The business environment of the United Kingdom is market oriented and highly developed. Being the fifth largest economy in the world, it is the tenth largest exporter of goods and fifth largest importer in the world. However, when the vote for Brexit had been conducted, this announcement changed the business environment drastically (Dhingra et al. 2016). The political, legal and economic environment was adversely affected the aim of the report is to analyze the political, legal and economic environment post the Brexit Announcement in the United Kingdom. Recommendations with reference to the alternatives available to the business has also been made
The UK is one of the most globalised nations and is comprising of the economies of Scotland, Northern Ireland, England and Wales. The service sector is the dominating sector of the UK economy and it contributes to around 80% of the GDP (Economics 2016). The financial industry is considered to be the most important with London being the world`s biggest financial sector. The pound sterling is the currency of UK, which is considered one of the ten largest industries in the world.
The Great Britain had been a member of the European Union since 1973. However, there have been certain crises that have shaken the confidence of the Great Britain in the European Union. The conservative Prime Minister of Britain, David Cameron was worried about the United Kingdom Independence party, hence, to gain the confidence of anti-immigration voters in the party, he promised the members a vote on the British exit from European Union in case where he won the 2015 election (Portes and Forte 2017). As predicted by the economists, the vote of leave caused a huge economic turmoil among the financial markets. The British pound fell by 10% to $1.35, which has been its lowest level against the US dollar since 1985. The stock markets were also badly affected.
The reason why the exit vote had a great impact on the financial market was that the economy of Britain had become deeply linked with that of the European markets. The negotiation related to the exit of the British economy withdrawal would have been a complex process and the new rules would have made it harder to conduct business between the European Union and the United Kingdom, which threatened the London`s status as the financial capital of the great continent of Europe (Gudgin et al. 2016)
The Brexit would also create a headache for people moving back and forth in the continent as when a part of the EU, citizens could settle in any associated country, however, with the exit of Britain, the nationals who were moving around easily could face certain complications. If no other effect, Brexit would mean hassles and increased paper work.
These parties have been given a two-year window to negotiate the specific terms and conditions. These rules that have to be renewed include rules related to migration, trade, environment and agriculture. Hence, the negotiation could continue for a long time. This uncertainty of results looms over the economy of Britain. The government of UK estimated that the exit could affect the size of the economy.
The Brexit bought about great amount of uncertainty and dread all over the European continent. Various effects on the Political, Legal, Economical and Technological environment have taken place.
The constitutional monarchy of the United Kingdom has been governed by the parliamentary system. The UK has always been viewed as a country where there are various opportunities for internal as well as external entities (Whitman 2017). The public has a huge influence on the inner working of the country. There exists a situation of Political stability and the government is working towards improvement. However, the Negative aspects of the political environment also exist. There is a certain level of well-hidden corruption, which looms over the nation.
Theresa May has taken over as the new prime minister of Britain after the resignation of David Cameron. She will be the first person who will be organization the Brexit from the European Union; hence, various speculations on how she is going to react have been made. May had created two new governmental departments (Wadsworth et al. 2016). The current uncertainty of the political actions will have a negative impact on the leaders. The political environment has a major effect on the taxes, labor and trade practices of the country. The Brexit will be a costly affair and has to be financed. This will be caused by taxes, which will be ultimately burdened on the people.
The trade could be affected greatly as the trade restrictions with Britain could create problems.
The economic environment of Britain was expected to be hit brutally after the vote for Britain’s exit, however this has not been the case. The retail sales (Refer to Figure 1 in the Appendices) have not witnessed a major downturn. This year itself, in August, the Great Britain experienced its second upturn in the retail sales since the time when Brexit took place sales since Brexit. The credit card sales have also increased. Although the consumers and business have remained cautious and conservative in their spending habits, however they have continued to spend and have not stopped.
The interest rates and the value of currency have decreased dramatically which has had a huge impact on the business environment with greater importance to the international business environment.
As the value of pound has been on a decreasing spree since the Brexit, the manufacturers have been hit by an increased cost of importing goods. The reason behind this might be related to interest, regulations and tax laws.
Even the export business prevalent in the United Kingdom has been hit as their costs have hiked up. Due to this, the UK business has become less competitive in the European Union markets and globally (Irwin 2015). If the businesses choose to maintain their competitive edge by decreasing the price of goods, that would lead to lower profits for them.
However, it has been predicted that there will be good effects of the Brexit on the economy as well. There will be fewer rules, regulations, and promotion of free trade. The Britain in that case, would not need to budget the Union Budget and would have more funds for itself.
The United Kingdom has an unwritten constitution. The laws consist of common law, case law and statutes. The early Roman and modern continental have an influence on the legal system. The International Court of Justice jurisdiction is accepted by UK and there is no review of the judicial acts of the Parliament (Irwin 2015). The British courts were earlier subject to the European Union courts, however since the Britain has opted to exit out of the Union, this will be subject to change. All the business in UK is bound by the laws of the specific country they operate in.
The United Kingdom has had a minimizing bureaucracy policy since long and policies leading to deregulating marketplaces to generate competition and improve the services provided to the consumer. There is a strict set of laws with respect to industrial emissions, employment, pollution control, monitoring and disposal of waste.
Financial transparency is a major requirement of certain limited companies, which have to submit their reports to the Britain registry named ` Companies House` (Begg and Mushövel 2016). There are various policies to protect the interest of the shareholders as well. There are various developmental agencies like the UK Trade & Investment, the Department of Education and Skills and more.
It is important for the business to adapt to these changes in the external environment so that it can survive in the end. Just like the Brexit affects the business, in the same manner, the presidential elections and other related can affect the business adversely (Dhingra et al. 2016). Hence, to cope up with the business, the business needs to take some steps like:
Using various tools and techniques the business needs to research upon the various opportunities available to it or some hindrance that can be caused to it if it does not take certain steps.
With the help of a SWOT analysis, the company will be able to find out its strengths, weaknesses, opportunities and threats. While performing this, the firm can get a fare idea of its position.
When a firm conducts a pestle analysis, all the factors of the external environment such as Political, Economical, Socio-cultural, Technological, Legal and Environmental aspects are analyzed. This helps the firm to prepare for any event that may drastically have an effect on the business (Busch and Matthes 2016). The businesses in Europe should have been prepared before the vote for Brexit because this has been in the discussion since long.
Once the analysis has been made the business should make should form an action plan and act accordingly before the environment changes.
Conclusion
Therefore, from the discussion it can be observed that the Brexit Announcement has severally affected the economic environment of the United Kingdom. The political as well as legal environment has also been affected by it. The firms operating in UK need to perform various analyses and prepare themselves for the change in various legislations so that they can survive in the end.
References
Begg, I. and Mushövel, F., 2016. The economic impact of brexit: jobs, growth and the public finances.
Busch, B. and Matthes, J., 2016. Brexit-the economic impact: A meta-analysis (No. 10/2016). IW-Report.
Dhingra, S., Ottaviano, G., Sampson, T. and Van Reenen, J., 2016. The impact of Brexit on foreign investment in the UK. BREXIT 2016, p.24.
Dhingra, S., Ottaviano, G.I., Sampson, T. and Reenen, J.V., 2016. The consequences of Brexit for UK trade and living standards.
Economics, C., 2016. The economic impact of ‘Brexit’. study commissioned by Woodford Investment Management.
Economics, C., 2016. The economic impact of ‘Brexit’: A paper discussing the United Kingdom’relationship with Europe and the impact of ‘Brexit’on the British economy.
Gudgin, G., Coutts, K., Gibson, N. and Buchanan, J., 2016. The macro-economic impact of Brexit: using the CBR macro-economic model of the UK economy (UKMOD). Centre for Business Research Working Paper, (483).
Irwin, G., 2015. BREXIT: the impact on the UK and the EU. London: Global Counsel.
Nunez-Ferrer, J. and Rinaldi, D., 2016. The Impact of Brexit on the EU Budget: A non-catastrophic event.
Portes, J. and Forte, G., 2017. The economic impact of Brexit-induced reductions in migration. Oxford Review of Economic Policy, 33(suppl_1), pp.S31-S44.
Wadsworth, J., Dhingra, S., Ottaviano, G. and Van Reenen, J., 2016. Brexit and the Impact of Immigration on the UK. Centre for Economic Performance. LSE, pp.34-53.
Whitman, R., 2017. Devolved external affairs: the impact of Brexit. Europe programme, Chatham.
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