ESSAY 4

Essay 4

Essay 4

Question 1

The U.K. economy has grown for eight consecutive years. Prospects for continued growth are strong and real GDP growth is expected to rise above 2 percent in 2001 despite the global economic slowdown(Barrell, 2006, pp.75).

Role of Small Firms to the UK economy

Small Firms are described by the UK Companies Act as meeting 02 of the following criteria:

•Having net assets of less than £5.6m

•Having a turnover of less than £11.2m

•Employing Two-Hundred and Fifty people or less; (Barrell, 2006, pp.75).

SMEs play a very important role in the UK economy, supplying new ideas, services, products and careers. The UK's 3.7 million SMEs account for about 40% of our GDP and have an annual turnover of 01 trillion pounds. Employing over 12 million people in the UK, they also account for 85% of the 2.3 million extra jobs created by new businesses in the private sector between 1995-99 and more than 50% of the 3.5 million jobs gained from expansion over the same period(Stiglitz, 2003, pp.22).

All of the one hundred largest U.S. companies have established operations in the U.K. The U.K. attracts over 20% of global inward investment destined for Europe, and nearly 40% of investment projects from the Far East and the United States.

The services sector, including banking, insurance and investment management accounts for almost 70% of the UK's GDP. Britain's telecommunications sector is among the most liberal in Europe, providing opportunities for innovative services and service providers. Broadband is in the process of being rolled out across the country(Barrell, 2006, pp.75).

The British economy is market-driven, with independent regulatory bodies supervising some sectors where the general public is affected including the telecommunications sector. The recent passing of the U.K. digital signature and data protection regulations are expected to accelerate the use of the Internet and e-commerce(Barrell, 2006, pp.75)..

The U.K. has no significant trade or investment barriers, or restrictions on the transfer of capital. The barriers that do exist are due to EU Directives and regulations. An EU common external tariff applies to all non-EU imports, and a local valued-added tax of 17.5 percent applies to most transactions including imports(Barrell, 2006, pp.75)..

Road and rail transportation and distribution in the U.K. needs capital investment for modernization and the government has planned significant capital injection over the next few years.

The UK telecommunications infrastructure is highly developed. The U.K. is extensively cabled and has ISDN bandwidth on demand. Digital TV will play a major role in bringing the Internet to non-PC users with half of the population expected to go digital by 2005. Due to the continued dominance of the traditional telecommunications carriers, the cost of local calls remains high. BT still retains an 85 percent share of the small business and home markets. The former state monopoly still dominates many market segments although competition is strongest in international voice and data traffic and mobile(Barrell, 2006, pp.75).

Its oldest competitor is Cable and Wireless. However, new entrants like wireless network carriers will ensure easier and cheaper connection to a choice of networks, including mobile Internet ...