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The UK Cultural, Business and Political Environment Research Paper


Executive Summary

The United Kingdom is one of the leading states among developed countries. Its economy is sound due to the balance of business freedom and strict regulations. The country attracts a considerable amount of investment, which contributes to the development of its economy. Globalization, as well as specific immigration policy, is transforming the United Kingdom into a multicultural society. Even though the vast majority of British people pertain to one ethnic group, the number of people from ethnic minorities is growing quite rapidly. It is clear that culture has a significant impact on the business environment. Therefore, it is important to pay attention to the cultural aspect when managing an organization operating in the UK.

This report dwells upon cultural peculiarities of the UK and their impact on the country’s business environment. The paper provides the country’s profile that includes some historical facts as well as information on the political and economic peculiarities of the country. It also contains the cultural analysis of the United Kingdom with the use of the Hofstede six-dimension model. A number of recommendations concerning organization management are provided at the end of this report.

Introduction

The official name of the country in question is the United Kingdom of Great Britain and Northern Ireland. However, it is usually called the United Kingdom or the UK. The United Kingdom has been one of the most influential countries for several centuries. Its imperial past has enabled the country to affect the development of many other nations and acquire a significant influence in the international arena. Of course, it also shaped the development of the country. Massive immigration of the 20th century and globalization have turned the United Kingdom into a multinational country. However, this multiculturalism is mainly found in big cities (Harte, 2014). It is necessary to add that the vast majority of companies are operating in urban areas.

The UK is one of the leading economies in the world. The country has achieved this position due to its successful policies in the field of legislation and economy. The economic model used has proved to be effective as the UK has one of the most favorable environments for business. The balance between freedom and regulations has attracted many multinationals, and it has also encouraged local people to start their own business (Wetherly & Otter, 2014).

The country attracts a significant amount of investment that contributes to its development. Of course, the United Kingdom faces numerous challenges in all spheres. For instance, education and employment are seen as the two most challenging spheres (Vignoles, 2011). There is a certain shortage in the highly skilled labor force, which can undermine further development of the UK economy. Nonetheless, the country is developing effective strategies to address the issues arising.

This report provides a brief profile of the country. The attention is paid to such aspects as history, legislation, business environment, and cultural values. The cultural analysis of the United Kingdom-based on Hofstede’s six-dimension model is included. Recommendations as to applying cultural analysis to running a business in the UK are provided at the end of the paper.

The UK’s General Profile

Historical Background

The United Kingdom has a very long history including the times of the rule of the Roman Empire, development of the nation, the so-called Golden Age under Elizabeth I, dominance in the world during centuries, serious damage during the two world wars and reoccurrence as one of the most influential countries in the world. The 20th century with the two World Wars brought a new world order. Although the country pursued its imperial policies between the two World Wars and achieved quite significant economic results, it could not solve all social, political, and economic issues that came into existence between the two wars and after World War II (Drummond, 2013). Unemployment, lack of skilled labor, insufficient investment of major industries have occurred throughout the history of the UK, but they were especially severe in the post-war period.

The United Kingdom lost its colonies and faced numerous financial constraints as its economy was weakened by the devastating wars (Kirby, 2013). However, the UK still retained its political influence in the world arena. The country became one of the founders and members of the most influential international organizations, including the UN, NATO, EU. This helped the country to pursue its national interests in the international arena, which favorably affected its development. It is necessary to note that financial challenges in the post-war years led to specific immigration policies (Harte, 2014). Thus, in the 1950s-1960s, many people from former colonies immigrated to the UK. This was the beginning of the process that is still taking place. The UK has been turning into an ethnically and culturally diverse society.

Present Economic Environment

As has been mentioned above, the UK is one of the leading countries with a sound economy. Like any other western country, it is characterized by the mixed economy where market freedom and state regulations are balanced (Harrison, 2013). This implies quite significant freedom and a favorable atmosphere for business. At the same time, there is certain security, and business people feel protected, which leads to significant investments, both domestic and international. According to evaluations of the 2015 Index of Economic Freedom, the UK has a great deal of market freedom (see table 1) (the United Kingdom, 2015). Businesspeople from all over the world are willing to operate in the UK market.

Index of Business Freedom in the UK.

Freedoms Index
Fiscal Freedom 62.9
Business Freedom 91.1
Labour Freedom 75.6
Monetary Freedom 74.4
Trade Freedom 88.0
Investment Freedom 90.0
Financial Freedom 80.0

It is necessary to note that the country is ranked 13th freest state in the world, and the UK is constantly increasing its index. Notably, it is the fifth freest country in Europe. It becomes clear that the model chosen by the country is efficient as the economic data are impressive. The GDP of the country is $2.4 trillion, and the GDP has increased (by 1.8%) since the last year (the United Kingdom, 2015). CPI is 2.6%, which is quite low compared to other European countries. The country’s GNP reached £442,160 million at the end of 2014 (United Kingdom Gross National Income, 2015). It is noteworthy that the UK’s GNP has been increasing since 2012 (see fig. 1). Clearly, these economic results of the country reveal the UK economy’s stability and progress.

It is necessary to add that the monetary policy of the country has also been quite efficient. The national currency has been strong, and the British pound is still one of the most stable currencies in the world. The British pay a lot of attention to their currency issues, which translated into their refusal to enter the Eurozone (Wetherly & Otter, 2014). The British are still against sharing risks associated with the single currency.

Miles (2014, p. 155) notes that the Bank of England follows a “flexible inflation targeting regime” that has proved to be effective. Thus, the bank can exceed the target inflation if the actual inflation is higher than expected. During the period of growth, the bank sticks to the target inflation. This approach is quite efficient, and the currency is rather strong even though there can be periods of weakening, especially during financial crises (for example, the 2008 crisis).

United Kingdom Gross National Income.
Figure 1. United Kingdom Gross National Income. Source: United Kingdom Gross National Income (2015).

Political System and the Form of Government

The economic stability of the country is ensured and facilitated by the political stability in the UK. The United Kingdom is a constitutional monarchy. Hence, the country is ruled by a monarch whose power is limited by the parliament. In the UK, the power of Queen Elizabeth II is limited to only a few responsibilities, and the UK monarch’s power is rather nominal (Heywood, 2008). The monarch is now seen as a symbol of unity and tradition rather than a leader who actually rules in the country. However, the British are eager to preserve this symbol.

The stability can also be seen as a result of the power of three major parties, Labour, Conservative and Liberal Democrat. There are other minor parties that often join one of the three parties mentioned above. In this way, the majority of the parliament is created. The parliament consists of the House of Lords and the House of Commons. The members of the House of Commons are elected through general elections while members of the House of Lords are hereditary peers or can be appointed by the Queen in accordance with recommendations of the Prime Minister.

At present, the Conservative Party has the majority in the parliament. This party advocates fewer state regulations of the market, lower taxes for the development of business, quite strict immigration policy. It is noteworthy that the Labour Party has quite similar views on immigration, but they are advocating the increase in taxes and stricter rules in the market. They are trying to reduce the business freedom, which, according to the party, will enable the country to develop such spheres as healthcare, education and so on.

In May 2015, the UK will have general elections, and the situation may change. The Conservative Party may lose the elections to the Labour Party. According to the latest polls, the gap between the two parties is insignificant, and there are high chances that the Labour Party will be able to get more votes and create the majority in the parliament (Ford, 2015).

As has been mentioned above, the United Kingdom is characterized by the mixed economy and, hence, the economic system used is capitalism. The right to have private property and the right to run a business are fundamental for the British. The majority of British people favor free market and economic freedoms. At the same time, the market is regulated, and there is the supremacy of law in the UK business world. Again, this contributes to the overall stability of the country.

Legal Environment

The UK’s legal system is characterized by the governance of the common law. The peculiarity of the system is that courts are able to develop laws through precedent, the decision made by the court. Thus, similar cases have to be solved in accordance with the existing precedent (Wetherly & Otter, 2014). The system has proved to be effective, and it works in many countries (the USA, Australia, and many others).

Since the United Kingdom is a member state of the European Union, it also follows EU laws. The EU Parliament develops laws, and the European Court of Justice, as well as the Commission, enacts the laws. Clearly, the UK, as any other member state, has its own laws that often differ from country to country. For instance, there is a ban on the use of asbestos in the UK, but this material is used in many other European countries (Wetherly & Otter, 2014). Of course, it is but natural that the United Kingdom has quite specific laws as they respond to the needs of the nation that has its cultural, political, and economic peculiarities. However, compliance with EU laws enables British companies to be successful in the European (as well as international) market.

Importantly, it has been acknowledged that the United Kingdom has a favorable legal environment for business. As has been mentioned above, the market is not strictly regulated, and there are many market freedoms (see table 1). Business people have many opportunities. More importantly, those running businesses in the UK can be sure that their rights will be protected. Thus, the index of property rights in the UK is 90.0 (the United Kingdom, 2015). Clearly, legal issues are solved in accordance with existing laws, and the system is quite transparent. This transparency and clarity attract investment to the UK economy.

Demographics and Ethnicity

It is possible to note that the population of the UK is quite young compared to such states as Japan. According to the data obtained in 2014, 41% of people are between 25 and 54 years old, 12.6% are between 15 and 24, 11.5% are between 55 and 64, and 17.5% are over 65 years old (United Kingdom demographics profile 2014, 2014).

As has been mentioned above, the UK society is quite diverse, as many immigrants came to the country in the 20th century, and immigration is still taking place in the 21st century. After the Second World War, the British government encouraged immigration from the former colonies as there was a significant shortage of skilled labor force (Harte, 2014). Later, the immigration policies became much stricter, but many people still try to immigrate to the UK as this country is characterized by social and economic stability. These factors have led to ethnic diversity in the United Kingdom. Of course, the population is not as diverse as it is in the USA. However, the number of ethnic minorities is steadily increasing. According to the census data of 2011, the white population of the country is around 87% (United Kingdom demographics profile 2014, 2014). Asian people form the largest minority group (4.2%) in the UK (see table 2). Importantly, these data are based on the way people evaluate their ethnic identities. It is necessary to add that the number of people of mixed races is also increasing (“Ethnic minorities: Into the melting pot,” 2014). Therefore, the ethnic composition of the United Kingdom is changing, and the nation is becoming more diverse.

Table 2: Ethnic Diversity in the UK.

Ethnicity Population
White 87.2%
Asian/Asian British (Indian) 2.3%
Asian/Asian British (Pakistani) 1.9%
Other 3.7%
Black/African/Caribbean/Black British 3%
Mixed 2%

As seen from the data above, the vast majority of British people pertain to the ethnic majority. In many cases, ethnic minorities are struggling with various social and financial issues (Chapman, 2014). Nonetheless, there is almost no tension associated with ethnicity in the UK. There can be some cases of tension between some groups or a certain degree of discrimination, but those are quite rare cases (Rees, 2011). However, it has been estimated that by 2050 one third of the UK population will be made up by ethnic minorities (Chapman, 2014). Researchers do not expect the increase of tension between ethnic groups as younger generations are accustomed to living in a diverse society, and they do not pay attention to the ethnicity of people they interact with (“Ethnic minorities,” 2014). Older generations may be more sensitive to the issues associated with ethnicity.

The ethnic composition of the UK society also has a certain influence on the country’s culture. For instance, this is apparent in the religious beliefs of British people (see table 3). The majority of people are Christians. Interestingly, almost a third of British people do not pertain to any specific religious group. It is necessary to add that there is no significant tension between different religious groups though some cases of discrimination or violence against some groups still exist (Rees, 2011). However, the British agree that these tensions can be overcome. Of course, people also believe officials have to pay special attention to these issues.

Table 3: Religions in the UK.

Religion Population
Christians (Anglican, Catholic, Presbyterian and Methodist) 59.5%
None 25.7%
Unspecified 7.2%
Muslim 4.4%
Other 2%
Hindu 1.3%

Source: United Kingdom demographics profile 2014 (2014)

Cultural and Social Values

The British are often seen as reserved and very polite (sometimes quite arrogant) people. Of course, this is a prejudice that has been developed throughout centuries. At the same time, British people are quite reserved, and they tend to be more focused on their private things rather than interfering in other people’s affairs (Higgins, Smith & Storey, 2010). It can seem surprising, but British people are characterized by a great deal of tolerance and flexibility. Clearly, society is transforming, and new trends are appearing, but many traditions are still strong.

Cultural and Religious Peculiarities

Thus, the UK is a modern and democratic society where such concepts as liberty and personal freedom are valued. Hugman (2012) notes that the British tend to value such things as marriage, but, at the same time, divorces and cohabiting relationships are accepted in society. It is possible to note that UK society is quite progressive. Sexual minorities are gaining more rights and, even though issues associated with sexuality are still seen as controversial, British society is rather tolerant.

It is necessary to note that economic growth and technological advances have transformed the United Kingdom into a consumerist society. Opoku (2015) stresses that British people have started consuming more products since the middle of the 20th century, and this trend can be quite alarming as some are becoming too concerned with material things. At the same time, the researcher claims that the 21st century has brought certain changes, and people are becoming more responsible (Opoku, 2015). The British are trying to build a sustainable society where such concepts as responsibility, tolerance, and assistance are valued and promoted.

As seen from the demographic data mentioned above, the majority of British people pertain to the group of people with Anglo-Saxon heritage. Thus, Anglo-Saxon values prevail even though they are affected by other cultures. The vast majority of British people practice Christianity. Many people in the UK go to the church, especially during religious celebrations (Higgins et al., 2010). Notably, many British people address the clergy when they have some moral issues or when they are facing a significant psychological load. It is necessary to add that there are various religious institutions that meet the needs of a diverse UK society. As has been mentioned above, there is certain tension associated with religious beliefs in the United Kingdom.

People are discussing these issues, and some solutions are already in place. Holehouse and Morrissey (2012) mention some of these cases. For instance, a nurse refused to remove her crucifix, which was a new safety requirement. There is also debate on the shutting the office during such celebrations as Christmas as someone calls it indirect discrimination as people practicing other religions are forced to go on holiday for Christmas while they have to get additional days-off to celebrate their major holidays (Holehouse & Morrissey, 2012). Importantly, these are quite specific cases, and they do not create large-scale tension in UK society. Of course, it is clear that the issues have to be solved, and there are high chances that this will be achieved in the future as younger generations tend to be more tolerant. They do not pay a lot of attention to the religious beliefs of people they interact with.

Technological Environment

Education

Since the UK is a technologically developed country that has a sound economy, it is but natural that it has a strong educational system. It has been acknowledged that education is the basis of any country’s development, and the United Kingdom has a sound educational ground. The UK increased its expenditure on education. For instance, 5.2% of the country’s GDP was spent on it in 2007 (Vignoles, 2011). As a result, the vast majority of young British people (80%) remain “on full-time education beyond the age of 16” (Vignoles, 2011, p. 169). At the same time, almost 40% of people get higher education. The country is famous for its educational establishments that provide students from all over the world with high-quality educational services. The country has numerous prestigious educational establishments (both secondary and higher), and certificates, as well as degrees from these institutions, are recognized in the entire world.

Nonetheless, there are still significant issues in the UK when it comes to education and especially the employment of graduates. Vignoles (2011) states that employers argue that the majority of graduates do not have the necessary qualifications to be successful in the contemporary labor market. Employers emphasize that graduates have too general or no skills to complete particular tasks. Of course, many students tend to choose prestigious courses, and there is a shortage of skilled professionals in many spheres.

Hence, the accessibility of higher education has not translated into guaranteed employment for graduates. Vignoles (2011) adds that UK educators and officials are addressing these issues through collaboration with employers and the development of new curricula and regulations in the system of education. Of course, various training courses are available for people, and employers invest significant funds into the development of their staff.

Employment

These measures have proved to be effective as the employment rate is increasing after the crisis of 2008. The level of unemployment in the UK is 5.7%, which is the lowest rate after the financial crisis of 2008 (Taborda, 2015). However, there is quite an alarming trend as more than 9 million people aged between 16 and 64 were unemployed and were not seeking jobs. The inactivity rate reached 22.2% at the end of 2014 (Taborda, 2015). This rate has not changed significantly so far.

At the same time, the labor market is quite flexible, and many international, as well as national companies, are eager to create jobs. Thus, the UK has a maximum 48-hour working week while other European countries have 35-40-hour working weeks (Harrison, 2013). The country also has a higher rate of “part-time, fixed-term, and temporary employment contracts” than the majority of EU countries (Harrison, 2013, p. 116). This flexibility is beneficial for both employers, as they can get a more diverse and skilled labor force, and employees who can get more employment opportunities.

Due to certain issues associated with the UK educational system, the country faces some challenges related to skilled labor. Since there is a shortage of highly skilled professionals (which is not dramatic but still quite tangible), the UK government is slightly changing its immigration policy. Highly skilled professionals from other countries (especially the countries of the Commonwealth) are welcomed (Harte, 2014). This contributes to the development of the ethnically and culturally diverse labor market as well as the entire society.

The Country’s Position on Geert Hofstede Index

General description

To better understand the cultural peculiarities of the United Kingdom, it is possible to use Hofstede six-dimension model (see fig. 2). The six-dimension model includes such elements as power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence. According to the cultural analysis, the UK is a highly individualistic society where competitiveness, self-centredness, and the desire to satisfy personal needs prevail (United Kingdom: What about the UK, 2015). It is necessary to note that these features are quite typical of a western country.

The Hofstede Six-Dimension Index.
Figure 2. The Hofstede Six-Dimension Index. Source: United Kingdom: What about the UK? (2015)

To explore the peculiarities of the working place environment in the UK, it is necessary to consider the dimensions of paying attention to such dimensions as masculinity and individualism. Hence, the dimension of power distance reveals people’s attitudes towards inequality in society. The British have a low score, which suggests that the majority of people think that all should be equal and have equal opportunities.

The individualism dimension shows that UK society is highly individualistic, and people are focused on their own affairs. They do not tend to concentrate on the good of all. The masculinity dimension reveals the British people’s need to be the winners. They focus on achievements and high scores of individuals rather than the contribution of each member of the group.

The low index of uncertainty avoidance suggests that British people do not focus on planning (though they create plans and follow them) and can address new challenges quite easily. They do not get upset if the environment changes as they are ready to adjust to the new setting and choose another strategy to cope with arising issues. The index of long-term orientation is quite intriguing as it is quite unclear whether the UK society is oriented at long-term goals. It seems that there is a balance between the present and the future for the British. Finally, indulgence is the index that shows the way people control their impulses. British people tend to realize their impulses.

Masculinity

It is necessary to note that the index of masculinity can help understand the peculiarities of the working environment in the UK. As has been mentioned above, British people focus on their performance and achievements. They are also concentrated on salaries and promotion as well as recognition in society rather than such concepts as a friendly atmosphere in the working place (Patel, 2013). Notably, the performance of the individual (as compared to the performance of the group) is often put to the fore.

The British are taught to compete since their childhood. Their upbringing, as well as the educational system, is based on the principles of competition where children compete for attention, pocket money, good grades and scores in secondary and higher education, certain achievements that will help them stand out against their peers.

Individualism

The index of individualism is quite closely connected with the one mentioned above. British people are concentrated on their own needs and goals rather than the needs of a larger group (Patel, 2013). In other words, if their values or goals are in conflict with the goals of the group, they are likely to pursue their personal aims. Again, individualism is an integral part of the younger generation’s education. Children are taught to mind their own business and to try to achieve their goals. Competitiveness can be seen as a certain by-product of British individualism.

As has been mentioned above, the vast majority of people pertain to the ethnic majority and, hence, all these people share similar values. Ethnic minorities only occasionally affect the concepts mentioned in this section. They are bound to assimilate and accept the rules of the game. They have to become more competitive to become effective members of UK society. Clearly, these aspects have to be taken into account when managing an organization operating in the United Kingdom.

Working Environment

When managing a company operating in a particular country, it is important to follow regulations and pay attention to the cultural peculiarities of people. A British company is likely to be governed by such concepts and values as competitiveness, individualism, indulgence, equality, and a certain attention to planning. Even though British employees will have a great deal of respect for authority, democratic leadership will be more successful in many settings. As has been mentioned above, performance is central to employees. Therefore, performance management strategies should focus on quite a specific measurement and particular motivation incentives.

The indices of uncertainty avoidance and long-term orientation suggest that British employees are likely to work in accordance with certain plans. They will try to meet the necessary deadlines. However, they are quite flexible and ready for changes. UK employees are unlikely to feel stressed out and depressed when meeting new challenges. They are likely to come up with solutions quite quickly.

Conclusions / Recommendations

The British business environment is highly favorable for international as well as local companies due to its stability and flexibility. At the same time, it is clear that the UK is a diverse society where people of different ages, ethnicities, and genders collaborate with each other. Therefore, it is important to remember that cultural aspects can have a significant impact on the development of the organization operating in the country. According to the cultural analysis with the use of the Hofstede model, it is possible to state that the UK society is competitive, individualistic, flexible, and democratic. Thus, people working in a British company are also characterized by these features. These characteristics should be taken into account when developing the company’s culture.

Competitiveness is one of the central peculiarities of British people. The company’s culture should also include this aspect. The company can encourage competitiveness among employees through ratings, performance measurement, particular goals set. Of course, it is crucial to focus on the organization’s competitiveness as well. Thus, employees will be more eager to work for a company that is a leader in a certain field. This will also help to motivate employees to work in teams on various projects.

Individualism can be an obstacle to the efficient performance of groups in some cases. Clearly, leaders have to make sure that each employee will be motivated to contribute to the effective performance of his/her group. It is also important to make sure that the culture of the company is shared by employees. Otherwise, employees will focus on their personal goals, which can sometimes be harmful to the organization’s performance. It is necessary to add that the atmosphere in the working place is not one of the major priorities of British employees. Nonetheless, it is still necessary to pay attention to it to avoid a high rate of turnover.

It is important to remember that the change is an indispensable part of the development of any organization. British employees are likely to welcome changes and will be able to adapt quickly. This is a very important aspect of the British nation that can adjust to the changing environment. More so, leaders can encourage employees to come up with innovative ideas that will help the company to fit into the changing environment.

At the same time, it is important to remember that the company operating in the UK is likely to have a diverse workforce. Therefore, the company’s culture (that will be based on British values) should also be flexible enough. Thus, some projects (departments, teams, and so on) may need additional attention, and some methods should be changed. Thus, the Hofstede model can be applied to assess the cultural peculiarities of employees pertaining to an ethnic minority.

In conclusion, it is possible to state that the UK is a multinational country where cultural and ethnic peculiarities do not create any obstacles for the development of the business as well as the development of the entire society. British people are democratic, flexible, and tolerant, even though they have strong traditions. To become successful in the UK market, it is important to pay attention to the cultural aspect. It is also necessary to remember that diversity is a key priority for the modern UK society.

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