I don't think that the UK has quite the same competition culture as the USA, but we're catching up. Here's how I decide which competitions to enter
I look at the fee/prize ratio when I enter competitions, and try to see where the money's going. I take into account the prestige of the competition, the judge, and the judging process. I only bother with poem competitions where the 1st prize is more than 100 times the fee. I'm more lenient with story competitions.
We're beginning to have magazines that charge reading fees, which is essentially a competition. I think that's fair enough for prose, especially if the fee includes a copy of the magazine.
We have a few (far fewer than the USA) competitions where the winner's book is published. I'm sympathetic to the established ones - they offer one of the few routes to publication; faster and much less hassle than submitting to publishers.
For the bigger UK competitions (Bridport, National Poetry Competition) not only is the fee/prize ratio good (Bridport's poetry/story 1st prize is 5000 pounds for a 6 or 7 pound fee; the Flash prize is 1000 pounds for a 5 pound fee), but the lesser prizes are worthwhile too. Getting on the short-list is noteworthy, and there's a good chance of anthology/newspaper publication later.
After a bit of naming-and-shaming a few years ago in the UK there's been a trend towards transparency of the judging process. For example, the Bridport rules say "Experienced readers assist the named judges in selecting the shortlists, headed by Jon Wyatt for short stories and Candy Neubert for poems". In the National Poetry Competition's FAQ they say "Unlike many poetry competitions, we do not implement a sifting / elimination round. Each entry is seen by at least two of the judges."
So I end up entering a big competition every year or 2. I enter a publication-prize competition every 2 or 3 years. I enter about 8 small competitions a year - more prose than poetry. I guess I've come out about even overall, and I feel I've helped out some worthwhile magazines and organisations.