Factors Influencing Location.

Factors Influencing Location

Sometimes firms have to decide where to build a new factory. It is important to consider the different costs of different locations. Businessmen take into account the natural and acquired advantages of a particular area.

Natural Advantages

An area may have a water source for waste disposal or cooling.
An area may be flat or isolated and attract dangerous or unpleasant industries.
An area may have the right climate for the production of a good.
Weight-losing industries use bulky raw materials to produce a compact finished product and tend to locate near the source of raw materials.

Acquired Advantages

An area may have developed a number of advantages as the result of firms locating in the region. These are called external economies of scale.

Weight-gaining industries use compact raw materials to produce a bulky finished product and tend to locate near the major market for the good.

Footloose Industries

A footloose industry gains no particular advantage from any one location usually because transport costs are the same for each site.

Industrial inertia occurs when a firm continues to expand on its existing site even though there are cheaper alternatives.

Structure of UK Industry

Regional Structure of UK Industry

The localisation of industry occurs when there is a concentration of producers of a particular product in one area. See Table 6.1

Table 6.1 Structure of UK industry by region

Recent Changes in ...

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Weight-gaining industries use compact raw materials to produce a bulky finished product and tend to locate near the major market for the good.

Footloose Industries

A footloose industry gains no particular advantage from any one location usually because transport costs are the same for each site.

Industrial inertia occurs when a firm continues to expand on its existing site even though there are cheaper alternatives.

Structure of UK Industry

Regional Structure of UK Industry

The localisation of industry occurs when there is a concentration of producers of a particular product in one area. See Table 6.1

Table 6.1 Structure of UK industry by region

Recent Changes in the Structure of UK Industry

Declining industries. Since 1973 manufacturing output has been falling by 2 per cent each year. The shipbuilding, textile and motor vehicle industries have suffered particularly.
Expanding industries. The energy crisis and discovery of North Sea oil has increased the output of the mining industry, dramatically. However, the collapse of oil prices in 1986 may see a reversal of this trend. Service industries including banking, communications and insurance have expanded rapidly.

Regional Policy

Regional Problem

The regional problem refers to the uneven spread of living standards between different regions of the UK. Areas with below-average income per person and high unemployment are depressed regions. They usually have a large concentration of declining industries and are remote from the major markets. New firms prefer to locate in the expanding South East.

The gap between the prosperous South East and the rest of the country is growing. New firms are attracted to the South East by the extensive motorway and air links and the availability of workers familiar with the new technologies. For example, computer-based, high-technology firms have located along the M4 motorway corridor west of London.

Government Regional Policy

Footloose firms can be attracted to depressed regions by government grants. The government offers:

Urban development loan.
Regional selective assistance. Firms locating in intermediate development areas may receive a grant towards machinery and training costs.
Enterprise Zones. These are small areas situated mainly in inner-city areas where rate and rent allowances are provided by the government.