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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
80.17 years (total population)
78.05 years (men)

LIFE EXPECTANCY

82.40 years (women)

ETHNIC COMPOSITION
(2001 CENSUS)

MAJOR RELIGION
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)

(2001

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


Nuclear reactors, boilers, machinery and mechanical

EXPORTS

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


and products of their distillation, bituminous substances and
mineral
Machinery, chemicals, vehicles, metals, agricultural products,

textiles
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IMPORTS

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 monarch
Queen 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


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

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. The Supreme Court of the United Kingdom is the
highest 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

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recycle the household wastes.

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

responsible

for

are
making

decisions on financial Bills,


proposed

new

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

as

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such

Government:
As far as formation of government is related the political party or coalition that wins the most
seats 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

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Europe:

May 2007.

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 the Conservative Party and the Labor 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 the Parliament of the United Kingdom are elected. Following the Parliament 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. The 2010 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

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with the most seats usually forms the government, and the second largest party forms Her

Majesty's Loyal Opposition. In 2010The election took place in 650 constituencies across the
United Kingdom under the first-past-the-post system.

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

UK

Scottish

National

Northern

House of Parliament Assembly Ireland


Common
Conservative
Party
Liberal
Democrats
Labor Party
Democratic
Unionist Party
Scottish
National Party
Sinn Fein

for Wales

Assembly

London

European

Assembly Parliament

306

15

14

25

57

11

257

37

30

12

13

38

69

29

11

14

15

Plaid Cymru
Party of
Wales
Social
Democratic
Alliance Party
of

Northern

Party

of England
Respect Party
Ulster
Unionist Party
Scottish

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Green

Ireland

Green Party
UK
Independence

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party

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 of
Conservatives 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 last
one. 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.

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

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

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

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

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

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

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

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

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 as
people 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

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

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

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

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 Government


Criticism 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 Blair
introducing 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 avoid
fiscal 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

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analyst should put more weight into it.

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

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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 18th century UK was the first
country in the world to industrialize and during the 19th century possessed a dominant role in
the global economy. From the late 19th century the Second Industrial Revolution in the United
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 the
accountability 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 the largest city GDP in Europe. As of December 2010 the UK
had the third-largest stock of both inward and outward foreign direct investment,
The Bank of England is the UK's central bank and its Monetary Policy Committee is responsible
for setting interest rates. The currency of the UK is the pound 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

Current statistics

GDP (%) QOQ

-0.3%

GDP

$ 2.4 trillion

Interest Rate

0.5%

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Economic Indicator

13

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

Unemployment Rate

7.7%

CPI

2.7%(124.4 index)

PPI

-0.3%

Balance of trade (total)

$(5.6) billion

Goods

$(14.83) billion

Services

$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

diversified economy that is one of the


largest

in

economic

the

world.

system

characteristics

of

The

British

exhibits
mixed

the

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.

Industry accounts for 23.8 percent of output while agriculture represents 1.2 percent. Overall,

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

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. In
addition, 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

intervening.

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cost analysis of the intervention both positive and negative and the cost of not
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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 Nations
Conference 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 300,0011,500,000 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
The service sector is the dominant sector of the UK economy, and contributes around 73% of

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

a total gross value added of around 170 billion, of which around 145 billion was

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

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" of the 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,
the London Metal Exchange, Lloyds of London, and the Bank of England. Several other major
UK cities have large financial sectors and related services. Edinburgh has one of the large
financial centers in Europe

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

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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easing.

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

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

Trade Year to date 2012

Trade Year to date 2012

12,000
10,000
8,000
6,000
4,000

UNITED
GERMANY
NETHERLAN
FRANCE
IRISH
BELGIUM
CHINA
SPAIN
ITALY
SWEDEN
RUSSIA
SWITZERLA
UAE
HONG KONG
INDIA
JAPAN
CANADA
SOUTH
SINGAPORE
AUSTRALIA
TURKEY
SOUTH
NORWAY
POLAND
DENMARK

2,000

% Change 2012/ 2011

% Change 2012/ 2011

100
80
60
40
20

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POLAND

DENMARK

NORWAY

SOUTH AFRICA

TURKEY

AUSTRALIA

SINGAPORE

CANADA

SOUTH KOREA

JAPAN

INDIA

HONG KONG

UAE

SWITZERLAND

RUSSIA

SWEDEN

ITALY

SPAIN

CHINA

BELGIUM

FRANCE

IRISH REPUBLIC

-60

GERMANY

-40

NETHERLANDS

-20

UNITED STATES

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 4th most 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 in global 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.

Exchange Rate

Exchange Rate
Linear (Exchange Rate)

0.8
0.6864
0.7
0.6

0.6214

0.6472

0.6436

2010

2011

0.6183

0.5039

0.5
0.4
0.3

19

0.2

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0.1
0
2007

2008

2009

2012

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 (nonexchange 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

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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20

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

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 35kilometer 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%. This
recession 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

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21

fold.

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

Labor Force - by
occupation(%)
Agriculture

Industry

Services

2%

knowledge-based industries has raised the general


demand for skilled workers across a range of

18%

continue to be, a crucial aspect of government

80%

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Improving the skills of the workforce has, and will

22

sectors and occupations.

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 3
billion 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 low
skilled adults without qualifications, basic literacy, investing more in intermediate skills and
further increasing the proportion of adults holding a degree.

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23

LABOR COSTS

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 rd quarter 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

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24

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

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

consumer

important
price

categories

index

are

in

the

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

Inflation rate %
4.50%
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%

Inflation rate % at
year end
2005 2006 2007 2008 2009 2010 2011 2012

due to decrease in the price of fuel and


housing. The targeted inflation by BOE for

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25

future is 2.2%.

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

operational independence.

England

has

Interest rate %

Decisions on

interest rates are taken by the Monetary

6.00%

Policy

5.00%

Committee

(MPC).

The

current

interest rate that is prevailing in market is

Interest rate % at
year end

4.00%

unchanged since March 2009.


3.00%
2.00%
1.00%
0.00%
2005 2006 2007 2008 2009 2010 2011 2012

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 system and the hereditary transmission of occupation, social status and

26

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

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

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

controversial, most are influenced by factors of wealth, occupation and education. Until
recently the Parliament of the United Kingdom was 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 serve
as 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

Population (m)

The United Kingdom has a total estimated


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

64

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

63

average

the

62

population is 0.553% resulting from a surplus or

61

27
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59
58
2012

2011

2010

2009

2008

2007

2006

57
2005

migrants entering and leaving a country. As per

60

2004

deficit of births over deaths and the balance of

2003

in

2002

change

2001

percent

2000

annual

population growth rate UK is ranked 146th in the world.

Population growth rate


(%)

Age Structure

0.6
0.5
0.4
0.3
0.2
0.1
2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

In Dec 2012 Office of National Statistics


has summarized the key feature of the
age distribution profile for UK. This data
depicts that people who aged 60-64
were born following the Second World
War and those aged 40-49 born during the 1960 baby boom. There is a smaller number of
children aged five to nine years than ten years ago which is a consequence of low numbers of
births at the beginning of the 20th century, and the broadening of the pyramid in the 0-4 years
category is due to a higher numbers of births in recent years. At older ages, females
outnumber males, reflecting the higher life expectancy of females. At younger ages there are
more males than females, reflecting that there are slightly more boys than girls born each year.
In age group 0-14 nearly 5.7 million are male while 5.2 m are female, in age group 15-64
nearly 20.8m are male while 20.95m are female and in age group 65+ nearly 4.6m are male
while 5.8m are female. In UK sex ratio for new birth is 1.05 male per every female, for age
bracket 1-14 is 1.05 male per every female, for age bracket 15-64 is 1.02 male per every
female and for 65 years and over age bracket sex ratio is 0.8 male per every female. Male to
female ratio for overall population is according to July 2011 estimate is 0.99 male per every

Dependency Ratio

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28

female.

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

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and 1.6%are others.

29

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

The country has been struggling with issues revolving around multiculturalism, immigration and
national identity. This is against a background of concerns about terrorism and Islamist
radicalism, heightened after the suicide bomb attacks on London's transport network in 2005.
One of the more recent trends in migration has been the arrival of workers from the new EU
member states in Eastern Europe.

Religion
The main and traditional religion in the UK is

Religion wise Population

Christianity. The Church of England (Anglican) is


the established church in England. Similarly, the
Church of Scotland (a Presbyterian Church) is
regarded as the 'national church' but it is not
official. Wales and Northern Ireland do not have an

Christian

23%

Muslim

1%
1%
3%

established church. Most people (71.6%) are

Hindu

72%

Other
Unspecified

Christian, but other main religions include Muslim,


Hindu, Sikh, and Judaism.

CLASS STRUCTURE AND EDUCATION


Britain was once a class-ridden society. Today, multiculturalism and a changing economy are
gradually eroding the British class system, but some features of the system still remain.
The British society has often been considered to be divided into three main groups of classes:
The Upper Class

often people with inherited wealth. Includes some of the oldest families, with many of
them being titled aristocrats.

The Middle Class

The majority of the population of Britain. They include industrialists, professionals,


business people and shop owners.

Lower or Working Class

30

People who are agricultural, mine and factory workers.

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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, hiphop, 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

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

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

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

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 the United 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

32

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

order to try and combat the past few decades' worth of ignorance we had, including more

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

recycling schemes being offered and plans to cut both household and business waste and the
use of landfill sites.

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OVERVIEW OF UK TECHNOLOGICAL AND SCIENTIFIC ENVIRONMENT

33

TECHNOLOGICAL ANALYIS

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 RollsRoyce 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

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Investment in Research and Development (R&D)

34

are of a lower R&D intensity.

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

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35

education and government as shown in figure 2.

R&D Tax Credits and Other Support for Business


Research and development tax credit are the largest government support for businesses
investing in research and development and continue to be the key driver for innovation. In the
year 2011 R&D claims made by the businesses were GBP 1.1 billion on GBP 10.9 billion of
expenditure.
The rate of tax relief available through the SME R&D tax credit was raised to 225% from April
2012, making it among the most competitive regimes in the world, which is likely to further
incentivize companies to invest in R&D.

Important Scientific Researches by UK Scientist


1. Law of motion and law of gravity by Sir Isaac Newton
2. Discovery of Hydrogen by Henry Cavendish
3. The theory of aerodynamics, by Sir George Cayley
4. The unification of electromagnetism, by James Clerk Maxwel
5. The first meaningful synthesis of quantum mechanics with special relativity by Paul

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6. Theories in cosmology, quantum gravity and black holes, by Stephen Hawking

36

Dirac

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 the
hotel 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 2 nd in 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 whereas

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University of Oxford is ranked 6th.

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

35 million for research campuses

25 million for the advanced metrology lab

50 million for transformative equipment and infrastructure

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Government has also committed a further:

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39

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 is
important 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 European
secular 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 pain,
and some of it is a good discipline with real benefits.

Employment law the relationships between you and your employees, from
payment rights to varying types of discrimination

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40

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

Consumer protection to ensure that consumers are treated fairly by


businesses, such as ensuring product quality is satisfactory.

Tax and regulations anything from payroll tax, VAT and corporation tax, to filing
accounts and statutory documents.

Its your 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

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

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

41

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

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 the
recruitment 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 and must 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

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

42

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

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

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ethnic background.

43

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

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 vigorous
competition 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 April
2014.
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.

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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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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.

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 concern
because 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, AntarcticMarine Living Resources, Antarctic Seals, Antarctic Treaty, Biodiversity, Climate Change,
Protocol, Desertification, Endangered Species,

Environmental

45

Change-Kyoto

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

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Climate

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.

CO2 emission

Value

10
9.5
9
8.5
8
7.5
7
6.5
6

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.

Air pollution

Climate change issues

Disposal of Royal Mail Rubber band

Food wastage

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46

Environmental issues in the United Kingdom

Key Environmental Regulation


The key environmental regulations in UK cover the following areas

Air

Hazardous substances

Land

Packaging

Waste and recycling

Water

UK allows Environmental permits and licenses for

Discharge of liquid waste to public sewers

Handling or storage of hazardous waste

The emission of specific substances

Current Threat
A recent report from market research firm Environment Analyst indicates that the
environmental consulting sector in the United Kingdom (UK) contracted by 8.4 percent in 2010,
to stand at slightly less than US$ 2 billion (GB 1.2 billion).
This is the markets second consecutive decline after more than two decades of unbroken
growth. This decline of US$ 2 billion was primarily the result of government austerity at the
national and local levels. In fact, 70 percent of the overall decline was attributable to the

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47

decrease in public spending; the remainder was lost in the private sector.

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 40 percent is also the lowest in the EU.
3. Most Flexible market in Europe: According to a World Bank report, the UK stands at

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48

second place to employ workers.

4. Least barriers to entrepreneurship: OECD has identified the UK as second in the world
for Product Market Regulation. It also ranks second for the least barriers to
entrepreneurship and third for the least barriers to trade investment in the world.
5. World leader in innovation: the UK is known for its quality research base and ranks
second on the list of most productive places for innovation.
6. Stable Political Environments: Transparency International rates the UK high on the
transparency list. The UK is the country with the least corruption in the world. It
achieves a higher rating in comparison to the US, Japan, Germany and France.
7. Stable Regulatory Environment: the UK follows a consultative approach for
formulation of regulation which is beneficial for a business environment.
8. Easy property registration: Registering property in the UK is easier in comparison to
Italy, Ireland, France and Germany.
9. International language for business: English being the operational language has
advantages when doing business globally.
10. Top Talent: the UK is home to the top six universities in Europe. Two of the top six
best schools in the UK figure in top three global universities.
11. Gateway to the EU market: The UK acts as an excellent gateway to the European
market which has 27 member states and an approximate population of 500 million.
12. Strong Communication Network: The UK has extensive broadband markets amongst
the G7 countries and also the strongest ICT infrastructure in the world.
13. Strong transport links: The UK is known for its world class transport links. The
government has taken steps to improve air facilities, rail network and rail freight

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infrastructure.

14. Leading Financial Center: London which is world's largest financial center is situated
in the UK.
15. Rapid productivity growth: The UK has taken a major leap in terms of productivity in
comparison to its other core competitors.

The UK's diverse economy is the perfect location for businesses to explore their international
business potential. All these factors make it the hotspot for foreign direct investment.

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1. Global

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and

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September

22,

2014

from

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22,

2014

from

http://blogs.reuters.com/great-debate-

analysis.php#ixzz3E3yFdhNk

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uk/2011/09/02/the-legislation-affecting-your-trade/

4. http://businesscasestudies.co.uk/building-societies-association/workingwithin-the-business-cycle/the-business-cycle.html#axzz3E41LHNZU

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performance-nears-ten-year-high-by-tim-kay/

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