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UK PEST Analysis: Social Factors

by Alan Nelson

With the role of accountants becoming increasingly automated, analytical skills are becoming more critical than ever. In order to provide good financial advice about the future it is critical we understand both the current context in which we operate, and likely developments in the future.

PEST is a methodology for analysing the external factors that affect the sector a business or firm operates in. The letters stand for:

  • Political
  • Economic
  • Social
  • Technological

We’ve already studied the Political and Economic Factors. This week we turn our attention to the Social Factors.

Currently the most widely reported topic involving changing attitudes is climate change. With the Extinction Rebellion fresh in the minds of Londoners and the visit of Greta Thunberg, both main parties are seemingly moving towards a more radical policy in this area.

Going Green

You should judge for yourself whether you think this represents a real sea change in people’s attitudes. You could find consumers switching quite quickly from one solution to another if they start to place a greater emphasis on green issues.

There may be opportunities for businesses that can demonstrate themselves to have solutions to the reduction of plastics, to the reduction of CO2 emissions or to the generation of cleaner sources of power. Your business may or may not be involved at the heart of this, but we should all be alive to the possibilities and aware of the risks from bad publicity.

  • What aspects of what you do could be developed and emphasised more?
  • What might you need to change?
  • What unexpected costs or risks might be hidden but about to surface?

Looking at society more generally, we are in the midst of a major change that may be at the heart of much of the turmoil we have seen over the past few years. Since the financial crash, the long slow recovery has been incomplete and unevenly felt. Many of the new jobs that have been created have been in the so-called gig economy, and the middle class has felt ever more squeezed.

At the same time, a generation of middle-class young people have graduated with high student debt, but without great jobs prospect. The ONS are currently reporting that 34% of those graduating since 2007 are doing jobs for which they are over-qualified.

With supply in the property market getting nowhere close to keeping up with demand, the relentless upward trend on house prices may make their parents happy, but it leaves young people feeling further away than ever from owning their own home. Indeed, owner occupation rates are at their lowest level for three decades. A third of 18-34s are living with their parents.

This hollowing out of the middle of society is likely to be accelerated by the rise of artificial intelligence, with accountancy only one of many professions under threat by the technology. It looks likely that we will be left with highly skilled jobs and very low skilled jobs in the economy, but not much in between.

So, what does that mean for the organisations we work in? That will depend on which sector you operate in, but certainly it is hitting some already. Take for example the grocery sector. The supermarkets that have been succeeding have done so by operating either at the premium end of the market or by offering smaller ranges at discount prices. Those operating between those two extremes have it much harder. How does that apply in your business? Do you have a mid-market position and if so is that sustainable? How are the changes faced by young graduates entering the labour market and seeing a future living at home or in rented accommodation likely to affect your business model?

If these ideas I have shared don’t resonate with you, here is a useful list for you to consider:

Traditional social factors

  • Cultural attitudes - gender roles / ethnicity / LGBT
  • Lifestyle attitudes
  • Health consciousness
  • Attitudes to education
  • Population growth
  • Age distribution
  • Carrier attitudes
  • Safety attitudes
  • Class structure
  • Entrepreneurial spirit
  • Leisure interests

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