PESTEL analysis of the UK (UK PESTEL analysis)
This detailed PESTEL analysis of the UK 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. PESTEL analysis is usually conducted in the context of an industry; however, it can also be conducted on a country in general.
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 will create a chaos unimaginable, whereas others believe it will open doors to immense opportunities for the country in the future. Likewise, recent rise in violence and crimes has caused serious concerns.
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.
Economic factors affecting the UK
The UK is the 6th largest economy in the world by nominal GDP. 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 (23+) in the UK is £8.91 as of April 2021. The 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%.
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, 2021). 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. According to the House of Commons Library (2021), it contributed £132 billion to the economy in 2019 with London leading the sector from the top.
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 to be dissected in the PESTEL analysis of the UK is the social environment. The UK has a big consumer market. The current population is over 68 million (Worldometer, 2021). Births continue to outnumber deaths and the population is expected to reach 74 million by 2039.
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.
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.
Technological factors affecting the UK
The UK is one of the most technologically advanced countries in the world. London is the 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.
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 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.
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Last update: 06 April 2021
BBC (2020) United Kingdom country profile, available at: https://www.bbc.co.uk/news/world-europe-18023389 (accessed 06 April 2021)
House of Commons Library (2021) Financial services: contribution to the UK economy, available at: https://commonslibrary.parliament.uk/research-briefings/sn06193/ (06 April 2021)
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 (2021) United Kingdom, available at: https://oec.world/en/profile/country/gbr (accessed 06 April 2021)
Worldometer (2021) UK Population, available at: https://www.worldometers.info/world-population/uk-population/ (accessed 06 April 2021)
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.