UK Economy and its Impact on Service Industry - Desklib

EXTERNAL BUSINESS
ENVIRONMENT

Structure and operation of UK economy
 UK economy is considered to be as the fastest growing and one of the largest
economies that features GDP rate. Thus, for operating the services in this
economy, there are various forms of market structure in which a company can
perform their business activities. Among all the forms of market structure, if the
company selects suitable market for operations then it directly influences the
behavior and culture of organization. The forms of market structures available in
the UK economy are perfect competition, imperfect, oligopoly, etc. British
Airways operates its services under oligopoly market as there are few firms and
large number of buyers in this industry. Further, when measured in size, UK
economy is 5th largest national economy and 2nd largest in EU and in nominal
GDP, it is 10th largest in the world while 3rd largest in EU. The economy of UK is
the fastest growing in the G7 for 3 consecutive years. Moreover, it is one of most
globalized economies in the world. The service sector of the UK contributes
78% of the GDP in the economy. This sector includes hospitality industry,
aviation, banking and financial sector, etc.

Contd.
On the other hand, taxation rate of UK economy has been reduced
to minimum extent which is a very good sign of establishing new
ventures in the country. Further, the taxation payment has to be
done to at least two different levels of government that is local and
central government. Moreover, in UK economy, there is efficient
regulatory framework which is also transparent. This encourages
entrepreneurship with no minimum capital requirement. Further, the
labor market in UK is relatively flexible. Moreover, the
unemployment rate in UK came down to zero which has pushed the
growth of economy. Therefore, job security has been increased and
this way inflation rate came down. This is how the structure of UK
economy has been formed and in this way, economy of UK
operates.

Current government economic policy and its impact on service industry
The economic policy includes trade, fiscal and monetary policies
which are framed by the government of UK. These policies have a
direct and indirect impact on the working of InterContinental Hotels
Group. Further, the fiscal policy laid down by the government is
increasing tax rates. This will impact the consumer’s demand
because the prices of the hotel rooms and other facilities will get
increase. Therefore, the demand may reduce which will directly
impact the profitability of the firm. Furthermore, the budget policy
of government also has an impact on the working of hotel. The
budget pass by the authority may increase or decrease the prices of
the products and services. Currently, the budget has been increased
for the hotel rooms and in this way prices have been increased. This
reduces the demand of the hotel