ECONOMICS

International Trade and Investment patterns



International Trade and Investment patterns

Introduction

The United Kingdom is the 7th global economy in 2011, with a Gross Domestic Product of 2481 billion, behind the United States, China, Japan, Germany, France and Brazil. The ranking of United Kingdom in terms of GDP in PPP is the 8th country in 2011. The strength of the country is due in part to its strong banks and its financial centre, the City, who is with Wall Street one of the two most important financial centres in the world. This economic power has some signs of weakness: the lack of balance of payments is high; the inequality of income is slightly higher than in the rest of the European Union (UK Trade & Investment, et.al, 2010).

The objective of this paper is to analyse the potential opportunities and costs for companies based in the UK in outsourcing their operations to countries in the enlarged European Union. Secondly, defining the roles and impact of UK membership on its economy of the World Bank, World Trade Organisation, and International Monetary Fund, and explaining the currency risks facing UK companies with relation to global exchange rates as a major exporter and major importer.

Potential opportunities and costs for companies based in the United Kingdom

There are various Multinational Corporation in United Kingdom, who have outsourced there operations in the European Union countries. There are potential coast and opportunities associated with this experience. Sometimes it is difficult to determine whether an entity is a multi-national, as is often the case that corporations do not communicate clearly, whether they belong to the foreign investor (Willcocks, et.al, 2010). For example, many people are not aware of the fact that Nestle, the world famous chocolate maker, is a Swiss, Canadian Northern Telecom, and Ford Motor has in its portfolio Jaguar - located in the UK. Foreign direct investment (FDI) means having the right of ownership and control of the foreign assets of the company. In practice, this is equivalent to a partial or full control over the company from abroad. Foreign direct investment and corporate capital investment rather can take various forms. One way is to buy a company already operating. For example, Santander Central Hispano, the largest Spanish lender bought Abbey National of the United Kingdom in order to improve its financial performance (Willcocks, et.al, 2010). Instead of assuming the activity itself, Banco Santander entered the UK financial market through FDI.

The cost and opportunities associated with outsourcing the large amount of human capital from EU zone has helped UK in boosting their economy by means of cutting cost in labour market. Other potential benefits are that some of the biggest and most popular multinational corporations of UK make millions of dollars a year by selling abroad. For example, in the European Union, companies in smaller economies need to expand the scope of their operations outside the country. This explains why 60% of the assets of the Royal Dutch / Shell 's and up to 75% of BP's assets ...