Department of

Business Administration

Submitted By: Taseer Mohammad

Submitted To: Ms. Zakiya Begum

Date Of Submission: 06-04-2019

Subject: International Business

Roll no: MBA-18-15

Semester: 2nd
Business Environment Analysis on
United Kingdom

• Introduction of Country
• Trade Basket
• Trading Partners
• PESTEL Analysis of the UK
• SWOT
 Introduction Of Country

The United Kingdom of Great Britain and Northern Ireland, simply called the United
Kingdom or UK, is a sovereign country in Northern Europe. It is a constitutional
monarchy that is made up of four
separate countries: England, Wales, Scotland and Northern Ireland. It is a member of
the European Union, United Nations, the Commonwealth, NATO and the G8. It has the fifth
largest economy in the world.
Around 66 million people live in the UK. They can be divided into four big nationalities based
on the countries where they live. These countries, and the names of the people and
language spoken there, are as follows:

• England is the biggest country, and the one where most people in the UK live. People
who live in England are called English. Their native language is called English, which is
spoken by almost everyone in the UK and has become a global lingua franca. A few
people in the southwest part of England can speak Cornish, a Celtic language.
• Scotland, to the north of England, is the second biggest country. People who live here
are called Scottish, and some speak languages called Scottish Gaelic, a Celtic language,
or Scots, which is a lot like English but is different from it.
• Wales is to the west of England. Its people are called Welsh and have their own Celtic
language which is also called Welsh. Not everyone in Wales can speak Welsh, but almost
everyone can speak English.
 Trade Basket

The United Kingdom is the 10th largest export economy in the world and the 11th most
complex economy according to the Economic Complexity Index (ECI). In 2017, the United
Kingdom exported $395B and imported $617B, resulting in a negative trade balance of
$222B. In 2017 the GDP of the United Kingdom was $2.62T and its GDP per capita was
$43.3k.

The top exports of the United Kingdom are Cars($45B), Packaged

Medicaments ($18.4B), Crude Petroleum ($17.8B), Gold ($16.1B) and Gas
Turbines($14.6B), using the 1992 revision of the HS (Harmonized System) classification.
Its top imports are Cars ($45.5B), Gold ($34.3B), Crude Petroleum($19.1B), Refined
Petroleum ($18.3B) and Packaged Medicaments ($17.6B).

The top export destinations of the United Kingdom are the United
States ($45.2B), Germany ($38.6B), the Netherlands ($24.9B), France ($24.8B)
and China($21.9B). The top import origins are Germany($90.3B), China ($58.9B), the
Netherlands ($47B), the United States ($46.6B) and France ($36B).

The United Kingdom borders Ireland by land and Belgium, Germany, Denmark, France, the
Netherlands and Norway by sea.

International trade really matters for the British economy. About 28% of the goods and
services we produce are sold abroad, while 30% of what we buy comes from other countries.

Their main trade partners are mostly the rich economies: the United States and other
European nations.

The US is the largest single export market for our goods and services. It's also their largest
foreign supplier of services. Germany is the biggest single source of imported goods.

But if you were a trader in goods or services and thinking about your options, you might
want to group countries together if they had the same trade policy and presented the same
barriers to your exports.

So, if you add the European Union countries together it's the UK's biggest trading partner
for imports and exports of both goods and services.

Seven out of the top individual destination countries for UK exports of goods are in the EU.
When it comes to services, it's almost as many - six of the top 10.
However, it's worth bearing in mind that the EU figures may be somewhat inflated by a
phenomenon known as the Rotterdam effect. This is the effect of goods being sent around
the world via the giant Dutch port, but being mistakenly classified as exports to the
Netherlands.

But even allowing for that, it's clear that the EU market really matters.
The one exception to Western countries' dominance of the top 10 UK trade partners is China
for goods. It comes in second for imports and sixth for exports.

UK exports a wide range of goods, including food and drink.

Plenty of people overseas (and not just expats) enjoy a wee dram now and then.

Whisky exports were worth more than £4bn last year. Beer, wine and gin were also in the
top 10 along with chocolate and salmon, another one with a strong Scottish flavour.

There's a lot of stuff you can't eat or drink heading out as well; a wide range of machinery
and parts, cars, jewellery, medicines and plastics are all important earners.

Important though industry is, the British economy is dominated by services, to the tune of
close to 80%.

It's another story in terms of exports, where goods are still ahead, when you look at gross
figures. But service exports are increasingly important; they have grown every year since
the turn of the century.

This includes things such as financial services (mainly, but not only, in the City of London),
other IT services, tourism and construction. Services imports are also up.

They sell a lot of stuff abroad. But we import more. There is a persistent deficit in our
balance of trade. Actually it's a deficit in goods, partly offset by a smaller surplus on trade in
services.
 Trading Partners

Comprised of England, Northern Ireland, Scotland and Wales, the United Kingdom is a
sovereign state situated across from continental Europe’s north-western coast.

The United Kingdom shipped US$484 billion worth of products around the globe in 2018
according to the latest statistics from the International Trade Centre. That dollar amount
represents a -5.3% decline since 2014 but a 9.5% year-over-year gain from 2017 to 2018.

From a continental perspective, 54.2% of UK exports by value were delivered to other

European trade partners (that percentage compares with 46.6% going to European Union
members). Another 23.1% was sold to Asian importers while the United Kingdom shipped
15.2% worth to North America.
Smaller percentages went to Africa (2.3%), Oceania (1.5%) led by Australia and New
Zealand then Latin America (1.3%) excluding Mexico but including the Caribbean.
 United Kingdom’s Top Trading Partners

Below is a list showcasing 15 of United Kingdom’s top trading partners in terms of export
sales. That is, these are countries that imported the most UK shipments by dollar value
during 2018. Also shown is each import country’s percentage of total UK exports.
1. United States: US$64.4 billion (13.3% of total UK exports)
2. Germany: $47 billion (9.7%)
3. Netherlands: $33.3 billion (6.9%)
4. France: $31.8 billion (6.6%)
5. Ireland: $28.3 billion (5.9%)
6. China: $27.5 billion (5.7%)
7. Switzerland: $25.4 billion (5.2%)
8. Belgium: $19.1 billion (4%)
9. Italy: $14.1 billion (2.9%)
10. Spain: $13.9 billion (2.9%)
11. Hong Kong: $10.3 billion (2.1%)
12. United Arab Emirates: $10 billion (2.1%)
13. Turkey: $9.5 billion (2%)
14. Japan: $8.3 billion (1.7%)
15. South Korea: $7.8 billion (1.6%)
Approaching three-quarters (72.5%) of UK exports in 2018 were delivered to the above 15
trade partners.

Turkey was the only top importers that decreased its purchases from United Kingdom from
2017 to 2018, down in value by -0.6%.

Among the other 14 countries, gains ranged from a minimum of 0.6% for Germany up to
28.5% for China.
 PESTEL Analysis of the UK
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.

Political factors
The Government of the United Kingdom, formally referred to as Her Majesty's
Government, is the central government of the United Kingdom of Great Britain and
Northern Ireland. It is also commonly referred to as simply the UK Government or
the British Government. Britain is a constitutional monarchy where the reigning monarch
does not make open political decisions. Such decisions are taken by the Prime Minister and
the Cabinet.
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.
 SWOT Analysis of The UK

SWOT analyses look at the Strengths, Weaknesses, Opportunities, and Threats of a business
venture, company or even — as in this case — a country (or at least its economic
opportunities)! This analysis will provide insight into the future success or failure of the
country’s economic situation, and help to identify factors which might affect it along the
way.

Strengths

Identify the strengths is the first step in any SWOT analysis. The UK has a relatively strong
position in today’s global markets, supported mainly by the following aspects

• Advantageous Trading Position: The United Kingdom has an established place in the
global markets, holding good relations with both importers and exporters.

• Strong Tertiary Industry: The UK has scores of well-educated individuals who

provide value in tertiary, service-based industries.

• High Standard of Education: The existing educational standards are of a good

quality, despite further education being relatively expensive.

• Plenty of FDI: The UK receives plenty of Foreign Direct Investment from other
countries, compared to some European states.

• Political Stability: Like most More Economically Developed Countries, the United
Kingdom has achieved seemingly national political stability.

Weaknesses

The weaknesses are the only other internal factor discussed in a SWOT analysis. In the case
of the country under discussion, some of the drawbacks include:

• Poor Transport: The UK is known for its poor transport systems, especially industrial
ones. This is to some extent a result of a high population and lots of industry, but still
acts a weakness.

• Suboptimal Innovation: Compared to the United States or some areas in Central

Europe, the UK has a poor level of innovation, and trails other countries in creation
and production processes.

• Significant Internal Wealth Disparity: The United Kingdom has a growing disparity
in the affluence of its poorer and more wealthy individuals
Opportunities

The first external factor in a SWOT analysis, the opportunities are the potential ventures that
might be pursued for any form of gains, financial or otherwise. For England, Wales, Scotland
and Northern Ireland, these are:

• New Trade Partners: More lenient trade rules are springing up all over Europe, the
Middle East and Asia, which is good news for the UK, who might be able to find new
trade partners.

• Riding Tech Waves: If the UK can create tech growth hubs similar to those across
the United States, it might get a much fairer slice of the tech market.

• Migrant Education: The United Kingdom’s current population has a significant

number of first-generation migrants, who often work in less skilled fields. With the
next generation of very cosmopolitan Brits, the UK could build a much more intelligent
population with good education.

Threats

Threats are the final factor in any SWOT analysis. Just as the name suggests, these factors
are opposite to opportunities — that is to say, possible negative forces. For the United
Kingdom, these might be:

• Competition: Many of Europe’s nations are working hard to reach levels of

development and wealth similar to those in the UK. When this happens, the UK will have
to directly compete with other countries, especially in the services industries.

• Worker/Business Relocation: The United Kingdom’s almost overcrowded,

expensive nature is not a positive for most individuals and businesses, who might
move elsewhere in the hopes of finding lower overhead costs.

• Financial Crisis: Just like any other country, the UK has to consider the threat of a
financial crisis, which could be triggered by events across the world (the end of
China’s development boom, or a US recession).

In conclusion, the UK seems to be in a fairly good (however still suboptimal) economic position
right now, but has to reckon with the ever-increasing competition presented by other nearby
countries. If the United Kingdom can build a broader reach, educate its (incoming) population,
and spark high-end innovation processes, then it might find itself in a very favorable position,
come a decade or two.