PESTEL analysis of the UK

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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, you can also carry it out on a country.

PESTEL analysis of the UK

This PESTEL analysis of the UK aims to address some of the political, economic, social, technological, environmental, and legal issues concerning the country.

Political factors

The UK consists of England, Wales, Scotland, and Northern Ireland. It is one of the most powerful countries in the world. Political stability is a great strength of the country; however, Brexit 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.

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.

The current corporation tax rate for company profits is 19%. However, the government announced a reduction to the corporation tax at Budget 2016. From 1 April 2020, the rate will be 17% (GOV.UK, 2018).

Economic factors

A  very important element in the PESTEL analysis of the UK is the country’s economic landscape. The UK is the 5th largest economy in the world by nominal GDP (The World Bank, 2017). The recession in 2008 had put the economy in trouble; however, the government took necessary steps to improve the economy.

British households faced certain challenges in 2017. Prices in the shops rose at fast rates as the weak pound increased the cost of importing goods to the UK. However, wages did not go up in line with the increased prices. The current minimum wage for people aged 25 and over is £7.50 per hour which is due to increase to £7.83 from April 2018.

The inflation rate rose to 3.1% in November 2017. It is worth noting that the Bank of England has set a 2% inflation target. It increased its key interest rate in November 2017. The rate has gone up from 0.25% to 0.5% (BBC, 2017). It is unlikely that there will be another quick increase; however, many analysts believe that the age of low interest rate is over.

Social factors

The UK has a big consumer market. According to the data released in July 2017 by the Office for National Statistics, the population of the UK was 65.6 million in 2016.  Births continue to outnumber deaths and the population is expected to reach 74 million by 2039. The population is getting older as well. In 2016, 18% of people were aged 65 and over, while 2.4% were aged 85 and over. 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

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 talent are coming into the sector. It is worth noting that the investment and development are spreading across the country. The UK attracted £28bn in technology investment since 2011, compared to £11bn in France and £9.3bn in Germany (McGoogan, 2017). However, the UK is falling behind the USA, South Korea, India, Japan and some other countries in technological development.

Environmental factors

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 is booming in the UK and contributes approximately £127bn annually to the economy.

Legal factors

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.

We hope the article has helped you explore PESTEL analysis of the UK. You may also like reading PESTEL analysis of the USA. If you liked this article, please share it by clicking on the icons below.

The article publication date: 16 January 2018

Further reading/references

BBC (2017) UK inflation rate at near six-year high, available at: http://www.bbc.co.uk/news/business-42320052 (Accessed 22 January 2018)

GOV.UK (2018) Rates and allowances: Corporation Tax, available at: https://www.gov.uk/government/publications/rates-and-allowances-corporation-tax/rates-and-allowances-corporation-tax (Access 20 January 2018)

McGoogan, C. (2017) Tech sector growing faster than UK economy with 72pc of investment outside London, available at http://www.telegraph.co.uk/technology/2017/03/22/tech-sector-growing-faster-uk-economy-72pc-investment-outside/ (Accessed 24 January 2018)

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Author: Jo David

Jo David has years of 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.