• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

In this report, I will be addressing the implications of the European monetary union and the problems Zeus will have in developing their market in Europe.

Extracts from this document...

Introduction

In this report, I will be addressing the implications of the European monetary union and the problems Zeus will have in developing their market in Europe. The UK and EMU When the UK decided not to join the European monetary union (EMU) in 1999, it affected UK businesses, especially those who trade within the EU. Does it matter whether sterling is in or out? For many UK Businesses, trading within the EU has become more competitive. After the introduction of the Euro, an Italian company for example, competing for a German companies business could cut 3% of costs due to their common currency, making it harder for UK business to compete. Currently UK businesses are paying �3bn per year in exchange rates, which hit small firms like Zeus the hardest. Advantages By joining the single currency, British businesses will benefit from a fixed exchange rate allowing businesses to plan and budget for future activities more accurately. Fixed exchange rates will deliver stability and increase confidence that will lead to more investment and jobs. By staying out of the Euro Britain will be at a disadvantage to competitors in the Eurozone who already trade with each other using the same currency. The development of free trade has contributed enormously to the economic prosperity across the EU, with the strong position of the wealthier nations and helping to bring the poorer nations more stability and economic success. The introduction of a single currency removes one of the final barriers to free trade i.e. the transaction costs and the uncertainty involved in currency conversion. ...read more.

Middle

Lower Borrowing Costs It's axiomatic with a single currency and single central bank that there will be a single interest rate. Banks will lend in Euros and enterprises will be able to borrow from outside their countries without incurring the risk of exchange rates, reducing borrowings costs. Cost savings may be greatest in countries where Euro interest rates fall below previous rates. The introduction of the Euro should favour the development of new financing methods. Overall, firms should have more choice and flexibility in raising finance and, in many cases, will face lower costs. How This Effects Zeus All these costs are going to affect Zeus and it might be a good idea for Zeus to look into these costs now, if they want to stay trading in years to come. Moving Production Many multi-national companies have expressed misgivings of Britain staying out of the Euro and state it could affect investments in British jobs. Companies want to know the value of the goods they sell from the UK will not decrease due to fluctuations in the exchange rate between Britain and the European countries and the cost of British labour will not rise significantly due to a strengthening pound. However, American, Asian and other foreign companies favour the UK as a base for their European operations because of factors such as culture, language, a de-regulated, business friendly environment, and low levels of taxation and corruption. EMU entry could reduce the cost of capital for UK firms if long-term interest rates fell within the EU and if membership of a larger financial market reduced the cost of finance. ...read more.

Conclusion

It could be argued that by joining the EMU the UK would lose its economic and political sovereignty; something the UK is not currently ready to give up for the euro and its benefits. To protect their own interests, countries can restrict imports by putting limitations, subsidies, quota or import duties to imports to protect industries. But this does nothing to protract free trade within the EU. Free trade was developed to increase political and economic stability within the EU. How This Effects Zeus Businesses like Zeus will need to consider political implications. Zeus will benefit from the movement of free trade within the EU, and the low taxation within the UK for businesses, however there are other political issues that Zeus will need to consider whether they stay in the UK or move into Europe. These are; o Social policies ~ health and safety standards, holiday/sick pay, working time directive, working conditions etc. o Environmental requirements ~ such as noise and pollution levels, safety fittings etc. o Technological ~ does the technology meet business requirements? do the workforce know how to use the equipment? etc. Recommendation I would recommend that Zeus stay in the UK. When the 10 new countries join the EU, EMU will be affected and it would be well advised to consider in the future expanding into Poland as they are in the centre of the EU and have a highly skilled and are inexpensive workforce to employ. Currently it would beneficial for Zeus to stay in the UK due to the government's objective to build a stronger economy. I would recommend that Zeus seriously look into moving or expansion into Europe and see how this mirrors with current and demand. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level UK, European & Global Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level UK, European & Global Economics essays

  1. Marked by a teacher

    International Business Strategy - Case Study on Unilever

    4 star(s)

    Previously, it used to report an annual growth rate of between 8% and 9%. Unilever has a personal care division that does most of its sales. The sales are also mostly done in emerging markets. This division has knowledge of how to discover and penetrate into new markets.

  2. International entrepreneurship in Europe

    Regulatory institutions associated with new listings on the country's stock exchange. Per capita GDP explained basic forms of entrepreneurship but, contrary to expectations, the country's unemployment rate associated only with the most advanced form of entrepreneurship. This article more concentrates on the weakness of international entrepreneurship such as unemployment, economic policy.

  1. Compare and contrast the levels of economic development in the regions of Europe and ...

    transport, sales and anything that offers someone a service. The percentage of people employed in these different sectors can be used to suggest how developed a country is. If a continent like Africa has most people in the primary sector then they are likely to be a less developed country.

  2. This paper investigates an evidence to support the HOV model by carrying out a ...

    (Leamer, 1980. 'The Leontief Paradox reconsidered', Journal of Political Economy, 88: 495-503) Factor content studies since then increasingly tended to be multi-country studies based on the Heckscher-Ohlin-Vanek (HOV) theorem equating factors embodied in net trade to excess factor endowments. Empirical HOV studies used impressive data sets on exports, imports, factor endowments and technology for a large number of countries.

  1. Why has GDP growth been so slow in Somalia?

    Population density is low in Somalia, with 63% of the population living in rural areas. With geographic dispersion like this our otherwise ordinary country has a risk of conflict of around 50% whereas with Singapore-like concentration its risk falls to around 3%43.

  2. Where does the World Trade Organisation fit in the overall scheme of international public ...

    * Rule-making: Clarifying and improving WTO rules on anti-dumping procedures, subsidies and countervailing measures, regional trade agreements and dispute settlement. * Developing country issues: Longer transition periods, improved technical assistance and other forms of "capacity building" to help with implementation of Uruguay Round agreements.

  1. Environmental Economics HSC Notes

    Climate Change * Several economists have linked rising emissions with increasing per capita incomes and growth in the world population over time. As standards of living improve, greater demands are being placed on limited natural resources to satisfy the world's energy and food needs.

  2. Infation HSC Notes

    producers and consumers change spending and investment decisions to minimise effects of inflation, e.g. buying assets instead of investment. Investment is discourages as businesses are uncertain about future price and costs hence ? levels. * Low inflation removes distortion to investment and savings decisions.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work