PESTEL analysis of the UK (Country Profile)
This detailed PESTEL analysis of the UK (Country Profile) aims to address some of the political, economic, social, technological, environmental, and legal issues affecting the UK today. PESTEL analysis is a very useful tool that helps business strategists to understand the impact of the macro-environmental factors on their businesses. It also helps them in making strategic decisions.
Political factors affecting the UK
The UK consists of England, Wales, Scotland, and Northern Ireland. It is one of the most powerful countries in the world. It is a modern parliamentary democracy and a constitutional monarchy with the monarch (Currently Queen Elizabeth II) being the Head of State. The role of the monarch in the legislative process is largely ceremonial (BBC, 2020).
The prime minister is the head of the government who is elected for a five-year term. Four political parties that mostly dominate the politics of the land are Labour, Conservative, Liberal Democrats, and Scottish Nationalist Party. London is the capital of the UK which is a globally powerful centre of finance and culture.
Political stability is a great strength of the country; however, Brexit (UK’s withdrawal from the EU) has created uncertainties and political debates. Some analysts believe that Brexit has already created a big chaos, whereas others believe it has opened doors to immense opportunities for the country as well.
The UK maintains very good relations with the United States, and many other countries in the world. It is a permanent member of the UN, and is a great power, with considerable influence on global economic, cultural, military, scientific and political affairs. However, its relations with some authoritarian regimes have drawn a lot of criticism. Likewise, recent rise in violence and crimes in the country has caused serious concerns as well.
Economic factors affecting the UK
Economic environment is a key area of discussion in this PESTEL analysis of the UK (Country Profile). The UK is the 6th largest economy in the world by nominal GDP. However, the global lockdowns in 2020 and 2021 put enormous pressure on the treasury and destroyed many businesses across different industries. Therefore, the Bank of England pumped an extra £100 billion into the economy in 2020. Inman (2021) reports that the economy has started bouncing back stronger than expected as evidenced from increases in household savings.
National Living Wage usually increases every year which is extremely useful to support people with low income. The current corporation tax rate for company profits is 19% (PwC, 2022). However, the rate is going to be 25% for the financial year beginning 1 April 2023.
Cars, gas tribune, gold, and crude petroleum are some of the top exports of the UK that mostly go to countries such as the USA, Germany, China, the Netherlands, and France. Its top imports are cars, gold, refined petroleum, broadcasting equipment (OEC, 2022). It attracts millions of tourists every year. Likewise, a huge number of international students come to the country every year and contribute to the economy significantly.
The financial services sector also plays a big role in the UK economy. It contributes immensely the GDP with London leading the sector from the top. It along with related sectors such as accounting, and law employ over 2 million people across the country.
The UK has long been a popular destination for foreign direct investment (FDI). Many business tycoons and organisations from around the world have invested in a variety of industries in the UK. Sports, real estate, technology, grocery and many other industries have drawn an enormous amount of interest from overseas.
Social factors affecting the UK
The next issue dissected in the PESTEL analysis of the UK (Country Profile) is the social environment. The UK has a big consumer market. The current population is over 68.5 million (Worldometer, 2022). Births continue to outnumber deaths and the population is expected to reach 74 million by 2039.
The UK has historically been influenced by the concept of social class; however, the population is multicultural. Over the years, companies have developed a variety of new products and markets to cater for the needs of different races and religions. There are still many opportunities out there for organisations to explore.
The UK is one of the top 10 countries perceived to have the most educated population in the world. It is also No. 3 in the rank of overall Best Countries. However, it is worth mentioning that the costs of living and higher education are on the rise.
Certainly, the UK has a relatively high degree of social mobility. However, it is important to note that there are still some disadvantages for those who grow up in poverty or in lower-income families. Inequality is quite pronounced in the UK and those from poorer backgrounds may find it difficult to keep up with the pace of change in society.
The population is getting older as well. This has implications on both the labour market and the health care system. However, there are a lot of opportunities for organisations to cater for the needs of older population. Real estate, holiday, insurance, health care and many other companies have already benefitted from this category of population.
Technological factors affecting the UK
The UK is one of the most technologically advanced countries in the world. London is a great hub for both financial and technological institutions. Businesses are frequently developing new technologies to offer the best solutions for their customers. The advanced technological infrastructure offers entrepreneurs unlimited opportunities to do business in the UK.
The high level of Internet connectivity in the UK creates opportunities for people who use online services for their personal, social, and business needs. It also provides businesses with opportunities to find new customers through digital marketing and social media channels.
Technology sector is a major contributor to the UK economy. A lot of investment and talents are coming into the sector. It is worth noting that the investment and development are spreading across the country. However, the UK is falling behind the USA, South Korea, India, Japan and some other countries in technological development.
Environmental factors affecting the UK
Economic activities impact on the environment; however, the UK has made significant improvements in reducing the negative impact. The government, local councils, newspapers, charities and many others have taken a variety of initiatives to create environmental awareness and reduce the negative impact of economic growth on the environment.
The UK sometimes faces challenging weather conditions. However, weather still plays an important role in tourism. Millions of tourists from around the world come to the UK, particularly during summer. In fact, tourism contributes to the economy significantly every year.
Legal factors affecting the UK
The last element to examine in the PESTEL analysis of the UK (Country Profile) is the legal landscape. However, a detailed discussion on the legal environment of the country is beyond the scope of this article. Nevertheless, the article addresses some of the key areas in brief.
The Employment Act 1996 protects rights of employees. Maternity and paternity leave, minimum wage, holiday pay, sick pay, and some other rights are legally protected. Likewise, the Equality Act 2010 protects people from any discrimination.
This PESTEL Analysis of the United Kingdom (Country Profile) shows that the country is in a strong position due to its size, strength, and influence on international politics and trade. It has been a world leader in business, innovation, and culture for centuries. However, can it maintain this position as it leaves the European Union? It is worth noting that it is in the midst of negotiating new trade deals many countries which heralds a promising future.
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Last update: 22 March 2022
BBC (2020) United Kingdom country profile, available at: https://www.bbc.co.uk/news/world-europe-18023389 (accessed 21 March 2022)
Inman, P. (2021) UK economy bouncing back stronger than expected amid savings boom, available at: https://www.theguardian.com/business/2021/mar/31/uk-economy-savings-expansion-recovery (accessed 06 April 2021)
OEC (2022) United Kingdom, available at: https://oec.world/en/profile/country/gbr (accessed 21 March 2022)
PwC (2022) UK: Taxes on corporate income, available at: https://taxsummaries.pwc.com/united-kingdom/corporate/taxes-on-corporate-income (accessed 22 March 2022)
Worldometer (2022) UK Population, available at: https://www.worldometers.info/world-population/uk-population/ (accessed 21 March 2022)
Author: Joe David
Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.