Social
and Cultural factors affecting business environment in UK

 

Having decades of sound economic growth, the UK has
a very robust social infrastructure. Owing to their healthcare and education
which ranks among the best in the world, the citizen of UK enjoy a very high
standard of living. The strengths and challenges on the social front are
discussed below.

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Education
and Human Capital

The UK has remained a
landmark for foreign education. The educational infrastructure in the UK is
considered to be of very high quality. The nation’s tradition of education
dates back hundreds of years and is constantly evolving. UK qualifications are
both recognized and respected throughout the world. There are above 2.2 million
students currently studying a wide range of higher education courses in the
country, while almost 630,000 people graduate every year from its universities.
In addition to this their openness to migration has led to a cosmopolitan
environment with 1 in every 8 residents born abroad.
This has led to an increase in the educated workforce and human capital as well
for less.

Healthcare

Due to sufficient public sector involvement and
available healthcare infrastructure, the UK’s healthcare system has been a very
successful social initiative. Known for its high public expenditure on
healthcare, the efficient and quality NHS services are available to
all residents of the UK, the European Economic Area and countries that have
bilateral healthcare agreements with the UK. This leads to lesser pacing out of
profits by healthcare premiums for businesses making it an attractive hub.

Aging
population and Dependency ratio

The dependency ratio(% of dependent people/number of
working people) in the UK is constantly rising. In UK the 67% of the total
population accounts for the working age, 17.2% accounts for 0-14 years and
15.8% are over 65 years of age. This rising dependency coupled with the rapidly
ageing population will put a strain on the standard of living of the citizens. The
labour market implication of this issue would be labour shortages as firms will
be forced to encourage older workers to work part time and increase the semi
retirement. In response to this there will be a decline in the productive
population and a growth in the non productive population ultimately affecting
the country’s productivity. The increasing ageing population and higher life
expectancy also strains the pension expenditure for businesses and government

Income
Disparity

In spite of its stabilizing economy, the UK is on
the top of the list of countries with rising inequality. As per the OECD
database on Household Distribution and Poverty, the real household income in UK
grew by only 0.9%  from the mid 1980s to
the late 2000s. Apart from this market income as well as disposable net income
has shown negligible growth. With an impact that can detour overall social development,
this issue has to be tackled by the government to enhance the country’s
business conduciveness. The government has attempted to bridge the gap by
taking initiatives to support middle and low income category families by
cutting income taxes from them by letting the first 10000£ of their income
untaxed hence putting more disposable incomes in their hands. However,
according to the Institute for Public Policy Research, the benefits given to
reduce disparity only contribute to a 1% for three years not keeping in mind
the inflation in UK, making the real benefit from the social reforms
significantly lower.

 

 

Migration

With the opening up of labour markets and the
sustained economic growth in the UK, migration has seen a rising trend over the
last 10 years.  With an influx of
migrants from A8 countries(Czech
Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia
and Slovenia) the pool of skilled labour has widened. However a social concern
of this issue maybe community cohesion which may be adversely affected if
backed by economic concerns like unemployment that divide the migrant and
settled communities and if there is an absence of sound labour migration
policies and public services for businesses to benefit from this migration.

 

Technological Factors Affecting business in UK

Telecommunication Infrastructure and Internet
Connectivity

The mobile phone
market grew at a rate of 11% in 2004, and has reached a saturation point with a
stable growth of 1.8%. The telephone infrastructure in domestic UK is one of
the best in the world consists of buried cables, fibre optic systems and
microwave radio relays while the international telephone system functions on at
least 8 international switching centres, 40 coaxial submarine lines and several
satellite earth stations. Broadcasting and telecom networks and services make
over 50 billion £ on an average per year and the number of subscribers has
risen drastically over the years showing a maximum growth rate of  36.2% in 2007.

Intellectual Property Rights

Being at the
international forefront of RnD and innovation, UK has developed a more
regulated legislation to protect intellectual property rights.
 Although the UK does not have a general statutory register of copyright,
the UK-IPO (United Kingdom Intellectual Property Office) an agency of the DIUS
(Department For Innovation, Universities and Skills) is responsible for
maintaining registers of trademarks, designs and patents. The various
developments in the industry and in businesses bring out effective amendments
in the IPR legislation. There continues to be a critical need for a stable,
coherent framework of regulation and support, so that the private sector is
motivated to invest, including in intellectual property to encourage investment
and
promote RnD.

 

Scientific expertise and RnD

The UK has always
concentrated on research and development in both private and public sectors.
The total RnD expenditure in UK accounts to around 1.7% of the GDP in 2015. The
Research Councils UK’s Energy Programme, the Carbon Trust supporting a wide
range of technological development and the Department of Trade and  Industry capital grant demonstration programs
are some of the RnD initiatives that are in the process which are also
attracting a lot of investment and entrepreneurial attention. Over the year
outsourcing the RnD to low cost emerging markets has also become a commonality
in the UK. This trend is significantly seen in the pharmaceutical industry of
UK where RnD centers of major pharma companies are established in Asian
territories like India, China, Malaysia, Indonesia as well as Eastern Europe
countries. Though the quality of output isn’t different from indigenous
research it tends to allow businesses to focus on other core areas leading to
innovative measures. Apart from research, a rise in automation in UK’s
workplace has led to a lesser need for skilled workers. The country has also
seen a widespread increase in e commerce and online retailing opening doors to
new business models over the last few years. The UK is said to undergo
an energy transition during the next 10–20 years. This will give rise to important
opportunities for UK companies as well as foreign companies.

 

Scope for new industries

The business
environment of UK is currently portraying an increased scope for nascent fields
in the forefront of new technology such as defense equipment, nanotechnology,
tourism, space research and most importantly alternate energy sources. Its
ranking as per the Innovation Union Scoreboard places itself fourth in terms of
human resource quality, fourth for finance and support and first in linkages
and entrepreneurship. Industries with hotspots in UK include energy harnessing
from gas, tackling intermittent supply
from renewable sources, and new opportunities from hybrid energy systems
combined with rapidly developing battery technology. Investment in such capital
intensive industries has become an attractive proposition since the government
has allowed for incentives such as tax concessions and the Technology Strategy
Board has offered support to start ups to demonstrate the idea’s potential on a
global forum.

 

References

1.       Rt
Hon. David Willetts MP, Minister for Universities and Science (2015) Technology and innovation futures:
UK growth opportunities for the 2020s (2012 refresh) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/288562/12-1157-technology-innovation-futures-uk-growth-opportunities-2012-refresh.pdf

2.       Marketline
(2016) Country Profile, United Kingdom In-Depth PESTLE analysis

http://www.academia.edu/8993883/UK_PESTLE_Analysis

3.       UNISON; Use of PEST Analysis at
UNISON

http://businesscasestudies.co.uk/unison/use-of-pest-analysis-at-unison/social-factors.html

 

 

 

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