When you get to see Michael Moore's excellent debut film Roger & Me which is about the decline of General Motors in Flint, Michigan, many of the problems that occurred there in the 1980s happen over and over, all over the world.
In the UK many firms have relocated abroad (even though with the Pound becoming very weak it will encourage investment from abroad as we will have cheaper labour, premises and machinery) but what are the reasons behind this?
Interest rates are important. If interest rates are lower somewhere else, then it makes sense to borrow high sums that mean you don't have to pay as much back.
Taxation is also a factor. The UK seems to be taxing everything! Corporation Tax and VAT are two taxes that affect a firms costs. Though recently the Government have reduced VAT from 17.5% to 15%, though this is only a temporary measure.
Cost of Labour - UK employees have a minimum wage which builds in costs for firms. Workers may be cheaper abroad to employ.
If the Pound is strong, then it is very expensive to export goods from the UK to Europe and the US.
Foreign Governments offer subsidies and grants to firms who wish to relocate to their countries. This is an incentive to attract profitable firms. Remember these firms will create jobs and workers pay taxes! This gives the Governments their budgets to spend on their policies. It is common sense really!
In the UK many firms have relocated abroad (even though with the Pound becoming very weak it will encourage investment from abroad as we will have cheaper labour, premises and machinery) but what are the reasons behind this?
Interest rates are important. If interest rates are lower somewhere else, then it makes sense to borrow high sums that mean you don't have to pay as much back.
Taxation is also a factor. The UK seems to be taxing everything! Corporation Tax and VAT are two taxes that affect a firms costs. Though recently the Government have reduced VAT from 17.5% to 15%, though this is only a temporary measure.
Cost of Labour - UK employees have a minimum wage which builds in costs for firms. Workers may be cheaper abroad to employ.
If the Pound is strong, then it is very expensive to export goods from the UK to Europe and the US.
Foreign Governments offer subsidies and grants to firms who wish to relocate to their countries. This is an incentive to attract profitable firms. Remember these firms will create jobs and workers pay taxes! This gives the Governments their budgets to spend on their policies. It is common sense really!
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