However, the increase in the amount of skilled labour could be a threat to workers in the UK. Research suggests that a solicitor with three years experience can expect a salary of over £70,000 in the UK, compared to just £5,000 for English speaking solicitors in Poland. This could lead to professionals from all over the EU bombarding the UK with job applications, and could also influence many companies to re-locate in less affluent EU member countries to cut labour and production costs, which would result in high unemployment in the UK.
There could be more attractive opportunities for UK firms to invest in the new member states as there will be lower risk associated with them compared to other emerging markets. Accession to full EU membership should further reduce risk profiles and clarify the other reasons why the new member states are currently attractive to investors:
- Political and economic stability, and a skilled and educated
workforce, relative to other emerging markets;
- Close geographical proximity, and free access, to EU markets.
- Favorable investment climates - most countries have set up schemes
to attract investors (although the terms of these are being modified to
meet the requirements of EU membership) and most have relatively low levels of regulation post-transition.
There could be more opportunities for UK firms to bid for infrastructure
projects, which could flow from structural fund awards, although a higher
proportion of projects are likely to be financed by the private sector,
national governments or development banks.
Trade opportunities have increased due to the new member states having tariff-free access to EU markets for most products. Furthermore, the enlargement has allowed more investment opportunities to arise. The new member countries’ economic growth has been growing at a very rapid rate. These effects have the potential to raise the productive capacity of the EU, which leads to higher productivity and gross domestic product (GDP) growth. (Table 2)
In antithesis, the UK may put in more than it will get out which would make it a net contributor to the EU. The rapid growth rate of the new members could slow or even send the British economy into decline.
However, in contrast, a long-term issue is whether the new member states will be able to close gaps on quality and productivity with the existing member states. If they do catch up, then this will increase competition between companies in the new member states.
In addition, the UK is likely to expand into the new member countries, as many UK businesses will look to move into the new EU member countries to cut costs in labour and raw materials, and furthermore increase productivity. As well as this, it will be cheaper to export goods back to the UK with the removal of trade barriers, which will consequently increase profit.
The expansion could also result in a decline in quality of products, particularly in agriculture. This is because; many of the new member states may not currently ensure produce is up to EU regulation quality and standard. The change cannot just happen overnight, and takes a good deal of time to enforce, therefore agricultural produce could be exported all over the EU but wouldn’t be of the same quality as current EU countries produce.
Finally, the main beneficial effects on the UK of the EU enlargement are, increased trade and investment opportunities, a larger skilled labour market, and political and economic stability. However, the larger labour market could also be a drawback to workers in the UK, and so could the economic growth of the new member countries being too quick to be efficient and productive.
In conclusion, I believe the enlargement of the EU should turn out to be a good thing for the UK as there will be increased trade and investment opportunities, which will in turn improve the British economy. The new member states’ economies are growing at a rapid rate, which will influence further growth in UK exports of goods and services. In addition, the larger skilled labour market gives many UK companies the opportunity to look for cheaper skilled labour in new member states, which would lower costs, and is likely to improve productivity and efficiency. In addition, the UK economy should benefit due to increased competition, which would result in lower prices and more consumer spending.
The new member states are not large countries or rich, although they have good growth prospects. The UK’s trade with them is currently small (about 2% of total trade) but is growing faster than our trade with the world as a whole, reflecting that many barriers to trade have already been removed in preparation for accession.
The continued economic growth of the new member states is very dependent on the momentum for economic reform and liberalisation being maintained, sound macro-economic policy, and the effective use of structural funds in ways, which are supportive of the reform agenda. These in turn will sustain the trend for increased trade and investment in the new member states.
1101 Words
Bibliography
Nuffield Economics and Business Textbook
DTI - Trade and Investment Implications of the EU
AS Business & Economics Portfolio
David Staley
Candidate Number: 9597
20th December 2004
