Political Environment Uk

Political Environment

As previously discussed in the political report, the UK is a parliamentary democracy which a stable political party system. Also, the UK uses precedence to judge cases, therefore the legal system is efficient and predictable. Moreover, there are strict anti-terrorism laws which enforce national security measures. Since this country is a member of the European Union it has a tariff rate of 1.1% with fellow member countries. That is considered to be a low tariff rate, and there are minimal non-tariffs barriers to account for when trading with the UK.  The amount of time that is required for imports to enter the UK and the costs per container are lower than average. Furthermore, the UK scores a 1.0 for both political and civil rights. The country’s government and population recognize globalization as a key factor of its growth; for instance, they treat legal foreign direct investments and national investments equally. Finally, according to the corruption perception index report, the UK is mostly transparent and corruption is not as prevalent as in other countries around the world.

As a positive, the UK has seen a long, stable political period. However, a negative can be drawn from this. Since the country is established in regards to its political landscape, it has not experienced a demanding need to solve political changes. Should an event happen, such as the global economic recession, it is unknown how the UK will react. Additionally, even though equal treatment is given under the law, living standards are not equal when comparing immigrants to non-immigrants.

In regards to political risks that need to be taken into account when investigating the UK, it is important to note that while private property rights and contract rights are very secure, laws regarding intellectual property rights are not as efficient. This could be very detrimental to companies looking to start or invest in the UK, and more specifically England.

Economic & Legal Environment

        England, and more broadly the UK, is seen as a strong location for starting a business. The country employs a mixed economy system, which allows for the privatization of companies along with government-owned entities. As previously reported, the country ranks within the top one-sixth of economies in regards to the ease of starting a business. The UK also ranks high in such freedom measures as labor, business, financial, monetary, and fiscal freedoms. While all of these measures have different meanings and implications, they all contribute to the idea that the UK is a country open to the creation of business. Additionally, 78.9% of the UK economy is comprised of services. This reflects the importance of the services industry in the country. In regards to the standard of living in the UK, the country reports a low level of poverty and sees an equal distribution of wealth among its citizens. The country’s GDP has been increasing steadily since 2008, which shows that the economy is growing. This is a positive aspect that should be strongly considered by any company looking to enter the market. An additional consideration for business is the state of the country’s inflation rate and foreign exchange system. The country’s inflation rates rank in the lower one-third of rates around the world and the exchange rate remains stable for the most part.

        After examining all of the positives of starting a business in the UK, there are very few drawbacks for a business to consider. One set of positives includes the economic and financial freedoms granted to the citizens. However, it should be noted that these freedoms have been decreasing in recent years. Another aspect of the UK economy that was noted as a positive is the annual GDP growth rate. The country has been experiencing increases since 2010, however it has not bounced back to its pre-2008 economic downturn levels. Lastly, the government spends such a high amount that the Heritage Foundation classifies the country as “depressed.”

        Leading from the previously mentioned disadvantages of starting a business in the UK, certain risks may arise. While the UK economy is growing in certain aspects, it is still trying to recover from the worldwide economic downturn of a few years ago. Due to this risk, businesses should pay close attention to the changes in annual GDP growth. If annual growth does not continue to occur, the government, corporations, and citizens could all be negatively affected.

Socioeconomic Environment

The unemployment rate of the economically active population has, in fact, decreased. As previously reported, 99% of the population is literate, with this measure being equal for both men and women. Employment regulations play a huge role in the UK and are very flexible. There is only a small amount of legal limitations for employers. All employees are entitled to a contract, which states the basis of the employment relationship; it includes various pieces of information from pay levels to dismissal procedures to pension agreements. The primary language in England is English, and the predominant ethnic group is white with some minor ethnic groups. Religion does not play a major role in business and the country does recognize religious freedom. The British culture is positioned low on the scale of power distance, which means there is no difference between working classes. The UK is also characterized by an individualistic culture, very similar to the United States.