An Overview Of The Uk Economy Economics Essay

The undermentioned study provides recommendations for consideration, for a Construction/Engineering Company, located in Canada, prior to foreign investing in the United Kingdom ( UK ) , following an assessment of the UK economic system ; this includes an analysis of the tendencies and the effects of globalization and Multi-National Company ( MNC ) activity in the UK.

Specifically, the study will supply an overview of the UK economic system ; here, the most up-to-date statistical information is provided along with investing flows and gross end product by the UK. Further item will sketch the potency challenges which could originate when MNCs enter the UK such as socio-cultural considerations. A brief overview of the chosen industry is provided and of the chosen Company. The study is finalised with a drumhead and recommendations to the Company as to whether investing in the UK is a executable and profitable concern scheme.

2.0 The United Kingdom – A Turning Economy

The UK has a diverse economic system and is positioned good for foreign companies to hold on their international concern potency. Bing the 6th largest economic system in the universe, the UK has a Gross Domestic Product ( GDP ) of US $ 2,646 billion ( World Bank, 2009 ) . Its concern environment is predicted to be the strongest of all major European economic systems for the period 2007 to 2011 ( EIU, 2007 ) . It has a population of merely over 60 million ( ONS, 2009 ) and the degree of unemployment is lower that the EU norm ; its economic system is supported by a strong work force. As a European economic system, the UK received the highest figure of Foreign Direct Investment ( FDI ) in 2008 ( Ernst & A ; Young, 2009 ) . As a leader in the planetary trading community, the UK is the 2nd largest exporter and 3rd largest importer of commercial services, and the ten percent largest exporter and 6th largest importer of ware ( World Trade Organisation, 2009 ) . It is a member of the European Union ( EU ) which is the largest planetary trading community with over 500 million consumers and a GDP of over US $ 18,000 billion ( IMF, 2009 ) .

3.0 Economic Growth

Economic growing in the UK was 0.6 per cent in 2008 ( HM Treasury, 2009 ) . Since 1999, GDP growing in the UK has exceeded or corresponded in growing with the remainder of the European Union ( see Figure 1 ) .

Figure 1 – United Kingdom and European Union GDP Growth

Beginning: Eurostat ( 2009 )

4.0 UK Exchange Ratess

The UK continues to utilize the Pound Sterling ( ? ) which is stable and competitory ; nevertheless, the UK authorities is committed to holding a referendum to see following the Euro ( a‚¬ ) every bit shortly as it considers its economic conditions are right for the UK to fall in ( UK Trade and Investment, 2010 ) .

5.0 UK Interest Ratess

As of December 2009, the Bank of England set the Bank Rate at a really healthy, all clip low, of 0.5 % . However, the Rate is reviewed monthly and adjusted consequently ( Bank of England, 2010 ) . During the latter one-fourth of 2007, the Bank Rate took a crisp addition, making an all-time high of about 5.9 % but quickly decreased to its current degree throughout 2008 to show day of the month ( See Figure 2 ) .

Figure 2 – Bank Interest Rates in the UK ( 2000-2009 )

Beginning: Bank of England ( 2010 )

6.0 UK Inflation Levels

The UK has an rising prices mark of 2.0 per cent for the one-year addition in the Consumer Price Index ( CPI ) which is based upon the Consonant Index of Consumer Prices and in October 2009, the CPI stood at 1.5 per cent. Presently, the degree of rising prices in the UK stands at 3.4 per cent ( Bank of England, 2010 ) .

7.0 UK Tax Levels

By comparing with the remainder of the EU, the UK has a reasonably good revenue enhancement system, which is good below the EU norm ( Eurostat, 2009 ) . Corporation revenue enhancement presently stands at 28 per cent and Value Added Tax ( VAT ) has late reverted back to its original degree of 17.5 per cent, following a two twelvemonth period at 15.0 per cent. VAT is non levied upon indispensable goods, nutrient merchandises or kids ‘s vesture ( Eurostat, 2009 ) .

8.0 Investing Flows – FDI

The UK is a stable economic system for FDI ; in 2008, it attracted the 4th highest sum of FDI globally, having US $ 97 billion of FDI influxs ; this is representative of 19 per cent of all FDI inflows into the European Union ( UNCTAD, 2009 ) and in 2009, it attracted the 3rd highest degree of FDI, with over US $ 980 billion ( UNCTAD, 2009 ) .

In footings of FDI undertakings, there were over 1,700 investings which were made by Multinational Companies ( MNCs ) in the twelvemonth 2008-2009. This calculates an addition of 11 per cent on the old twelvemonth ( UK Trade and Investment, 2009 ) . Furthermore, the UK is the 2nd largest individual finish globally for US investing and in 2008 accounted for 26 per cent of all US investing stock in the European Union. The UK has received more FDI from the United States ( US ) than the combined sums of Germany, France, Spain and Ireland ( US Department of Commerce, 2009 ) .

Inward FDI contributes to the integrating into the planetary economic system ; the presence of foreign concerns aids with economic development by increasing domestic competition. Consequently, this leads to higher productiveness degrees, lower monetary values and an evened allotment of resources.

9.0 UK Employment, Workforce and Regulation

The UK has a extremely skilled, flexible and dynamic labor market, with less labour ordinance than most other European states. Skills are, on the whole, rather strong in the UK ; in footings of instruction, there are many first universities and Centres of Research and Development ( R & A ; D ) located across the state parts. London is systematically ranked as the taking European location for the handiness of qualified staff ( Cushman and Wakefield, 2009 ) .

Employment is presently at an all clip high with degrees of 28.92 million people in work ; this comprises 21.26 million people in full-time work and 7.66 million in parttime work ( ONS, 2009 ) . The employment degree i.e. the proportion of working age people in work is besides high in the UK at 72.5 per cent, compared with the European Union norm of 64.8 per cent ( ONS, 2009 ) .

The UK ‘s unemployment rate of 7.8 per cent is significantly lower than the European Union norm of 9.3 per cent ( ONS, 2009 ) . The one-year rate of growing of mean net incomes across the UK economic system stood at 1.2 per cent in September 2009 ( ONS, November 2009 ) .

10. A Socio-cultural Economy

The UK truly is a multi-cultural economic system ; with traditions steeped in heritage and architectural admirations, being extremely popular in the Tourism industry. The traditional British Nobility can be traced back many 100s of old ages. It includes diverse parts from the really North, including Scotland, back down to the South and Western corners. English is the primary linguistic communication, with differences in idiom and the Welsh linguistic communication and Gaelic derived functions. Migration degrees are reasonably consistent, and in comparing, net migration contributed to 186,000 of population growing in the twelvemonth to mid-2008 ; this is an addition of 26 % on the mid-2002 figure of 148,000 ( ONS, 2009 ) .

In footings of supplying a good blend of societal, cultural and cultural features, the UK is considered the most popular finish, with London, in peculiar, being the figure one European City for Tourism and Architecture.

11. Overview of the Construction Industry in the UK

The building industry in the UK has benefited from a period of sustained growing, from a demand-driven economic system and by the re-development of Brownfield sites ; important investing and fiscal support has been provided towards advanced undertakings through Private Finance Initiatives ( PFIs ) with an addition in funding towards new public edifice undertakings, such as art galleries, infirmaries, prisons and route and rail web substructure. The UK building industry is besides exceptionally diverse, integrating micro endeavors and high bluish bit companies. State-of-the-art undertakings such as the Tate Modern in London, the recent Millennium Stadium in Cardiff, and the extremely popular Eden Project in Cornwall, is testament to the invention from within this industry.

There are about two million people employed in the UK building industry within 250,000 houses ( UK Trade and Investment, 2010 ) . However, of recent concern has been the accomplishment spreads and deficits within the industry ; growing in building end product has seldom been constrained by a deficit of human resources, and the relationship between end product and employment is closely correlative ( see Figure 3 ) .

Figure 3 – Construction end product & A ; Annual work force ( 1978-2008 )

Beginning: Department for Business, Innovation and Skills ( 2010 )

However, the fluctuation in work load and employment has important effects for the industry. If the end product growing exceeds the degree of economic growing, so this will take to rising prices. Furthermore, deficits in skilled labor will pull overseas labor, which is frequently inadequately skilled, therefore making force per unit area upon the societal costs which are outside the building end product. Consequently, the industry is at hazard of a hapless quality end product.

The UK building and technology industry generated entire grosss of $ 95.4 billion in 2008, stand foring a compound one-year growing rate ( CAGR ) of 1.9 % for the period crossing 2004-2008. The UK building stuffs market generated entire grosss of $ 7.7 billion in 2008, stand foring a compound one-year growing rate ( CAGR ) of 1.1 % for the period crossing 2004-2008 ( MarketResearch, 2010 ) .

12. Company Overview – RWDI

Canadian Company, Rowan Williams Davis and Irwin ( RWDI ) is a confer withing house which provides a scope of technology, computing machine and scientific capablenesss to assist interior decorators make comfy environments and high public presentation edifices and constructions for all of the universe ‘s climes ( RWDI, 2010 ) . It has worked on the universe ‘s most complex architectural challenges for illustration, the Grand Canyon Skywalk, the Burj Dubai and St Mary Axe, London ( named the Gherkin Tower ) but to call a few. The Company has been in being since 1972 and has a portfolio of 400 employees. The Company ‘s end is to keep a controlled growing that includes turning grosss by about 15 % per twelvemonth. In 2009, the Company was voted one of the victors of the 2008 ‘Canada ‘s 50 Best Managed Companies ‘ for their continued success in hiking the Canadian economic system ( Fiscal Post, 2009 ) .

13. Potential Challenges for FDI

Foreign Direct Investment ( FDI ) is important for an effectual international economic system and acts as a major accelerator for growing and enlargement. National policies and the international investing architecture pull FDIs to a larger figure of developing economic systems in order to obtain the benefits of FDI for development. The UK is non entirely here and, as with many other developed states, chiefly, the challenges affect the host states, since they need to set up a transparent, wide and effectual enabling policy environment for investing and to construct the human and institutional capacities to implement them ( OECD, 2009 ) .

FDI has the possible to convey societal and environmental benefits to the UK through the airing of good patterns and engineerings within MNCs, and through their subsequent enlargement to domestic endeavors. However, there is a hazard that foreign-owned endeavors could utilize the UK to put and export production which is no longer approved in their place states ( OECD, 2009 ) . In this instance, and particularly where the host authorities are acute to pull FDI, there are hazards of cut downing the regulative criterions.

14. Drumhead and Recommendations

To summarize, the UK has a population of 61.4 million and received the highest figure of foreign direct investing ( FDI ) undertakings in Europe in 2008. It is a taking planetary trading state, being the 2nd largest exporter and 3rd largest importer of commercial services, and the ten percent largest exporter and 6th largest importer of ware.

Bing a member of the European Union, the universe ‘s largest trading entity, with about 500 million consumers and a GDP of over US $ 18,000 billion, the UK is one of the most competitory locations in Europe for concern and personal revenue enhancement, and, with a low unemployment rate sitting good below the European Union norm. Its capital metropolis, London, is rated as being the best European metropolis in which to make concern.

This Report demonstrates that the UK remains at the head of planetary R & A ; D which is supported by a extremely skilled work force. As a planetary trading economic system, the UK has maintained its place as the figure one finish for FDIs in Europe, and 2nd in the universe. Offering an unfastened and nimble concern environment, limited ordinance and favorable concern conditions means it has ne’er been easier for foreign investors to set up a UK operation. It is recommended that the Company should take to put in the UK.