency of United Kingdom. British pound is one of the most

important currencies in the world and it is the oldest currency currently being used and also a

highly valued currency among the major currencies of the world. Bank of England is the only

bank in the United Kingdom allowed for issuing banknotes as a legal currency. Pound sterling

is the 4thmost traded currency in the foreign exchange market, its volume of trading is about

12.9%. One of the reasons for the heavy trade in the currency is the location of the largest

foreign exchange trading hub.

The currency uses a floating rate regime and can be easily traded in the foreign exchange

markets. The contraction of the British economy has led to a highly volatile monetary system

and that is why the value of the currency fluctuates frequently in comparison with the United

States dollar and Deutsche Mark. This attracts the attention of the investors resulting in more

of investment and more of hedging in the currency. Sterling is also the third most held reserve

currency inglobal reserves (about 4%).

Movement in exchange rate in terms of British Pound (GBP) per US Dollars is given below.

The data is taken on year date exchange rate basis.
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UNITED KINGDOM FINANCIAL MARKET

London is arguably the worlds largest and most significant financial centre. The following

summary provides a brief overview of its share of global markets:

London is the worlds number one centre for foreign exchange.

The market capitalization of London Stock Exchange (LSE) was $ 3.266 trillion at

December 2011.

London is an important centre for both capital raising and secondary market trading, with

active domestic commercial paper and euro commercial paper markets as well as an

estimated multi-trillion Eurobond market.

London maintains a leadership position with 45.8% of total global interest rate OTC (non-

exchange traded) derivatives turnover (BIS 2010).

The London Metals Exchange (LME) is the largest metals exchange in the world.

Figures from International Financial Services London (IFSL) indicate that the UK fund

management industry was responsible for 4.8 trillion of funds at the end of 2010.

INFRASTRUCTURE QUALITY

The United Kingdom has one of the most developed and extensive infrastructure systems in

the world but many of those infrastructure aspects require maintenance. Because of

constraints on the government's budget, London has endeavored to transfer responsibility for

the maintenance and construction of new roads to local and regional governments. There are

also increasing efforts to transfer control of infrastructure projects to private industry.

The United Kingdom has 371,603 kilometers of roadways. This includes 3,303 kilometers of

expressways. The kingdom also has 16,878 kilometers of railways. The majority of this track is

standard gauge and one-quarter of it is electrified. There is also an extensive network of

canals and waterways which total 3,200 kilometers. Since the United Kingdom is an island, it is


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dependent on the maritime and air transport of goods. The nation has some of the world's

busiest ports such as London, Glasgow, Manchester, and Portsmouth.

One of the most significant infrastructure projects in the history of the kingdom was the

completion in 1994 of the Channel Tunnel, popularly known as the "Chunnel." This 35-kilometer tunnel under the English Channel connects England and France. For the first time in

its history, the United Kingdom had a direct, if limited, land route for the transport of goods and

people to and from the continent. Since its opening, the amount of goods that are transported

through the Chunnel has grown by almost 20 percent per year.

BUSINESS CYCLE STAGE AND ECONOMIC GROWTH

UK enters in economic recession in second quarter of 2008 when its GDP falls 0.9%. Thisrecession was result from crisis in financial services industry. Manufacturing output reduced by

7% by end 2008. It was the deepest recession since the war. It has affected many sectors

including banks and investment firms, and seen many well-known and established businesses

fold.


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Britain has notably struggled to come out of the latest recession, with much speculation of a

'double dip' recession during the 2010s. In quarter four of 2010 GDP fall 0.4%, unemployment

rate rose to 8.1% in August. Economic growth in Q3 2012 was 1.0% helped by an Olympic

ticket sales boost. But, in Q4 2012, the economy went back into negative growth.

Manufacturing fell 1.5%, service sector growth was flat, and construction rose 0.3% in the final

quarter. If growth is negative in first quarter 2013, the UK will be officially in a triple dip

recession.

SKILL LEVEL OF WORKFORCE

As demand for skilled labor increases, there has

been a rapid decline in skilled labor supply in the

UK. In addition, employers also claim that there is

an apparent skill gap amongst the existing work

force for certain occupations. The expansion of

knowledge-based industries has raised the general

demand for skilled workers across a range of

sectors and occupations.

Improving the skills of the workforce has, and will

continue to be, a crucial aspect of government

2%

18%

80%

Labor Force - by

occupation(%)

Agriculture Industry Services
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policy. Previous influential studies, based mostly on aggregate data, have shown that UK

productivity lags behind some of its competitors and that part of this gap is due to a lower stock

of skills within the workforce. The UK has a strong economy and world-leading employment

levels, but its productivity trails than many key comparator nations, poor skills are a key

contributor to this problem as well as having wider impacts on social welfare. Over the last

decade, the skills profile of working age people in UK has improved. For example, the

proportion with a degree has increased from one fifth to over one quarter of the population.

Despite these improvements, the UK still does not have a world-class skills base because over

one third of adults in the UK do not have a basic school-leaving qualification, five million

people have no qualifications at all and one in six do not have the literacy skills expected of an

11 year old and half do not have these levels of functional numeracy. Looking ahead to 2020,

global, demographic and technological change will place an even greater premium on the UKs

skills profile.

New analysis conducted by the Review shows that, if the Government meets its current

ambitious targets for improving the UKs skills, by 2020 the proportion of working age people

without any qualifications will fall to 4 per cent; and the proportion holding a degree will

increase from 27 per cent to 38 per cent, and this will have significant benefits for the economy

increasing annual productivity growth by 0.2 per cent with a net benefit to the economy of 3billion a year, equivalent to 0.3 per cent of GDP.

However, even if the UK can meet these targets, the nations human capital will still fail to be

world-class. Considerable problems will remain; at least 4 million adults will still not have the

literacy skills expected of an 11 year old and 12 million would not have numeracy skills at this

level.

In order to have strong skill level of workforce UK government has to tackle the stock of lowskilled adults without qualifications, basic literacy, investing more in intermediate skills and

further increasing the proportion of adults holding a degree.

LABOR COSTS


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Minimum wage set by the government that an employer is legally allowed to pay an employee.

The minimum wage for an employee aged 21 or older is GBP 6 an hour. Workers aged 16 to

17 must be paid GBP 3.8 per hour. The development rate for those who aged 18 to 20 is GBP

5 per hour. A new minimum wage of 2.50 per hour is set to be introduced for apprentices who

are either under 19 or in the first year of their apprenticeship.

Labor costs index decrease to 105.4 indexes in 3 rdquarter of 2012 from 105.50 Index Points in

the second quarter of 2012. Historically, from 1959 until 2012, the United Kingdom Labor

Costs averaged 49.13 Index Points reaching an all-time high of 105.50 Index Points in May of

2012

UNEMPLOYMENT RATE, INFLATION RATE AND INTEREST RATE

Unemployment Rate in the United Kingdom decreased to 7.70 percent in November of 2012

from 7.80 percent in October of 2012. Historically, from 1971 until 2012, the United Kingdom

Unemployment Rate averaged 7.26 Percent reaching an all-time high of 12 Percent in


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February of 1984 and a record low of 3.40 Percent in November of 1973. The current fall in the

UK unemployment rate is due to the employment created by London Olympics which helps the

UK economy to recover a bit. As per the CBI and PwC forecast UK Financial services

companies are likely to cut a further 18,000 jobs across the UK over the next three months

despite optimism that business volumes will rebound.

The inflation rate (measured by CPI) in the United Kingdom was recorded at 2.70% in

December of 2012. Inflation Rate in the

United Kingdom is reported by the UK Office

for National Statistics. In the United Kingdom,

the most important categories in the

consumer price index are Transport,Housing, Water, Electricity, Gas and Other

fuels, Recreation and Culture, Restaurants

and Hotels and Food and Non-alcoholic

Beverages. This inflation rate in consistent

from past 3 month. Decrease in inflation is

due to decrease in the price of fuel and

housing. The targeted inflation by BOE for

future is 2.2%.

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

2005 2006 2007 2008 2009 2010 2011 2012

Inflation rate %

Inflation rate % at

year end


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The benchmark interest rate in the United Kingdom was last recorded at 0.50 percent.

Interest Rate in the United Kingdom is reported by the Bank of England. In the United

Kingdom, the Bank of England has

operational independence. Decisions on

interest rates are taken by the Monetary

Policy Committee (MPC). The current

interest rate that is prevailing in market is

unchanged since March 2009.

Currently there are two opinions in the market regarding interest rate change. Some

economist says that Interest rate will remain unchanged in UK till 2009 and some says

that interest rate has to be increased in 2013 so that Banks can have solid recovery and

BOE inflation target can be meet.

SOCIAL ANALYSIS

OVERVIEW OF UK SOCIAL SYSTEM

The social structure of the United Kingdom has historically been highly influenced by the

concept of social class, with the concept still affecting British society in the early-21st century.

British society, like its European neighbors and most societies in world history, was traditionally

divided into caste systemand the hereditary transmission of occupation, social status and

political influence. Since the advent of industrialization, this system has been in a constant

state of revision, and new factors other than birth are now a greater part of creating identity in

Britain. Although definitions of social class in the United Kingdom vary and are highly

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

2005 2006 2007 2008 2009 2010 2011 2012

Interest rate %

Interest rate % at

year end


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controversial, most are influenced by factors of wealth, occupation and education. Until

recently theParliament of the United Kingdomwas organized on a class basis, with

the Lords representing the hereditary upper class and the House of Commons representing

everyone else, and the British monarch is often viewed as being at the top of the social class

structure.

British society has experienced significant change since the Second World War, including an

expansion of higher education and home-ownership, a shift towards a services-dominated

economy, mass immigration, a changing role for women and a more individualistic culture, and

these changes have had a considerable impact on the social landscape.

DEMOGRAPHIC CHARACTERISTICS

According to the July 2012 estimate population of United Kingdom is 63,047,162. It has the

22nd largest population in world. Its population density is among the largest in the world and

almost one-third of the population lives in England Almost one-third of the population lives in

England.

The UK has an extremely high literacy rate of 99%. Parents are obliged to have their children

educated from the ages of 5 to 16. The Church of England and the Church of Scotland serveas the official churches of their respective countries. The population is mainly white, with

92.1%, followed by 4% South Asian, 2% black, 1.2% mixed, 0.4% Chinese and 0.4% other.

Population

The United Kingdom has a total estimated

population of 63,047,162 people. As per the

estimate of year 2000 it was 59,511,460. The

average annual percent change in the

population is 0.553% resulting from a surplus or

deficit of births over deaths and the balance of

migrants entering and leaving a country. As per

57

58

59

60

61

62

63

64

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Population (m)
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The Age dependency ratio (% of working-age population) in the United Kingdom was last

reported at 51.87 in 2011, according to a World Bank report published in 2012. Age

dependency ratio is the ratio of dependents--people younger than 15 or older than 64--to the

working-age population--those ages 15-64. Data are shown as the proportion of dependents

per 100 working-age population. As the ratio is increasing in given chart this means burden on

productive part of the population is increasing. This will result in direct impact on financial

expenditure on things line pension funding, old age benefit program, social securities etc.

The main reason is that low birth rates in the UK as compare to other countries and rising life

expectancy are leading to a rapid aging and a decline in working age population. That means

that the dependency ratio is gradually moving up. Obviously, the higher the ratio, the fewer

working people there are to pay for the elderly. If that continues, than at some point the cost of

supporting the elderly will become unsustainable.

Ethnicity

The UK is a very multicultural place and ethnically diverse. Main ethnic groups include British,

Asians, and Africans/African Americans. The 2001 census showed that 92.1% was of the

population was White, of which English are 83.6%, Scottish are 8.6%, Welsh are 4.9% and

Northern Irish are 2.9% whereas there are2% Black, 1.8% Indian, 1.3% Pakistani, 1.2% mixed

and 1.6%are others.


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As far as Education is concerned each country of the United Kingdom has a separate

education system, with power over education matters in Scotland, Wales and Northern Ireland

being devolved. Education is mandatory from ages five to sixteen.

The UK has some of the top universities in the world with Cambridge, Oxford, London and

Edinburgh ranked amongst the top 20 in the 2011. The United Kingdom's high literacy rate

(99%) is attributable to universal public education introduced for the primary level in 1870 and

secondary level in 1900.

Government expenditure in UK is about 5.5% of GDP and it is ranked 44 in the world for his

expenditure on Education. Education is one of the United Kingdom great export industry.

International (non-UK) students in UK HE in 2010-11:

totaled 428,225 compared with 405,810 in 2009-10 (an increase of 6%), with full-time

undergraduate study up 9%, full-time taught postgraduate courses up 8% and full-time

research postgraduates up 4%, while full-time "other" undergraduates and

postgraduates, and all part-time non-UK student numbers decreased.

made up 14% of full-time first degree students and 13% of all first degree students

made up 70% of full-time taught postgraduates and 46% of all taught postgraduates

made up 48% of full-time research degree students and 41% of all research

postgraduates

Culture

UK life is an incredible mix of international cultures and contemporary thinking, held together

by a strong sense of identity and tradition. The food you can buy in the UK reflects the many

ethnic influences in British society. Most supermarkets sell ingredients from Asia, Africa, the

Caribbean and Latin America, as well as food from many other parts of the world. Music is a

big part of UK culture. Whether you just listen or take part, youll find pop, rock, electro, hip -

hop, classical, folk, and jazz, opera and all sorts of world music. The UK also has a vibrant

theatre and performing arts heritage, maintaining both traditional plays and musicals, and

encouraging new and alternative productions. There are cinemas in almost every UK town and

city, showing feature films from all over the world. There are also many film festivals in Britain,

focusing on themes in film, specific directors or animation. The UK offers an incredible and

beautiful landscape for walking, climbing, cycling, mountain-biking and running. The mountains


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of Scotland and Wales, the rolling hills of England and Northern Ireland, the Lake District and

the Yorkshire moors, as well as the coastline of all parts of the UK will be all around you. Many

UK institutions have state-of-the-art sports facilities

Entrepreneurial spirit

Overall prosperity is on the rise in the UK, according to the latest findings. Britain climbed one

place in the worldwide prosperity rankings in 2012 as well as scaling the Governance, and

Safety & Security sub-categories and ranks amongst the worlds 30 Top Performers for

overall prosperity. However, poor economic performance and low confidence in the health of

the UK economy could hold back Britains prosperity. The UK fell four places in the Economy

sub-index since last year, now ranking in 26th position.

According to the Index, low start-up costs for new businesses are a key factor in the UKs

strong Entrepreneurship & Opportunity score. Start-up costs in the UK are low at 0.7 per cent

of Gross National Income, compared to the global average of 20 per cent. Britain ranks in sixth

position in the Entrepreneurship and Opportunity sub-index. In addition, British citizens have

increasingly equal access to opportunities falling from 4.7 to 4.2 over the last three years.

Health and Environment

Healthcare in England is mainly provided by England's public health service, the National

Health Service,that provides healthcare to all permanent residents of theUnited Kingdom that

is free at the point of use and paid for from general taxation. Since health is a devolved matter,

there are differences with the provisions for healthcare elsewhere in the United Kingdom.

Though the public system dominates healthcare provision in England, private health care and

a wide variety of alternative and complementary treatments are available for those not willing

to pay.

As far as Environmental Consciousness is concerned, rising trend can be found in UK. As one

of the top 50 countries in terms of greenhouse gas emissions, the UK governments try to make

sure that they do their best in other areas in order to ensure that they do not contribute more to

the worsening of the globe on a worldwide scale. Current government have plans in place in

order to try and combat the past few decades' worth of ignorance we had, including more
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The pace of technological change is one of the biggest challenges facing by any country today.

We are living in an era where economic uncertainty is at its peak and major economies in the

world, with the help of science and technology, are changing their strategies in order to gain

competitive advantage over other economies.

Scientific research and development remains important in British universities, with many

establishing science parks to facilitate production and co-operation with industry that is one of

the reason UK 2 universities are in top 5 universities in world. United Kingdom has produced

many important figures in the field of science and technology. Some major figures from UK are

Isaac Newton, Charles Drawin, Henry Cavendish, Alexander Fleming, Francis Crick etc.

Scientists from the UK continue to play a major role in the development of science and

technology and major technological sectors include the aerospace, motor and pharmaceutical

industries.

The UK plays a leading part in the aerospace industry, with companies including Rolls-

Royce playing a leading role in the aero-engine market; BAE Systems acting as Britain's

largest and the Pentagon's sixth largest defense supplier, and large companies including

GKN acting as major suppliers to the Airbus project. Two British-based companies,

GlaxoSmithKline and AstraZeneca, ranked in the top five pharmaceutical companies in the

world by sales in 2009 and UK companies have discovered and developed more leading

medicines than any other country apart from the US.

INNOVATION IN MACRO ECONOMY

Innovation is important for long-term productivity growth and UK is amongst the leading

countries in terms of innovation intensity. Research and development investment in UK K is

historically broadly in line with some of the comparator countries, such as Canada and France

but is behind the lead group of countries which includes Finland, Japan and Germany.

Relatively low Research and D investment compared to some countries is partially explained

by the UK industrial structure, which includes a relatively high proportion of industries which

are of a lower R&D intensity.

Investment in Research and Development (R&D)


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R&D is historically the most cited metric of innovation in an economy. It is an important input to

many innovative processes and is relatively easy to compare across industries and countries.

The figure 1 depicts the Gross expenditure on R&D, since 1991, which is currently $38.4 billion

1.7% of GDP.

From 1990 UK have relatively low intensity which in current years have further decreased. UK

Gross expenditure in R&D in 2010 was 1.8% of GDP which is now 1.7%.

In the UK in 2010, 61 per cent of all R&D was performed by businesses, with 27% occurring in

higher education, 9% in government and the remainder in private nonprofit organizations.

Compared to 2008, this represents a small shift away from businesses towards higher

education and government as shown in figure 2.


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UK SOCIETY AND TECHNOLOGY

Some of the emerging technology trends can be seen in the UK society:

Broadband is Big

The growth in the use of internet applications in everyday life is growing at an exponential rate.

One of the biggest trends is the unstoppable growth of broadband internet connectivity,

especially for home use. There are currently 1 million UK households with broadband, and new

subscriptions are in the order of 42 000 per week.

Apples and Blackberries

A neat internet and phone tool called the Blackberry is the toy to have for business people on

the move. The Blackberry allows people to access email on the move. While you're riding the

tube, train or bus, you can check your mail. Another favorite pastime for commuters is the

Apple iPod.

Wireless Connectivity

Coffee shops, airports, stations, hotels, all are going wireless these days. Most up market, UK

hotels have a wireless broadband internet connection, meaning guests can move around thehotel with their laptop and not worry about wires and connections. Wireless is becoming a

worldwide trend

Nobel Laureates

United Kingdom has won 119 Noble laureates. UK ranked 2ndin the race of most noble prizes

won by countries. In the area of scientific research UK won 94 Nobel laureates. On the basis of

Nobel laureates by University affiliation, University of Cambridge has most affiliation whereasUniversity of Oxford is ranked 6 th.


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UK VISION FOR FUTURE TECHNOLOGIES

UK government wants to allocate an extra of GBP 600 million of funding in area of science and

technology. The areas in which UK government want to spend are:

1. Big data estimator and analyzer

2. Space Industry

3. Robotics and autonomous systems

4. Synthetic biology

5. Regenerative medicines

6. Agri-sciences

7. Advance manufacturing materials

8. Energy Industry

The allocation of the extra 600 million of extra science funding is as follows

189 million for big data

25 million for space

35 million for robotics and autonomous systems

88 million for synthetic biology

20 million for regenerative medicine

30 million for agri-science campuses

73 million for advanced materials

30 million for energy

Government has also committed a further:

35 million for research campuses

25 million for the advanced metrology lab

50 million for transformative equipment and infrastructure


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LEGAL ANALYSIS

Legal factors are the factors that influence business strategies and are related to

changes in government laws and regulations. For a successful business operation it isimportant that the businesses consider the legal issues involved in a particular situation

and should have the capability to anticipate ways in which changes in laws will affect

the way they must behave. Laws keep changing over a period of time. From the point of

view of business it is important that they are aware of these changes in the areas of

consumer protection legislation, environmental legislation, health & safety and

employment law, etc.

The English court system dates back to 1200, the longest running within Europeansecular court records. It is a common law system. The court system started as a

concept of justice, a matter of the crown. The court system works on a hierarchy. This

proves to be a tried a tested system which is centuries old, the hierarchical system

means there is always a court of appeal, thus a second chance for justice.

The main backbone of the English court system is the doctrine president, this plays a

very important part of the English judicial system. The doctrine president means that

courts are bound by an earlier decision on the same point made by the same court or a

higher court. For this reason lawyers who argue in courts started publishing collections

of important decisions, to remind the courts of its previous decisions .The doctrine

president is one of the main reasons as to why the English system is deemed to be one

of the fairest in the world (Smits 2006).

The way legal factors affect your business in U.K.

Legislation affecting your business can seem like one of those extra things you just

shouldnt have to worry about, but it is real and does matter. Some of it is a real p ain,

and some of it is a good discipline with real benefits.

The main kinds of legislation that affect the running of your business are:

Employment law the relationships between you and your employees, from

payment rights to varying types of discrimination


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Consumer protection to ensure that consumers are treated fairly by

businesses, such as ensuring product quality is satisfactory.

Tax and regulationsanything from payroll tax, VAT and corporation tax, to filing

accounts and statutory documents.

Itsyour responsibility in your business to make sure you adhere to all these things. But

it doesnt mean you have to do it yourself. My first advice would be to make sure you

have an accountant who is looking out for the day to day stuff, particularly around

payroll and other taxes. The Inland Revenue isnt particularly sympathetic to people

paying incorrect tax, and a competent accountant will make sure you do.

On the legal and employment side of things, take advice when you need it. Treat people

with respect and fairly and youll be OK in most cases. If you find yourself in a tricky

situation, then take advice. There are several business services that will offer standard

contracts and process documents (e.g. dismissal), so you can use these to save

money. Barclays and RBS both have business software bundles that include legal and

accounting software (as does Moonfruit), so they can be helpful here.

Most importantly, dont be afraid to do something for fear of regulation or concern that

its all too complicated. Seek to do things the right way and take advice if youre unsure,

but dont get paralyzed. Most government agencies want you to succeed and will work

with you to help you comply, even if its tidying up after the event.

Some laws can even lead to a benefit for your business. Understanding that EU law

requires us to give customers a 60 day right of refund for digital purchases has allowed

us to promote this effective 60 day money back guarantee to our customers so its not

all bad.

Some of the key legal regulations which affect businesses in the UK are:

Minimum wage legislation - A key piece of legislation in the UK which affects

organisations with a large number of low paid workers is that of various minimum wage

regulations. In this case, the legislation requires UK employers to pay their employees a

minimum of 6.19 per hour for those aged over 21 (Gov UK). Given the large number of

employees of firms which are affected by the National Minimum Wage, temporary shifts


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in legislative policy can have a high impact upon the sector.

Other key legislative issues include equal opportunities legislation and various other

acts of parliament designed to ensure equality both in the work place and in therecruitment and selection process (Pilbeam and Corbridge, 2010). In this case, such

legislation has a direct impact upon the processes and practices of an organization who

are required not only to design corporate polices which facilitate equality but also to

record activities related to recruitment and selection should an employee call foul at a

later date. The issue here for businesses is that the legislative environment often places

the burden of proof on the defendant rather than the claimant in such cases. As such,

the development of detailed HR processes and practices is critical (Bratton and Gold,

2007).

CONSUMER PROTECTION LEGISLATION

The Trade Descriptions Act, 1968:This makes it illegal for a business to provide false

or misleading descriptions of their products, services, accommodation and facilities.

The Unsolicited Goods Act, 1971: This stated that unsolicited goods become the

property of the recipient if the sender does not retrieve them from the recipient within 30

days of notice.

The Consumer Credit Act, 1974: This states that any business which offers credit

facilities must obtain a licence from the Director-General of Fair Trading andmust also

display the annual percentage rate (A.P.R) that will be charged.

The Sale of Goods Act, 1979:This states that goods must be of merchantable quality,

as described in their advertisements and fit for their purpose.

The Consumer Protection Act, 1987:This states that it is an offence for a business to

give a false or misleading price indication on its product(s) AND businesses are liable

for any damage and injury that their defective products cause to consumers.


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The Food Safety Act, 1990:This states that it is an offence for a business to sell food if

it is not registered to do so and also if those handling the food have not been

appropriately trained. It also states that the food must be of the expected nature and

quality that is demanded by the consumer.

EMPLOYEE PROTECTION LEGISLATION

1) The Employment Relations Bill, 1999: Stating that employees who have been in

employment with the same business for a period of one year have the right not to be

unfairly dismissed.

2) The Employment Rights Act, 1996: Covering unfair dismissal, redundancy and

maternity.

3) The Public Interest Disclosure Act, 1998: Covering employees who disclose

confidential information.

4) The Health & Safety at Work Act, 1974: Covering working conditions and the

provision of safety equipment, hygiene, etc).

5) The National Minimum Wage Act, 1999: Making it illegal for employers to pay less

than 3.60 per hour to its full-time staff who are aged over 21.

6) The Equal Pay Act, 1970: stating that pay and working conditions must be equal for

employees of the opposite sex who are performing the same work.

7) The Sex Discrimination Act, 1975: Stating that it is illegal to discriminate against an

employee, or an applicant for a job, on the grounds of their sex and/or their maritalstatus.

8) The Race Relations Act, 1976: Stating that it is illegal for an employer to

discriminate against an employee, or an applicant for a job, on the grounds of their

ethnic background.


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9) The Disability Discrimination Act, 1995: Stating that it is illegal for a business with

20 or more employees to discriminate against an employee, or an applicant for a job, on

the grounds of their disability.

COMPETITION LEGISLATION:

Office of Fair Trading (O.F.T).:The Office of Fair Trading (OFT) was a not-for-profit

and non-ministerial government department of the United Kingdom, established by the

Fair Trading Act 1973, which enforces both consumer protection and competition law,

acting as the UK's economic regulator.

The OFT's goal is to make markets work well for consumers, ensuring vigorouscompetition between fair-dealing businesses and prohibiting unfair practices such as

rogue trading, scams and cartels. Its role was modified and its powers changed with the

Enterprise Act 2002.

The Department for Business Innovation and Skills (BIS) announced reforms to the UK

consumer protection and competition regimes. Under the provisions of the Enterprise

and Regulatory Reform Act 2013, the Competition and Markets Authority (CMA) was

established on 1 April 2014 combining many of the functions of the OFT and the

Competition Commission and superseding both. Regulation for the consumer credit

industry passed from the OFT to the new Financial Conduct Authority (FCA) from April2014.

Monopolies and Mergers Commission (M.M.C) and Competition Commission:The

Competition Commission was a non-departmental public body responsible for

investigating mergers, markets and other enquiries related to regulated industries under

competition law in the United Kingdom.

It was a competition regulator under the Department for Business, Innovation and Skills

(BIS). It was tasked with ensuring healthy competition between companies in the UK for

the ultimate benefit of consumers and the economy.The Competition Commission replaced the Monopolies and Mergers Commission on 1

April 1999. It was created by the Competition Act 1998, although the majority of its

powers were governed by the Enterprise Act 2002.

On 1 April 2014 the Competition Commission was replaced by the Competition and

Markets Authority (CMA), which also took over several responsibilities of the Office of

Fair Trading.


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ENVIRONMENTAL ANALYSIS

OVERVIEW OF ENVIRONMENT IN UNITED KINGDOM

We live in the world where the environment is of major concern. It is a major issue of concernbecause the natural processes are being disrupted by people to such an extent that the quality

of life and nature surrounded us is threatened.

The environmental issue in the world is increasing because of rapid growth in population

which is giving rise to more consequential growth in energy consumption, and as there is

growth in energy consumption which in turn give rise to carbon dioxide emission at high pace.

As one of the developed country United Kingdom has high concern over environmental issues.

UK Government has played an important role in reducing the greenhouse gas emissions. It

has achieved the target of decrease in greenhouse gas emission of 12.5% from year 1990

level, given by Kyoto Protocol (institute of United Nation for climate change) and currently UK

is making policies to cut greenhouse gas emission by 20% (domestic goal). Also the

government has reduced the amount of industrial and commercial waste disposed of in landfill sites

to 85% of 1998 levels and also recycling 25% of household waste and wants to increase it to 33% by

2015.

United Kingdom international agreements related to environment concerns are Air Pollution,

Air Pollution-Nitrogen Oxides, Air Pollution-Persistent Organic Pollutants, Air Pollution-Sulfur

94, Air Pollution-Volatile Organic Compounds, Antarctic-Environmental Protocol, Antarctic-

Marine Living Resources, Antarctic Seals, Antarctic Treaty, Biodiversity, Climate Change,

Climate Change-Kyoto Protocol, Desertification, Endangered Species, Environmental

Modification, Hazardous Wastes, Law of the Sea, Marine Dumping, Marine Life Conservation,


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6

6.5

7

7.5

8

8.5

9

9.510

CO2 emission Value

Ozone Layer Protection, Ship Pollution, Tropical Timber 83, Tropical Timber 94, Wetlands,

Whaling.

Total renewable water resources in UK are about 160.6 cu km and total fresh water withdrawal

in UK is 11.75 cu km per year. Major natural hazards in UK are floods and winter windstorms.

The proportion of land area covered by forest is about 12.1% which was 11.5% in 2000.

Proportion of total water resources used is 9.9%

Carbon dioxide emissions

UK government has concern for the carbon dioxide

emission and they are continuously working to

reduce it down. The chart shows the carbon

dioxide emission (metric tons per capita) in UK and

its comparison with past years. This data was

issued by United Nations Framework Convention

on Climate Change.

Ecological Footprint

The UK's average ecological footprint is 5.45 global hectares per capita with variations

between regions ranging from 4.80 gha (Wales) to 5.56 gha (East England). Beddington Zero

Energy Development (BedZED) a 96-home mixed-income housing development found to have

a footprint of 3.20 gha due to on-site renewable energy production, energy-efficient

architecture, and an extensive green lifestyles program that included on-site London's first car

sharing club.

Environmental issues in the United Kingdom

Air pollution

Climate change issues

Disposal of Royal Mail Rubber band

Food wastage
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CONCLUSION

The UK is the leader of foreign investment in Europe. The UK is a hotbed of activity for foreign

investment in Europe, especially from American companies. The UK offers vast business

opportunities for investors. Low labor costs and high returns make it an attractive investment

destination. The UK was successful in retaining its top position in terms of foreign investment

in Europe in 2008.

Top 15 Reasons why investing in the UK is profitable in comparison to other countries.

1. The easiest place to establish and run a business is Europe: According to a World

Bank study, it takes only 13 days to establish a business in the UK. The World Bank

has ranked the UK first in Europe and sixth in the world to operate business.

2. An internationally competitive tax environment for foreign investors: the UK has the

lowest corporate tax at 28 percent which is the lowest in the G7. The highest personal

tax bond at