For the UK, and Scotland in particular, foreign investment has become an essential source of production, employment and income in both manufacturing and service sectors.

University Degree Business and Administrative studies

BRIAN MCKEOWN ECONOMICS OUTCOME 3 BUSINESS ADMIN

QUESTION 1

For the UK, and Scotland in particular, foreign investment has become an essential source of production, employment and income in both manufacturing and service sectors. It is no exaggeration that for some regions, inward investment flows have been significant in reversing relative economic decline and contributing renewed hope for increasing employment and living standards in depressed areas. It has created new employment and protected “at risk” jobs. Many of the new jobs have been full-time, offering above average levels of pay. The third benefit focuses on the supply-side of the regional economy. There is evidence that foreign investment boosts average productivity – especially when new plants are capital-intensive, using the latest technology and effective management techniques and labour practices. Also, factors such as this one above affect whom the voting public vote for in general elections. If there are no improvements in employment the public soon lose confidence and want a change of leader. The Government also pay out heavily to local people who cant gain employment, thus they are losing millions of pounds in benefit cash and where there are high unemployment levels, there are also high crime levels as people soon turn to crime to help pay for their next meal or rent. This affects the social area in which people live in.

QUESTION 2

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QUESTION 2

Companies like Chunghwa came to Scotland in the mid 1990s, creating several hundred jobs and promising many more. Chunghwa was a flagship inward investment project and, in the days of government grants, cash incentives wooed the firm to Scotland. Inward Investment grants are often paid in stages, with each stage being triggered if a company takes on more staff. In particular, Scottish utilities have played a major role in helping to attract inward investment to Scotland. There is no doubt that the quality of infrastructure on offer to foreign companies is a major factor in deciding whether or not to locate in Scotland. This has played a function in attracting major inward investors such as Chunghwa and the expansion of other operations in Scotland. Another factor that will affect the placement of big companies would be the promise of huge pools of workers that are available to employ and they will be offered land to invest in this country.

QUESTION 3

The establishment of foreign companies will have both positive and negative effects on local businesses and the local people. Some of the advantages of foreign investment on local businesses are with more employees in factories and more flying visits by top businessmen, the areas’ economy should rise significantly as more people will spend more money on things such as hotels, car rental or food services. The local business will also benefit due to the inward investors reputation. If the company is world famous there will be more attention paid to the businesses in that area which should generate money for them. The negative thing about these massive companies is that they may take away your base of customers or employees, which will harm the way a business is operated. Another disadvantage of foreign investors is that the profits of the company go back to the companies’ original country. This means that less money will be getting shared throughout the local economy. The advantages on local people are that they will gain employment in these companies with more than satisfactory wages. In some occasions the wages can be sky high. The town may be a competitive investment location with an adaptable, well educated and highly motivated workforce that will boost the qualifications of many townsfolk. The jobs that are provided may well prove to be secure for at least 4 years with training available should anyone require it. The disadvantages of this, however, are that as these companies may leave the country if there is a downturn in profits, the local people will have no jobs and will have to leave the area to find more employment. The people would also have learned a lot of new skills and these may well be put to bad use in a non-qualified job or boring job. It would be a waste of valuable resources to local companies who like your qualifications but will be unable to hire you.