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A country analysis and assessment of a new emerging market where rapid GDP growth has created attractive investment opportunities.

General Overview of the Country or Region

England is the island country and it is the part of The United Kingdom. England is in the southern part of Great Britain and it is in the north-west of the European region. England is the largest country of the United Kingdom

England is sometimes confused with whole of the United Kingdom, as nearly 84% of the population of the United Kingdom lives in the England itself (Geels et al, 2016).

The general laws, rules and regulation of England are those which whole of the United Kingdom follows. The trade laws are also no different, being the part of The United Kingdom all of the trade laws are same.

In this write-up we are going to discuss in detail about what are the factors that are involved in creating attractive investment opportunities for foreign investors and how new emerging market and growing GDP affects England’ economy.

Political, Economic, Socio-cultural and Technological influences/benefits/ advantages

Political Factors:

Factors to be considered here are as follows:

Government policies, Global trade agreements and restrictions, Political stability, Taxes levied on the industries and Industrial policies are the factors that need consideration (Share et al, 2018). The pound is left weak due to UK’s decision of leaving European Union. This step has increases the uncertainty of further trade restrictions within European region; it has affected the profit margins as well. Consumer protection rights within the retail industry have affected the organizations on a medium level.

The constitutional system of The England is a parliamentary system. It can be called as constitutional monarchy (Share et al. 2018). The England offers many opportunities for local as well as foreign investors.

• The England is politically stable.
• The government is proactively working for the development and betterment of the country.
• Being a constitutional monarchy the general public has a lot of influence on the internal issues of the country.
• Government administration is divided into two parts one is national and another one is local
• The England also suffers from very well planned and hidden corruption. Some well-hidden corruption. According to trade analysts the Brexit will have worst effect on UK economy. Worst impact will be on its trade and it will create a lot of barriers for foreign investment.

Economic Factors:

The official currency of England is the pound sterling. The ISO code of the currency is 4217.England maintains the social welfare infrastructure; it is a mixed market economy and has adopted several free market principals. (Share et al. 2018) The average GDP per capita is £24,000. England’s economy is one of the world’s largest economies. The tax system in England is extremely competitive as compared to other countries as the rate of personal tax is 20% on the taxable income of up to £31,865 and the tax is 40% on any additional earnings above the mentioned amount.

England has 18th highest GDP and purchase power parity in the world. England makes the largest part of United Kingdom’s economy. The chemical, pharmaceutical and technical sector of England is world’s most developed industrial sector especially aerospace. England is also a world leader in the arms industry and in software development industry.

The United Kingdom’s stock exchange is present in London which is the largest stock exchange in Europe and it is also the main stock exchange of United Kingdom. This is the financial hub of England. (Share et al. 2018)

UK currently has £45 billion aerospace industry. The central location of aerospace industry is England. It offers great business opportunity for the aerospace industry globally which is growing at the rate of 200% per year the estimated revenue for next ten years is £2.6 trillion. The Unemployment rate in the country is 8.7% and it is continuously increasing this is creating a problem for the government.  Population of England is more than 55 million, it has total of 85% of population of whole of the UK. Large number of population makes room for profit for both small and large markets. The economy of England is composed of both large public and private sectors. The Liberal economy has increased FDI in the country. The recovery after 2008 recession has shown a very sluggish trend.

Social Factors:

The social structure is based on “the class” system. In recent times England has become multicultural place and now has people from different places and different races. England has National Health Services which provide free health services to the general people.

The rates of Education are rising continuously. Country is facing social unrest due to large number of migrants, in England 1 in 9 residents is a migrant. The large population offers easily accessible and cheap workforce. The population above the age of 60 years is more than the population below the age of 30 years; it has increased the dependency rate of people.

Technological Factors:

The great economic conditions of the country help in keeping the country technologically updated.UK has invested 30 billion Euros in technological development and in innovations. This investment has helped in improving science and IT innovations in the country. The government is working towards inculcating intellectual property rights in the law. The speed of innovations is slow and the technological development is far behind United State of America.

Legal Factors:

The common law being used in England is based on The English law legal system which took ages to develop, therefore it is has exhaustive coverage of laws, rules and regulations to be followed in the country. Many commonwealth countries are following this law. All the government policies are strictly implemented in England. The legal factors are most of the times affected by political factors therefore England needs to anticipate and plan for the future.

National Resource and Factor Endowments That Create Competitive Advantage

Large number of population of England offers easily available and cheap workforce

The ethnic division of England is like 84.3% White,8.7% Asian 3.3% Black 2.5% Mixed 0.5% Arab 0.5% Other and large number of migrant population makes England cross cultural and ethnically dispersed. (Alhajji, 2017) The land area of England is 130,279 km2 out of which 40% is used in Agriculture. The process of agriculture is highly mechanical and developed technology helps in producing 60% of crop needs by utilizing only 2% of the labor force. The soil of England is full of minerals which makes use of fertilizers to the minimum and produces the healthy crop. Allan et al. (2017) suggested the service industry of UK poses large competitive advantage, especially in legal, insurance, accountancy, communication, advertising and business management. The entrepreneurship of UK citizens can be seen in the above mentioned services and in their delivery process. The UK is the second largest exporter of services according to the date of year 2016 UK has exported services of about $422 billion. In the year 2016 UK has exported financial services worth $90 billion.UK has become second largest exporter of services after the year 2016.In goods manufacturing the country offer competitive advantage in aerospace sciences and pharmaceuticals industry. The chemical industry is also growing at a very fast pace in the UK.

Foreign Currency and Exchange Influences

The strength of the currency is determined by attractiveness of country’s economy and its future prospects. The health of UK economy is getting better day by day and now the UK assets offer more value to the investors. This thought process of the investors moves the currency up, down, radically and suddenly.

The vote for Brexit in 2016 lead to fall of sterling by 20%, therefore investors showed reluctance in investing in UK economy. The rise and fall of the currency is dependent upon many factors such as the monetary policy of the country, inflation, prevalent rate of interests and dept rates of the country.

The higher rates of interests prevalent in the UK in comparison to other countries offers investors’ higher rate of returns on the assets. The currency moves at unpredictable rates. The monetary policy of the country affects the currency movement. If UK interest rates rise relative to elsewhere, it will become more attractive to deposit money in the UK. You will get a better rate of return from saving in UK banks. Therefore, demand for Sterling will rise.  This is known as “hot money flows” and is an important short-run factor in determining the value of a currency.

Inflation also affects the currency markets. The higher the rate of inflation greater the depreciation rate of currency. Investors look for the balance of trade. The UK has negative trade balance as it imports goods more than it exports it results in increases inflow of foreign currency in the economy which means value of pound is going to fall. If UK faces lower rate of inflation compared to other countries, then the UK exports will become more competitive and there will be increase in demand of Pound in order to import goods from the UK. If the imported goods are of lower quality, then the citizens of UK will buy more local goods than imported goods

The political environment also affects the economy for example when it was announced that Theresa May is going to be the prime minister then the value of pound falls by 8%.

The deflation in UK economy which took place after the exit of UK from ERM it helped UK to be more competitive because of large amount of Pounds being dispersed in the economy, the government was clever at the time as it added to the advantage while many other economies which faced the same circumstances never able to survive again.

The Countries Existing Trade Policies, Systems, Barriers and Incentives

The UK is currently following free trade policies. The UK Trade Policy Observatory is looking for ways to make better trade policies better and beneficial for all.  The decision of leaving EU is being made which requires successful planning to move through international trade arena. The UK is reconfiguring its trade policies and   making way for free trade after the decision of Brexit. In the past EU was taking care of International trade policies of the UK, but BREXIT has affected in a way that the UK is on its own to make trade policies. Currently The UK requires correct position and definition of world trading system. The expert analysis is required to make its own independent decision (Kitch, 2016).

The trade policy of UK has four important aspects:

• Unilaterally create competition prone environment at home and reducing the trade tariffs’.
• Bilateral activity to sign more and more trade agreements with other countries
• Gather more and similar economies together to increase the economic prosperity.
• Working towards making UK more liberalized economy.

The UK Trade Policy Observatory is working in the following areas:

• It is involved in making overall trade strategy, which includes the effects of trade agreements within the country. It helps in making strategies that affect service regulation and also regulates service selection (Kitch, 2016)
• UKTO also monitors the UK trade policy and the treatment meted by the UK export goods by other countries. Monitoring the treatment of UK exports by others and UK de facto import policy.

The import of goods in the UK doesn’t requires a license, some of the goods require licensing but mostly all the goods are free from importing license. Licensing requirements depends upon the country of import. According to Geels et al. (2016), Tariff rates and duty rates are constantly being revised and government can change them without prior notice.

The goods which require license are: Food products, agricultural products, medicines, chemicals and firearms, plants and animals and textiles.

• UKPO is also working towards developing policies for the UK trade which are capable of making UK business market relatively open and working towards removing the trade barriers from the trading market.
• United Nation Trade observatory also offers the support of trade negotiations with other countries.
• The help of Institutional designing is done by UKPO.
• It works towards enforcing the laws of trading.
• It provided training to government agents and negotiating agencies so that they could completely understand UK open trade policy.
• UK trade policy offers very limited barriers to trade and business except for licensing activities and UK economy is able to make open domestic market (Kitch, 2016).

Existing Levels of Foreign Direct Investment

In the year 2017, The United Kingdom received FDI of 20 billion USD. These numbers were lower than previous years’ data by 90% as in the year 2016 UK received FDI of about 107 billion USD. In spite of Brexit issues UK economy is still very strong.  (Forde et al. 2016)

The UK occupies the seventh position out of one ninety countries which offer business opportunities according to the report done by the World Bank. The UK financial services industry offers large percentage to the FDI inflow while other investment comes from the member states of EU which is about GBP 1.2 trillion.  (Forde et al. 2016) The Brexit has created confusion between the member states which offer high trade costs in the EU. The working system of UK offers great advantage for the business who want to setup a new company in the UK, it takes only 14 days to open and set up a new business in the UK. Lower taxation system is also an attraction for foreign investors. The excessive impact of financial sector on the GDP offers disadvantage to the UK economy, due to open economy the foreign companies face high level of competition.

Government Measures to Motivate or Restrict FDI

Summary and Recommendation Based On Your Assessment

The study of the UK as a whole and England in particular shows that the England offers new emerging market for business and foreign direct investment, the rapid growth of GDP makes the market attractive for new investors. If the Brexit is dealt with systematically them market will definitely show upsurge (Muldrew, 2016).

The recommendations for England and more specifically The UK are as follows:

The UK needs to make long term action plans in order to deal with the Brexit’s impact on the economy. The government needs to reassure the investors that Brexit is not going to make less harm than expected as government will take all the measures to deal with it and will avoid recession to take place

The government needs to take more and more business friendly actions not only on papers but it should reflect in actions also.

Muldrew, (2016) suggested that the balanced budget theory for the year 2020 should be kept aside for a while and government should focus on making strong fiscal policy.

The European business which has large amount of investment in the country should be directly communicated with and the reassurance should be made that Brexit will not cause any harm to them.

Government should start talking to its trading partners and major importers like Canada and Australia. (Muldrew, 2016)

The government should shoe concern towards the businesses that have left far behind during globalization activity or are being threatened by it.

As this time Brexit issue The UK needs leadership which helps in adopting policies and goals that play significant role in the progress of the country.

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