Our PESTLE Analysis of The United Kingdom examines the political, economic, social, technological, legal and environmental factors that affect the UK.
Imagine you are standing across the River Thames at the golden hour. The weather is all clear, which is rare in London, by the way.
But for a second, imagine you're standing across the mighty London Eye with the cool wind brushing your face. Isn't all this worth experiencing at least once in your life?
You must be thinking, why are we talking about the River Thames, London Eye, and London? It's because today we will conduct a PESTLE Analysis of The United Kingdom to find out the political, economic, social, technological, legal and environmental factors affecting the country.
Before providing you with a complete overview of the U.K., let's see what PESTLE Analysis is.
What is PESTLE Analysis?
PESTLE analysis is a framework used by strategic managers in business analysis. It investigates the Political, Economic, Sociocultural, Technological, Legal, and Environmental factors that affect a company or an entire industry.
It's better explained with examples like we did here.
The U.K. is everyone's go-to place since it has a rich history, multicultural diversity, an essence of kingdoms, and, of course, top shopping malls and thousands of places of entertainment. But, of course, you don't get all that in a single country, do you?
The history of the U.K. goes back to the earliest civilizations of humans, around 1000 B.C. Traces of Roman invasion can also be found, which happened around 43 A.D. Romans lived in the area now known as the U.K. for centuries.
They built basic infrastructure there. Later, in the 8th century, Vikings invaded Britain and settled in some of its parts. After that, in the 11th century, William the Conqueror invaded Britain.
A great development took place in the 12th and 13th centuries when Britain developed its legal system, and feudal development started. After that, however, the country experienced a couple of civil wars and invasions until it saw the British Empire's rise in the 16h century.
The British Empire became the largest empire. It was said that the sun would never set in the British Empire because it had colonized countries on every continent. Soon the Britains experienced the industrial revolution in the late 18th century.
The Britains became a superpower since they had the machinery and technology that no one had then. Britain also had some of the best educational institutes that attracted people from all over the globe.
That's when people from all across the globe started migrating to the U.K., and its culture diversified. The industrial revolution not only helped the British to establish mills. It also helped the U.K. develop infrastructure and the best transport system.
Moreover, the U.K. was now also manufacturing quality ammunition. Britain participated in both World Wars. The Second World War specifically made the U.K. weak politically and economically, due to which the fall of the British empire started.
Countries such as India took advantage of the weak Britain and gained independence. The U.K. joined the European Economic Community to get support from its fellow European countries in 1973.
Recently, the U.K. has been a part of NATO and indirectly participated in Iraq and Afghan wars. But, ever since World War 2, it has never been involved in a conflict directly.
One of the recent actions taken by the U.K. was to exit the European Union in 2020. This decision had both positive and negative implications for the U.K. However, the U.K. remains a significant social, economic, and cultural country.
Today, we will conduct a PEST analysis on the U.K. to see what external factors impact the U.K. So, let's proceed further with the UK PESTLE analysis without taking much of your time.
United Kingdom PESTLE Analysis
Political Factors Affecting The United Kingdom
Political factors are the factors that are linked with the government and its policies. In this section, we will take a look at the political factors that have a direct impact on the U.K.
Political stability is very important for any country. The U.K. is one of those fortunate countries that have experienced a smooth transition of governments ever since it adopted the parliamentary system.
Due to such political stability, foreign investors have always been keen to invest in the U.K. Moreover, its currency is relatively stable. The U.K. experiences all these benefits due to political stability.
Besides that, the U.K.'s visa policies set by the government impact the U.K. significantly. For example, suppose the government makes strict visa policies and allows tourists, businessmen, immigrants, and students to enter the U.K. After tight scrutiny, people might feel discouraged about visiting the U.K.
This can hurt the economy of the U.K. For example, the U.K. has a developed tourism industry that contributes around £106 billion to the U.K.'s economy. Moreover, it provides employment to 2.6 million people.
Hence, visa restrictions can damage the tourism industry and cost billions to the British economy.
Besides that, government policies regarding healthcare can impact the U.K. If the government decides to increase its healthcare expenditure, the quality of life of Britons would increase.
Economic Factors Affecting The United Kingdom
Economic factors are related to the economy of a country. Therefore, it analyses the economic condition and the impact of macroeconomic variables on an economy.
Various economic factors impact the U.K. However, one of the economic factors that significantly impacts the U.K. is the country's economic growth.
If the U.K. is experiencing high economic growth, in that case, people will have a higher living standard and more disposable income to spend. This would trigger economic activity, and money will keep on circulating in the economy.
Moreover, interest rates have a deep impact on the money circulation of any country. Suppose the central bank of any country sets the interest rate high. In that case, the people in that economy start depositing money in the banks, and the economic activity falls.
Similarly, if the interest rate is high, investors won't be willing to take loans at a high-interest rate for investments. This would cause a decrease in investments in the country, and the country will suffer from unemployment and low income per capita.
Besides that, the exchange rate also impacts the U.K. If the U.K. has a volatile exchange rate, countries won't use the Pound as the medium of exchange. Instead, they would prefer to deal in a relatively stable currency like the Dollar.
This would cause the supply of Pounds in the market to increase. Hence, the Pound would depreciate significantly.
Social Factors Affecting The United Kingdom
Social factors take societal factors into account. They analyze how society and culture-related factors can impact a country. This section will examine how social factors affect the U.K.
The U.K. is experiencing an increase in the population of elderly citizens. More than 18.6% of its population is 65 years old or above. This is concerning the U.K. since having a high percentage of elderly citizens means that the healthcare system would be more burdened.
Moreover, the country's economic activity goes down as the population of elderly people increases since they can't really contribute to the economy.
Besides the elderly population, the number of immigrants also increases in the U.K. daily. Although this creates diversity in the country, and people get to learn about different cultures, an increase in the number of immigrants may lead to a higher crime rate because some immigrants are from countries suffering badly financially and morally.
Furthermore, the U.K. is undergoing rapid change due to exposure to social media and the Internet that Britians have. Different crimes are occurring online, such as fraud, cyberbullying, etc. The U.K. faces a challenge to prevent these crimes from happening over the Internet.
Technological Factors Affecting The United Kingdom
Technological factors examine technology and innovation in a country. In this section of the PESTLE analysis, we will examine what technological factors impact the U.K.
The U.K. is considered one of the most advanced economies. Currently, almost 98% of people have access to the Internet. Such great Internet penetration impacts the U.K. since people now use the Internet for various purposes.
People are using the Internet to earn money. This is beneficial for the U.K.'s economy. Moreover, such significant access to the Internet is creating awareness among Britons.
Moreover, the use of artificial intelligence is emerging worldwide, including in the U.K. It is increasing the workforce's efficiency, but at the same time, it is creating unemployment.
Besides that, A.I. is also being used inappropriately for creating morphed images and audio. The law enforcement agencies of the U.K. are responsible for holding people who are misusing A.I. technology accountable.
Moreover, as businesses in the U.K. are adopting the latest technologies in every field, this can increase the competition in the market. Hence, the markets will work more efficiently.
Similarly, access to the Internet and increased awareness have caused the number of players to increase in the market, making markets more competitive.
Legal Factors Affecting The United Kingdom
Legal factors are the factors related to the legal framework of the country. This section shows what impact the Constitution and laws have on the U.K.
Labor laws have a significant impact on the U.K. The labor laws in the U.K. protect laborers from being exploited. Strict labor laws would ensure that laborers are treated right in an organization. They would ensure that no discrimination occurs with the employees at any level.
However, strict labor laws may discourage organizations from hiring laborers. This could result in unemployment. Moreover, tax laws also significantly impact the U.K. If there are strict tax laws, the government will be able to collect huge sums of tax, which will then be redistributed in the economy.
However, higher tax rates may result in tax evasion and concealment of assets. These practices would harm the U.K.
Moreover, almost the entire U.K. has access to the Internet. This is why data protection laws are necessary in the U.K. Data protection laws should be strict. Actions should be taken on data breaches, or businesses might fly away from the U.K. if they feel unsafe.
Environmental Factors Affecting The United Kingdom
Environmental factors are the factors that are associated with nature and the environment that impact various countries. In this section, we will look at how various environmental factors impact the U.K.
The UK is facing the wrath of global warming. Recently, it experienced one of the hottest summers ever. It disturbed the lives of Britons and discouraged tourists from visiting the country. Hence, global warming caused Britain billions of Pounds.
Moreover, the frequency of natural disasters has increased over the years. This means in the future, natural disasters can cause more economic loss in a year. This can cause the U.K. economy to suffer severe losses.
Moreover, as the number of natural disasters are increasing, the U.K. might experience frequent road blockages. This can disrupt the supply of commodities and business activities. As a result, the economy of the U.K. will suffer.
Final Word and Recommendations
The U.K. is one of the countries that have a rich and diverse history. The U.K. experienced invasions, monarchy, and whatnot from prehistoric eras to the middle ages.
Later it saw the rise of the British empire that dominated the entire world. The U.K. then witnessed the industrial revolution and became a superpower. However, after fighting both world wars, the British Empire weakened and couldn't keep its colonies together.
Looking at the interesting history of the U.K., in today's article, we decided to conduct the PESTLE analysis of the UK. Through the PESTLE analysis framework, we discussed how various external factors impact the operations of the U.K.
If you gained valuable insights about the U.K. through this article, feel free to look at some more interesting examples of PESTLE analysis and our guide on how to do a PEST analysis by yourself.
Check out the analyses of some of the most prominent UK-based businesses:
- PESTLE Analysis of Unilever
- PESTLE Analysis of Tesco
- PESTLE Analysis of Vodafone
- PESTLE Analysis of Shell
