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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 km
2

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
IMPORTS
Machinery, 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 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 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.


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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 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 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 May
2007.
Europe:
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


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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
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.




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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
Democrats
57 5 5 - 2 11
Labor Party 257 37 30 - 12 13
Democratic
Unionist Party
8 - - 38 - 1
Scottish
National Party
6 69 - - - 2
Sinn Fein 5 - - 29 - 1
Plaid Cymru
Party of
Wales
3 - 11 - - 1
Social
Democratic
3 - - 14 - 0
Alliance Party
of Northern
Ireland
1 - - 8 - 0
Green Party
of England
1 - 0 - 2 2
Respect Party 1 0 0 - - 0
Ulster
Unionist Party
0 - - 15 - 1
Scottish
Green Party
0 2 - - - 0
UK
Independence
party
0 0 0 1 0 13



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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.
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.

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


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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."
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.




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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.

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


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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
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
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


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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 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 18
th
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 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%


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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,


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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. 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 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 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 300,001-1,500,000 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
The service sector is the dominant sector of the UK economy, and contributes around 73% of
GDP. The creative 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 compensation to
employees. In 2008 health and social work had a gross value added of around 93.7 billion. This


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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 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 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.


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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 19
th
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


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A
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A
R
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% Change 2012/ 2011
% Change 2012/ 2011


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0.5039
0.6864
0.6214
0.6472 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 Rate
Linear (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 4
th
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.












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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
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.


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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%. 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
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 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
2%
18%
80%
Labor Force - by
occupation(%)
Agriculture Industry Services


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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.
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


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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
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


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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%.
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.

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
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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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 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 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 22
nd

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.




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


Age Structure
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
57
58
59
60
61
62
63
64
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
Population (m)
0
0.1
0.2
0.3
0.4
0.5
0.6
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
Population growth rate
(%)


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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 female.

Dependency Ratio
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.



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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.
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
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
established church. Most people (71.6%) are
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.
72%
3%
1%
1%
23%
Religion wise Population
Christian
Muslim
Hindu
Other
Unspecified


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The Middle Class
The majority of the population of Britain. They include industrialists, professionals,
business people and shop owners.
Lower or Working Class
People who are agricultural, mine and factory workers.

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


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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 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.


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















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TECHNOLOGICAL ANALYIS
OVERVIEW OF UK TECHNOLOGICAL AND SCIENTIFIC ENVIRONMENT
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


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



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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 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
University 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 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.
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 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
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 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
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.
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


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



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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.
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 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, 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, 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%



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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
Key Environmental Regulation
The key environmental regulations in UK cover the following areas
Air
Hazardous substances
Land
Packaging
Waste and recycling
Water

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7.5
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8.5
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CO2 emission
Value


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













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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 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
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.


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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
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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BIBLIOGRAPHY

1. Global factors and strategy. Retrieved September 22, 2014 from
http://www.essay.uk.com/business-environments/global-factors-
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2. White Joe, September 2, 2011: The legislation affecting your trade. Retrieved
September 22, 2014 from http://blogs.reuters.com/great-debate-
uk/2011/09/02/the-legislation-affecting-your-trade/

3. http://www.ukessays.com/services/example-essays/business/next-pestle-
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