Importance of Entrepreneurial Activity to the UK Economy
Introduction
Constantly growing and developing economic relations, both between countries and between participants within a country, are prerequisites for the creation of new forms of business. Entrepreneurship is an important, but not the only factor in economic and social development of many countries (Waschik, Fisher and Prentice, 2010). However, uncontrolled, no adjustable (wild) business (without the supervision of the state) is just as harmful as the administrative-command system. Entrepreneurship is essential for the development of a competitive environment, in order the final consumer of products has the right to choose, but does not content with goods offered to him/her at unreasonable price by private entrepreneurs or state-owned enterprises. The State is also often not profitable to be engaged in many areas of economic activity, so there is the need for the emergence of private entrepreneurship (Hisrich, 2010).
The purpose of the study is to examine and analyze the basic forms of doing business in the United Kingdom and to consider their regulation from the state side. The object of the study is the legal forms of business in England, and the subject is the activities of these forms in the context of the civil rights of foreign countries.
The UK economy is regarded one of the most stable in the world. It is mostly based on the service sector (almost 80%), where banking, financial and insurance services prevail. Such significant banking groups as HSBC, Royal Bank of Scotland, Barclays and Lloyds are located on the territory of Great Britain (Cadman, Bernard and Pearson, 2016). The London City has head offices of large international banking, insurance groups, legal and financial companies. The role of production sector in the economy decreases. In terms of industrial production growth rate, the United Kingdom is ranked 121st in the world (Central Intelligence Agency, 2015). Now, the structure of the industry has an increasing trend of the share of mechanical engineering and other manufacturing industries and the declining tendency in the share of traditional mining and textile industries. The manufacturing sector made up 11% of GDP in industrial production (The Manufacturer, 2015).
The development of modern industry of the UK depends on the level of high technologies’ development. The UK has Europe’s highest scientific and technical potential, and ranks second in the world after the USA by Nobel prizes obtained by its scientists. British agriculture is high-value, while its share in GDP is the smallest among the developed countries, only Germany has the less. United Kingdom is self-sufficient in food by half (Central Intelligence Agency, 2015).
Concerning foreign trade in the UK, it is presented by the negative balance mainly because of growth in demand of customer products, weakening in industrial production, decrease of the GBP and worsening in oil and gas manufacture. The country mostly imports equipment and transport technology (35%); industrial goods (26%); mineral fuels and connected resources (13.5%) and chemical merchandises (11%). The major partners include Germany, China, the United States, the Netherlands and France. Exports also consist of 40% equipment and transport technology, almost 24% of industrial goods, 15% of chemical merchandises and 10% of mineral fuels and connected resources. The United States is the biggest export partner, followed by Germany, France, the Netherlands and Ireland (Trading economics, 2016).
International experience shows that entrepreneurial skills are most effectively implemented in countries, where liberalization of economic activity is combined with the high efficiency of public institutions and active government support for small and medium business and policy to encourage competition in the domestic market, i.e. under the vigilant public control (Markovic and Salamzadeh, 2012). State by state order, tax breaks, soft loans, subsidies to enterprises, etc. can effectively switch the entrepreneurial activity in those areas of activity that need development and modernization. The state by similar measures (fines, bans, higher taxes) restricts the activities of the monopolists and achieves lower prices, harmonization of equipment, the use of new technologies, etc. (Webster, 2014).
Modern Britain is one of the most interesting and promising countries for business. At the moment, a small business in the UK is very well developed and occupies 50% of the total GDP of the country (more than in the US and Japan). The creation and development of business in England is a cost-effective and excellent opportunity to invest money or sale of any interesting ideas (Yoshioka, 2016). To register the company United Kingdom offers fairly favorable and comfortable conditions. Opening a personal company in the UK is relatively inexpensive and it is available for non-residents method of doing business. Also, it should be noted that the excellent reputation of the jurisdiction has a positive effect on the image of the business and is the key to the safety of investment (Burn-Callander, 2014).
In the UK, there are quite low taxes, when compared with other EU states. A company incorporated in England, is controlled, as a rule, by general power of attorney, and is used as a commercial agent in the export and import of goods or services, as, for example, the investment structure (Cadman, Bernard and Pearson, 2016). In addition, the UK is not an offshore zone, has a high level of development of the banking system and the economic development of the country as a whole. According to the ease of doing business, the UK occupies the 6th position in 2016, 15th position by taxation, 17th position by companies’ registration, etc. (The World Bank Group, 2016). By The Global Entrepreneurship Index, the United Kingdom occupies 9th position with 67.7 points (The Global Entrepreneurship and Development Institute, 2016).
Sectors of Entrepreneurship Prevalence
All segments of the market of private businesses are almost completely filled, ranging from cleaning services and ending with transport and exclusive. The same trend is observed in the trade, the tourism sector, etc. However, there is a positive side for those, who want to succeed in business in the UK. A niche of hotel and restaurant business, especially in the segment of domestic hotels, still remains quite spacious. This service, in recent years is rapidly growing by its popularity and profitability. The main consumers are the people, who want to save a little budget to rest, as well as students, who massively come to study in the UK and are looking for options with an inexpensive and comfortable accommodation (Department for Business Innovation and Skills, 2015).
In 2014, 20% of the British SMEs were mainly directed by females. Inspecting just SMEs with staff, female-led organizations are under-characterized in the industrial production and construction segments (making up just 7% and 8% of business correspondingly), however, represent 43% of companies in the joint public administration, schooling, health and security segment (Rhodes, 2015).
Importance of Growth as an Objective
The development of small and medium-sized enterprises in the UK is driven by the state, various tax benefits available to them in recent years. The level of development of small and medium-sized businesses in the UK is at the average level in the EU. So, per one thousand inhabitants in the United Kingdom there are 46 small and medium enterprises (overall level of the EU – 45). However, their share in GDP is not very significant (50-53%). In 2015, the UK had over five million private segment companies, almost 146,000 or 3% in comparison with 2014. Within the last fifteen years, the quantity of companies in the UK has grown every year, by 3% commonly. In 2015, the amount of companies compared to 2000 increased by 55%, almost two million more over the total period (Rhodes, 2015).
Figure 1. Private Segment Companies in the United Kingdom
The country’s development was unstable in 2015 and that outline is set to endure. Frail demand in the European area, Great Britain’s most significant foreign market, together with an increase in the worth of the pound, has affected the life of exporters strongly. In the meantime, strong progress in customer spending has imbibed in imports. Therefore, two options to expect in 2016 are whether London begins to fret on the scope of the UK’s balance of payments deficit and whether the Bank applies its new controls to lead in the housing industry (Elliot, 2015).
Business activities in the UK are carried out by sole proprietorships, partnerships and companies. The partnership is full and with limited liability (limited partnership). Companies in turn are divided into the following main types, namely companies with unlimited liability (unlimited company), a company with responsibility within the guaranteed them sum (organization restricted by guarantees), the company without liability of shareholders (no-liability company) and Limited Liability Companies. LLCs can be private and public companies. State-owned companies in the UK are called public corporations (Lipsey and Chrystal, 2015). Companies in the UK can be formed by a special decree of the Government, by royal decree, and by registration in the state bodies in accordance with the Companies Act 1948. In theory, the country’s law allows recording fifteen different types of companies. However, a limited company is the most widely used (Gola and Roselli, 2009).
Given that the UK is multinational country, the business world is very diverse, but the main points are common to all. British businesses have a stable reputation in the business world as one of the most qualified. The abilities to analyze the current situation on the market and predict the development of business in the short and medium term are the UK’s business’s strengths. Also, British businesses are strong in the commodity and, particularly, in the financial business sectors. The vast majority of the innovations here belongs to them (Sorrells and Sekimoto, 2015).
International companies consider opening a business in the UK as the creation of an ideal platform for further successful development in Europe. In addition, companies thus gain access to the domestic market. This process, many companies begin with the placement of their shares on the UK markets (De Kluyver, 2010). The UK is the center of concentration of international innovation with recognized competence in the field of scientific research. In developing sectors, such as polymer electronics, the development of polymer displays and photoelectronics, research potential of the country sets the foundation for the development of business of modern international companies (Karami, 2016).
Nevertheless, fast food is considered to be the fast-growing niche of the UK business. There are quite a few institutions of this type on the streets of the country, but for a long time opened places stale consumers for a certain period of time and they start looking for something new, with a delicious and inexpensive. Here, it is possible to win its small target audience. One of the positive aspects of business in the UK is relatively small consumer sophistication. It is strange, but the inhabitants of the British Isles are less demanding in comparison with the other people. The basic rule to be followed by anyone wishing to succeed in the business related to the mass consumer service is “good quality t a reasonable price” (Associated British Foods, 2015).
The British sector of biology and medicine is one of the most stable and fastest growing markets in the world. The total contribution that biotech, pharmaceutical and medical industry bring in is over £23 billion in the country’s economy annually. Biomedical sector employs over 400 thousand individuals. Businesses that operate in this sector and want to enter the international market, the UK is ready to offer invaluable experience in drug development, scientific basis, as well as an ever-expanding government support for scientific research by means of tax and investment incentives. By the development of the most significant medicines, Britain is ahead of all other European countries and is the second largest after the United States (UK Trade and Investment, 2016).
In recent years, the influx of labor force in the United Kingdom significantly intensified. Also, the UK economy expects the growth in GDP, industrial and services sectors as well as exports (The Economist Intelligence Unit, 2016).
It is worth mentioning that businesspersons in Great Britain can link with like-minded individuals via commercial cooperation networks. Correspondingly, there are systems for innovation that lead businesspersons in the UK. Such nets help join forces of supply chain management, industry exploitation and allocating of expertise and procedures for a shared benefit. The UK Government sustains private enterprise in Great Britain that is surroundings friendly and publicly advantageous. The Low Carbon Energy Demonstration suggests funding to elaborate technologies that encourage the application of a smaller amount of carbon (EntrepreneursUK, n. d.).
The UK businesspersons were less motivated to develop their companies internationally or hire large amounts of individuals. This has led to a lower position for the UK in the motivational classification, occupying ninth position in Europe and fifteenth place worldwide. The United Kingdom could additionally progress the way greatly experienced individuals regarded entrepreneurship, ranking eleventh in Europe by this category. The UK similarly is lower compared to the US in business interacting, meaning that attaining mentoring sustains and learning from the practices of others is reasonably more complicated here (The London School of Economics and Political Science, 2014).
Therefore, the development of state-monopoly capitalism, if considering it in a specific legal aspect, entails a significant increase in direct administrative rule-making on issues of economic regulation; the adaptation of the old institutions and the creation of many new items for State intervention in the economy of the tasks; change the relationship between the legislative and executive bodies in the direction of strengthening the independence of the executive bodies of the Parliament (and judicial) control (Westwood and Johnson, 2016). In modern capitalist society, the ownership structure has significantly changed. The economy is dominated by the large joint-stock companies and state property. The dialectic of development is such that the conditions of modern capitalism create more and more material prerequisites for the transition to a new, higher system – socialism (Ekelund Jr. and Hébert, 2013).
Further Opportunities for the UK Economy
Among the achievements of recent years in the UK, the improvement of conditions of running a small business, streamlining the system of social benefits, more and more growing level of tolerance in society (allowed same-sex partnerships, relatively prosperous issues of ethnic relations), the level of democracy and protection of human rights in the UK, which may be a model for a number of EU countries can be specified (Business culture, n. d.).
Britain is a country with a highly developed, strong and independent economy. But today, attention is drawn to the discrepancy between seriously undermined country’s industrial production, international trade and monetary sphere, on the one hand, and the weakening, but still a very strong, position in the export of capital, and the continuing role of London as one of the leading financial and commodity-exchange centers – on the other hand (Lipsey and Chrystal, 2015).
In 2016, emerging states require new strategies to keep going economic development and grab the prospect from these movements. This means shifting from dependence on product exports and growing employment-intensive production and amenities, which can form the much-required job prospects for their young inhabitants (Calabrese and Tyson, 2016).
Thus, on the issue of taxation the United Kingdom is one of the most comfortable countries of the European Union. Thanks to government programs for support of small and medium business, taxation in the country is quite gentle. There are exemptions for small private enterprises, and individual entrepreneurs have non-taxable minimum income tax, which is about 8000 pounds, and the system is clear and transparent (Deloitte, 2015). Opening and running a business in the UK is quite simple and prestigious option, requiring at the same time a relatively low cost. The government tries to provide the most comfortable conditions for doing business and ensures maximum support to small forms of business, which quite positively can be reflected on the new reality in a distant country (1Office London, 2015).
Conclusion
The essence of entrepreneurship is manifested most through the combination of different functions objectively inherent in civilized business, but is largely dependent on the subjects of entrepreneurial activity and state support. State regulation of the activities of the organizational-legal forms of business is not only in the adoption of regulatory legal acts of the respective levels, but also consolidation of the special procedure of registration, control activities, liquidation of enterprises, as well as in the establishment of tax regimes for different types of businesses (Schoonhoven and Romanelli, 2002).
The UK economy is currently recovering steadily, being second in terms of growth among the countries of the Great Seven only after the US economy. Now, the traditional banking system in the UK under tighter regulation and capital requirements is more stable, although the appetite for excessive lending has virtually disappeared in the banking sector (OECD, 2016).
Thus, the development of small and medium-sized enterprises in the UK is driven by the state, various tax benefits available to them in recent years. Modern Britain is one of the most interesting and promising countries for business. The country occupies 6th position on ease of doing business (International Monetary Fund, 2016). However, in the UK, there is a fairly rigid system of control over the activity of enterprises, which creates serious obstacles to the organizations and businesses, which use the activity for fraudulent purposes. This system functions at numerous steps of the organization and activity of the company: the initiation of bank accounts, levy and financial informing, authorizing definite types of activities, etc. Great Britain implements a large number of measures to stimulate the development of small and medium businesses in the UK (European Commission, 2016).
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