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How competitive is the UK economy?

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Introduction

How competitive is the UK economy? When talking about competitiveness we are talking about comparative advantage when comparing the UK with the rest of the world. Comparative advantage of one country over another occurs when a certain country can produce a good at a lower opportunity cost i.e. if it has to forgo less of other goods in order to produce it. There are certain goods and services in which Britain does have a certain comparative advantage and does it is favourable to trade with other countries on certain terms. An example of this is in the production of Heavy duty manufacturing building equipment in particular diggers by the British company JCB. This market is a duopoly almost with JCB and the American firm Caterpillar having a very large share of the world market. ...read more.

Middle

This could be down to the high exchange rate in the UK. This will mean that our exports will be more expensive than other competitors and as a result more people will buy the goods from our competitors rather than us. A clear example of this is the exchange rate between the � and the $ with �1 buying me $1.67 dollars (Tuesday's price). At certain times during the last year �1 could buy me $1.50 dollars, which was when the pound was weak and this greatly helped exporters sell products to the US because they were lower in cost. However this mainly applies to low technology goods in which the cost is the most important factor. Nonetheless there are other certain industries where the exchange rate does not matter as much, like the market for luxury cars like Rolls Royce, Bentley and TVR. ...read more.

Conclusion

The human resources in effect are of a very high standard, which are brought about by the huge sums of money that the government has invested into education and training. This is something that Britain does have a competitive edge in. There is also good research and development within the UK by certain UK businesses which is good, but still a bit worrying because only a few UK firms spend close to the amounts needed to maintain their position as world leaders e.g. GSK and Vodafone. The vast majority of British firms are not investing enough in the future of their businesses and as a result are being leapfrogged by technology from the Asian Tiger economies. In conclusion I feel that Britain is quite a competitive country in certain aspects of the world economy, however more should be done to minimise labour costs as well as encourage far greater sums to be invested in R&D. ...read more.

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