Virgin Money: Economic and Global Impact on UK Banking Sector

This report examines Virgin Money's role in disrupting the UK banking sector, focusing on the economic and global business environments in which it operates. It details both the micro and macro factors affecting Virgin Money, including its value system, organizational structure, and technological capabilities, as well as external factors like inflation, tax rates, and recession. The report also analyzes the competitive landscape, banking regulations, and international banking trends. Furthermore, a PESTEL analysis is conducted to assess the political, economic, social, technological, environmental, and legal factors influencing Virgin Money's global expansion. The report concludes that Virgin Money primarily focuses on small to medium enterprises in the UK, with economic challenges significantly impacting its operations and future planning.

Virgin Money
Disrupting the UK
Banking Sector

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Examine the economic environment within which businesses operate.......................................3
Examine the global business environment..................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The UK banking sector consists of the certain number of private, international banks and
building societies. The large banks which are big in nature determine the market position of the
banks. The growth has been major in the banking sector of UK for the mobile and online banking
(Alabsy, 2018). The virgin group is an UK based organisation which is founded by Richard
Branson. The report will be discussing about the Virgin money of the group. It is a corporation
which deals with the financial services and is headquartered in London. In the below report,
economic environment of the UK banking sector will be explained considering the Virgin money
group. Further, the global business environment of UK and its impact of the various countries
will be elaborated and how it put an influent on the country United Kingdom.
MAIN BODY
Examine the economic environment within which businesses operate.
Internal environment in which a business operates are of two type micro and macro, in the
context of virgin money micro factor effecting the organisation are:
Value system: The organisation works in the direction to improve the customer experience in
banking. Main aim of the bank is to be different from other bank and focuses on customer
satisfaction.
Vision mission and objective: It has objective of providing customer the services which goes
beyond traditional banking system. Delivering digitally enabled services that would make
everyday life of the people easy and hustle free by being trustworthy and improved Fintech. To
maintain the brand value and be the market disruptor. In the future aims to deliver additional and
extra return
Organisational structure: the cooperation follows the decentralized system, where
responsibilities are distributed by top level management to middle level to lower level (Al-
Ismaili, 2018).
Corporate culture: it is a leading fully digitalized bank, offering the best services and product
for retail and business needs
Human resource: organisation ought to employee the best force so that can be asset to the
company and deliver the best of them to the consumer. They promise to have the people with

years of experience and deep knowledge in financial sector (Anouze, Alamro and Awwad,
2018).
Resources and technological capability: the company is working on creating unique value by
using business analytics, with the use of cloud automation, data structure and architecture, data
environment, data modelling and other business analytics tools.
Bank specified external environment that affect the operation and function of the organisation
are, interest rate, inflation, employment rate, bank size, GDP, tax rate, recessions, consumer
trust, income.
Inflation: Banks has great effect on inflation, interest are increases and decreases a lot because
of it. UK has a price inflation about 23%. Rising prices have indirect relation with profitability.
Tax rate: The UK rate of tax is 27% which is 19% the tax rate+ 8% surcharges.
Bank size: The bank operates for small medium size enterprise. Virgin money is a government
sector bank that operates on international level.
Recession: This is period in economic cycle where interest rate falls due to which bank suffer
decreased profitability. The two successive quarters showing a declining GDP is the period of
recession which puts a lot of pressure on the economy's banking industry. The loan demand
decreases and household seeks safety from the current situation.
Other factors of the bank environment are situation of the bank, defined goals and
politics, trade union, solvency, liquidity, management, technology used, quality of workforce,
trustworthy customers, brand image, efficiency of the things offered in the market, profitability
of the deliverables,
Banks generally operates in three type of environment:
 Competitors banks: The economic environment is filled with similar product serving
organisation which competes with bank at every level. Threats in the form of strong
brands like HBSC is really challenging to deal with (Bătae, Dragomir and Feleagă, 2021).
Financial instruments, money market tools and other banking services are really hard to
differentiate because regulations and norms does not allow much innovation therefore
there is tough competition among the banks. In order to succeed and be able to survive
the dynamic environment creativity, innovation and marketing is only key to success. UK
has the lowest competition because of its restrictions and strong entrant’s policy. Low

competition is profitable for the bank as there is no price competition much and firm
earns higher profit.
 Banking regulations: since banking is the pillar of an economy there is need to be
regulate and control it at high level. There is constant change in the interest rate, repo
rate, and other regulatory norms (Chaudhari, 2020). Virgin money has to follow all the
protocols required and then operate in nay market. New product and services can be
introduced keeping in mind all the legal frameworks and government regulations. The
framework legislation that works in UK is financial services and market act 2000. there
various regulation that need to be followed capital requirement directive, financial market
framework, market abuse regulation, short selling regulation, payment service protocol,
European market infrastructure. There are three main regulators of the banking system in
UK. Bank of England, prudential Regulation Authority, financial conduct authority.
These regulators check the authorisation, prudential matter and conduct of business.
 International banking trends: In order to grow and expand the business the
organisation have to cross the boundary and provide service on international level.
Different economy attracts variety of rules and norms. The bank has been expanding its
business through branches in various countries which are on pace of development such as
South Africa. International banking is really strict when foreign counties bank tries to
enter their market (Daly and et.al., 2019). People acceptance in the other country is not
that easy. The bank has hold over to launch banking services related product for SMEs
for neutralizing the effect of leaving the European Union. The chief of the bank said she
expects the lower in interest rate by 0.5% for at least three years.
Examine the global business environment
To study the international business for an organisation, there is need to understand the political,
legal, technical, economic, social and environment aspect of the place. It provides the deep
analysis about the favourable and unfavourable situations existing in the market and solution to
deal with those factor. Before entering into the foreign market there are things need to be taken
into the consideration. Virgin money is working in almost 131 countries, providing retail and
small medium enterprise banking. PESTEL analysis is a management tool that facilitates the
strategic planning, virgin money seeks to expand its business all over the world by its core
capabilities and ability also achieving a long term growth (Gaur and Mohapatra, 2021).

 Political factor: It plays a vital role in identifying the aspect that has effect on virgin
money, in certain market. The organisation is working in a dozen of the countries and is
exposed to various economies politics and laws. To gain success in these environment
following component need to be analysed such as political stability, red-tapism,
bureaucracy, wage regulations, protocols and legal framework, intellectual rights, foreign
trade policies, industrial regulations, trading partners, working culture, favouritism of the
ruling party, taxation. Now in UK BREXIT is the hot topic. The UK banking sector
facing a competitive pressure due to the chaos created by this policy changes. Such
factors really have a deep impact on the cooperation and disturbs the operation of the
industry.
 Economic factor: The economic growth of the country directly influences the
organisation working in the economy. The macroeconomic factor such as the type of
economic system, stability in the economy, government intervention, infrastructure,
enables a bank to function properly and provide better customer satisfaction
unavailability of which might lead to poor business performance. literacy rate is higher
depicting the population might better understand the service and the product also there
will be quality employees, poverty rate, GDP will have the business entity to determine
its long term goals, higher GDP reflects high spending power of the population and
ability to spend on the deliverables in the market (Kumar and Prakash, 2020).
Unemployment in the economy depicts the availability of cheap labour at low wages, the
exchange rate fluctuation also influences the organisation a lot as it directly impacts the
profitability and productivity. Labour supply in the economy can affect the bank when
there are skilled workers available it is advantage for the organisation failing to which
might increase the risk of failure business in the particular economy.
 Social factor: Business organisation has a deep effect from the culture and social trends
and customs. Marketing and promotion strategies are influenced majorly by this factor
only. Understanding targeted audience beliefs and mentality is very important. The data
extracted from the social culture, trends and working culture can be used by the virgin
money to form its marketing strategy. Consumer behaviour and spending pattern of the
audience helps to evaluate profitability of the product and services offered. It need to
understand the general attitude of customer towards such services and also their

requirements to provide services and offer products. Market segmentation and targeting
the niche market is important for positioning the brand value in the mind of the people
which is possible only after studying the social factor (Pardoe, 2021).
 Technological factors: The fast technological development in the economy can help the
virgin money in various way like increasing profitability, boosting creativity, using
artificial intelligence and enhancing operational activity. Social media marketing can help
the bank to improve its identity among the users, to get recognised by the targeted
audience. This can be effective platform it is really important for the organisation to get
recognition in the economy it is operating. A market where technology is not at peak, the
bank can use its technical competencies to increase its market share and profitability in
that area. In the opposite case where in the market high level technology is already
prevailing the company make use that resources for-betterment of the product and
services. Research and development play a vital role in improving the supply chain
management and improvised product and services. Post BREXIT virgin offers digitally
focused product and services more to the citizens.
 Environment factor: The worldwide presence of the organisation requires the study of
climatic condition, waste management, renewable technologies, resources fuller
utilization, preference towards eco-friendly products (Ziegler, 2021). Post COVID it is a
very significant for an organisation to take care of the environment and take into account
all the natural resources protection for maintaining the balance of the ecosystem.
CONCLUSION
From this report, the following conclusion can be drawn that the business mostly puts focus
for the small medium enterprises in UK. The most important one is the economic challenge that
affects the operations and the work environment of the company and impacts the plans and
comparison policies of the previous two years. This element builds interruptions in the internal
and external working of the company that hugely impacts and affects the normal business
operations. Other than this, it evaluates the goals of the government that supports the small and
medium size enterprises during Covid 19 pandemic. Due to which the companies fell short of
funds and they were not able to pay salaries to their employees. Looking at this the UK
government supported them and provided necessary funds.

REFERENCES
Books and Journals
Alabsy, N., 2018. The impact of electronic banking services on customer satisfaction in the
Sudanese banking sector. International Business Research.
Al-Ismaili, A.M.A., 2018. Risk exposure and performance in the banking sector: a comparative
investigation of Islamic, conventional, and Islamic window banks (Doctoral dissertation,
University of Hull).
Anouze, A.L.M., Alamro, A.S. and Awwad, A.S., 2018. Customer satisfaction and its
measurement in Islamic banking sector: a revisit and update. Journal of Islamic
Marketing.
Bătae, O.M., Dragomir, V.D. and Feleagă, L., 2021. The relationship between environmental,
social, and financial performance in the banking sector: A European study. Journal of
Cleaner Production, 290, p.125791.
Chaudhari, V.M., 2020. Role of CRM in Indian Banking Sector. International Journal of
Engineering and Management Research, 10.
Daly, K and et.al., 2019. Contagion risk in global banking sector. Journal of International
Financial Markets, Institutions and Money, 63, p.101136.
Gaur, D. and Mohapatra, D.R., 2021. Non-performing assets and profitability: Case of Indian
banking sector. Vision, 25(2), pp.180-191.
Kumar, K. and Prakash, A., 2020. Managing sustainability in banking: extent of sustainable
banking adaptations of banking sector in India. Environment, Development and
Sustainability, 22(6), pp.5199-5217.
Pardoe, L., 2021. Banking and competition in the UK economy.
Ziegler, T., 2021. Implementation of Open Banking Protocols Around the World. In The
Palgrave Handbook of Technological Finance (pp. 751-779). Palgrave Macmillan,
Cham.