Section A: Energy Costs - Do you agree that the competitiveness of UK manufacturing will not improve significantly unless substantial government action is taken to reduce energy costs? - Advantages and disadvantages table in A Level and IB Business Studies

Created by: Megan
Created on: 14-06-15 12:15


	Section A: Energy Costs - Do you agree that the competitiveness of UK manufacturing will not improve significantly unless substantial government action is taken to reduce energy costs?
	Advantages Yes I agree because... It will force UK manufacturers abroad to cheaper alternatives. Rising energy prices and green taxes will increase the costs of production for UK manufacturers. Cemex is the largest cement plant in the UK and is worried about the green taxes imposed in the UK and is considering switching to overseas production in Egypt. More UK manufacturers will be offshoring production to where green taxes are not imposed. Reduced manufacturing in the UK and the current decline in manufacturing will continue. Damage to UK economic growth and 'undermine efforts to rebalance the economy towards manufacturing' Reduces international competitiveness as energy costs are higher, which gives more of an incentive to produce in different countries. EVALUATION: This may only be the case with energy intensive manufacturers, some will stay in the UK for skilled workers and the higher value added advantage. Yes I agree because...	Disadvantages No I disagree because... Costs of production is not the only source of competitiveness, the location of the UK is an advantage. Access to the EU market in the UK will reduce costs of exporting goods for manufacturers as there is no tariffs when trading with EU members. Reduced transport and exporting costs may be an incentive for manufacturers to move manufacturing to the UK. Nissan have increased FDI into the UK by placing their manufacturing in the UK due to access to the EU market. Higher levels of FDI into the UK through manufacturing will increase manufacturing and see economic growth as a result of higher exports. No government intervention is needed to improve the competitiveness, as it is sourced elsewhere in the form of location competitiveness. EVALUATION: Deloitte ranking of manufacturing competitiveness has the UK ranked at 20, which is well below US, Germany, China and other emerging markets, despite access to the EU. No I disagree because... UK manufacturers can reduce energy costs themselves by improving their energy efficiency. "UK manufacturers are increasingly turning to energy efficient technologies" Increased investment into energy management, should reduce energy costs over time and mean UK manufacturers are more efficient. Improvements in efficiency will reduce energy costs for UK manufacturers, which will make them more competitive on an international scale as prices could be reduced. No government intervention is needed if manufacturers are investing in ways to reduce their own energy costs. EVALUATION: There's costs involved for investing into green technologies and some of these costs may weigh out the long term cost savings, so UK manufacturers may decide to leave or some may deter from moving manufacturing to the UK.
	Evaluation Competitiveness of a country can be defined in many different ways, e.g. through energy costs, location or value added. In the UK, while energy costs are high, we are still seeing a trend of re-shoring of manufacturing back to the UK. However, rising energy costs will deter manufacturers that are energy intensive because the costs of energy will weigh out the costs of transportation or tariff costs, if the country is not part of the EU for example. A EEF survey found that energy prices and green taxes are worrying industry more than other issues, which means that businesses will reconsider their location if costs begin to rise to high. UK manufacturing will improve over time with the trend of re-shoring and other competitive advantages, however the competitiveness will not significantly improve unless substantial government actions is taken because rising energy prices happen to be the biggest concern to manufacturers, especially energy intensive. So it will deter manufacturers from moving production to the UK or even force current UK manufacturers abroad.

Section A: Energy Costs - Do you agree that the competitiveness of UK manufacturing will not improve significantly unless substantial government action is taken to reduce energy costs?

Advantages

Yes I agree because... It will force UK manufacturers abroad to cheaper alternatives.
Rising energy prices and green taxes will increase the costs of production for UK manufacturers.
Cemex is the largest cement plant in the UK and is worried about the green taxes imposed in the UK and is considering switching to overseas production in Egypt.
More UK manufacturers will be offshoring production to where green taxes are not imposed.
Reduced manufacturing in the UK and the current decline in manufacturing will continue.
Damage to UK economic growth and 'undermine efforts to rebalance the economy towards manufacturing'
Reduces international competitiveness as energy costs are higher, which gives more of an incentive to produce in different countries.
EVALUATION: This may only be the case with energy intensive manufacturers, some will stay in the UK for skilled workers and the higher value added advantage.
Yes I agree because...

Disadvantages

No I disagree because... Costs of production is not the only source of competitiveness, the location of the UK is an advantage.
Access to the EU market in the UK will reduce costs of exporting goods for manufacturers as there is no tariffs when trading with EU members.
Reduced transport and exporting costs may be an incentive for manufacturers to move manufacturing to the UK.
Nissan have increased FDI into the UK by placing their manufacturing in the UK due to access to the EU market.
Higher levels of FDI into the UK through manufacturing will increase manufacturing and see economic growth as a result of higher exports.
No government intervention is needed to improve the competitiveness, as it is sourced elsewhere in the form of location competitiveness.
EVALUATION: Deloitte ranking of manufacturing competitiveness has the UK ranked at 20, which is well below US, Germany, China and other emerging markets, despite access to the EU.
No I disagree because... UK manufacturers can reduce energy costs themselves by improving their energy efficiency.
"UK manufacturers are increasingly turning to energy efficient technologies"
Increased investment into energy management, should reduce energy costs over time and mean UK manufacturers are more efficient.
Improvements in efficiency will reduce energy costs for UK manufacturers, which will make them more competitive on an international scale as prices could be reduced.
No government intervention is needed if manufacturers are investing in ways to reduce their own energy costs.
EVALUATION: There's costs involved for investing into green technologies and some of these costs may weigh out the long term cost savings, so UK manufacturers may decide to leave or some may deter from moving manufacturing to the UK.

Evaluation

Competitiveness of a country can be defined in many different ways, e.g. through energy costs, location or value added. In the UK, while energy costs are high, we are still seeing a trend of re-shoring of manufacturing back to the UK. However, rising energy costs will deter manufacturers that are energy intensive because the costs of energy will weigh out the costs of transportation or tariff costs, if the country is not part of the EU for example. A EEF survey found that energy prices and green taxes are worrying industry more than other issues, which means that businesses will reconsider their location if costs begin to rise to high. UK manufacturing will improve over time with the trend of re-shoring and other competitive advantages, however the competitiveness will not significantly improve unless substantial government actions is taken because rising energy prices happen to be the biggest concern to manufacturers, especially energy intensive. So it will deter manufacturers from moving production to the UK or even force current UK manufacturers abroad.

Get Revising

Section A: Energy Costs - Do you agree that the competitiveness of UK manufacturing will not improve significantly unless substantial government action is taken to reduce energy costs?