Explain the impact of foreign multinational enterprises on the British economy?

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Explain the impact of foreign multinational enterprises on the British economy?

        Britain’s position as the birth place of the industrial revolution in the late 18th century gave it a unique importance in the world economic system (Jones, 1996). Britain also had a geographical advantage which enabled access for multinationals to other markets. There were many corporations which established production bases in Britain from the 1850s onwards. The first of these the Colt gun manufacturing corporation and the North British Rubber Company which established its first base in Britain in 1853 and 1868 respectively (Jones, 1988). Although they did not continue to manufacturing for very long it did pave the way for further FDI in Britain. MNCs had a considerable impact on the British economy, be it positive or negative. The main sector that FDI has shaped over the years has been manufacturing. In terms of industries, foreign MNC have been particularly influential in electrical equipment before 1914 (Jones, 1988). Also the motor car industry was dominated mainly by companies such as Ford until the 1920s and by 1939 about a quarter of British production was controlled by Ford and Vauxhall (Jones, 1988). New technologies, management and stock control have been the main factors which have been shaped by MNCs.

        Multinational corporations in Britain provided much employment to the British population. By 1932 manufacturing subsidiaries of US MNCs provided employment for around 65000 people and by the early 1960s this number rose to around 450000 (Jones, 1996). Even the retail MNCs such as Woolworths became the largest employer in the retail sector employing over 60000 people by 1961 (Godley, 2003).The British government attempted to control where MNCs could set up manufacturing bases in order to distribute employment equally. This was especially true in the case of investment outside of the South East and London which most MNCs favoured (Chick, 1990). MNCs were encouraged to set up in areas of high unemployment such as Scotland and the Midlands and many Germans MNCs before and after the First World War favoured these regions (Chick, 1990). However, MNCs did not just create job directly but also indirectly in the form of ancillary firms, suppliers and subcontractors (Jones, 1988). This was particularly true in the case of the car industry which would provide parts which would be cheaper to buy rather than produce by the large car manufacturers (Jones, 1996).

        MNCs might have provided much employment in Britain but the quality of that employment must also be taken into account (Jones, 1996). Foreign companies tend to place nationals of their country of origin in higher management positions, however this varied between companies (Jones, 1996). This could have potentially limited the possible ‘spin off’ effects of managerial techniques (Jones, 1988). However by the interwar years British management in US subsidiaries was not uncommon; perhaps due to cultural similarities and the common language (Jones, 1996). For example many US MNCs such as Gillette employed only British staff (Jones, 1988).  Foreign MNC also tended to use differing conditions of employment in Britain which is commonplace even to this day (Jones, 1988). Employers associations were often shunned and trade unions ignored. This seriously undermined worker and business representation and often left trade unions and employers associations weakened by the lack of participation by MNCs (LivingLogic AG, 2000-2009). Huge chunks of the working population were not represented, although now this has changed as in house procedures have become more commonplace with advent of more advanced HR procedures (LivingLogic AG, 2000-2009).

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        A significant ramification of MNCs presence within Britain was the transfer of technology and managerial skills. This is particularly important as technological advances play a serious role in the economic growth of a country especially Britain (Jones, 1996). Although Britain was the birthplace of the industrial revolution its competitiveness was slowly dwindling due to lack of investment and innovation (Jones, 1996). In the case of transfer of management skills, companies such as Ford, introduced line production and Kodak, which were famed for their spending on research, were companies which changed the landscape of management in Britain (Jones, 1988). US MNCs ...

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