A2 Business Studies Unit 4 Supply Side Policies Supply Side Policy Possible Business Impact Evaluation Encourage new business This will create more Any policy to assist new start-ups to create new competition for existing business start-ups will enterprises. firms. only be really successful if For example, the Successful new the whole economy is government finances businesses may demand expanding and not in business link website which for products from downturn/recession. provides useful advice and existing firms, details of support for new increasing output and business start-ups. jobs. Expand the university UK businesses should Such policies take several courses to increase the benefit from better years to have much proportion of the working qualified staff who impact. population with specialist should be more Other countries, e.g. and flexible skills. productive. China, are expanding UK firms should be able higher education to compete effectively provision even faster than in the knowledge based the UK. global markets. Allow increased immigration This will increase the Increased congestion into the UK total labour supply caused by increased For example, in 2007 net available to UK firms. population – may push migration into the UK Increased labour supply wages down. reached 240,000. helps to keep wage rises down. Skills shortages have been reduced. Encourage multi-national Creates more UK based firms might be investment in the UK. competition for UK forced out of business by based companies-may competition. For example, Honda’s make them more Foreign companies may Swindon plant has been efficient. use foreign managers and expanded with government More jobs increases key workers so impact on support. incomes and this will UK job market could be lead to increased limited demand and output in the economy. Reduce direct tax rates such Should encourage Other countries have as income tax and increased incentives for much lower direct tax corporation tax. firms to invest for the rates in the UK so the UK’s future and for relative competitiveness employees to work. may not be increased greatly. Other taxes may have to be increased to finance this policy e.g. VAT
A2 Business Studies Unit 4 Supply Side Policies Supply Side Policy Possible Business Impact Evaluation Encourage new business start-ups to create new enterprises. For example, the government finances business link website which provides useful advice and details of support for new business start-ups. This will create more competition for existing firms. Successful new businesses may demand for products from existing firms, increasing output and jobs. Any policy to assist new business start-ups will only be really successful if the whole economy is expanding and not in downturn/recession. Expand the university courses to increase the proportion of the working population with specialist and flexible skills. UK businesses should benefit from better qualified staff who should be more productive. UK firms should be able to compete effectively in the knowledge based global markets. Such policies take several years to have much impact. Other countries, e.g. China, are expanding higher education provision even faster than the UK. Allow increased immigration into the UK For example, in 2007 net migration into the UK reached 240,000. This will increase the total labour supply available to UK firms. Increased labour supply helps to keep wage rises down. Skills shortages have been reduced. Increased congestion caused by increased population – may push wages down. Encourage multi-national investment in the UK. For example, Honda’s Swindon plant has been expanded with government support. Creates more competition for UK based companies-may make them more efficient. More jobs increases incomes and this will lead to increased demand and output in the economy. UK based firms might be forced out of business by competition. Foreign companies may use foreign managers and key workers so impact on UK job market could be limited Reduce direct tax rates such as income tax and corporation tax. Should encourage increased incentives for firms to invest for the future and for employees to work. Other countries have much lower direct tax rates in the UK so the UK’s relative competitiveness may not be increased greatly. Other taxes may have to be increased to finance this policy e.g. VAT
a2_business_studies_unit_4_supply_side_policies_teacher_version.docx