You will prepare and submit a term paper on The UK Department of Trade and Industry. Your paper should be a minimum of 1500 words in length. The free movement of goods, services, capital, and labor which resulted from the Single Market Programme meant that the member state would be constrained from imposing increases in taxes and regulation which would surely reduce benefits due to increasing domestic production costs.

To facilitate further trade, the European Union embarked on a venture of establishing a single currency for its members. The result of the EU monetary union was the euro. This currency is currently used by Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. Monaco, San Marino while the Vatican City is licensed to issue and use the euro (UK DTI).

It would be the interest of this paper to explore whether this move by the UK affected its foreign direct investments economy due to its refraining from a supposedly beneficial single currency. It will also delve, to a limited degree, in the effects of EU enlargement in the UK’s FDI.

Business Aversion: The Case for Toyota and Nissan

In the year 2000, the United Kingdom was threatened with pullouts from major industry players. Industrialists, one after the other, have warned that unless the UK joins Euroland, they will be forced to move their operations out of the country.

One of the most prominent of this pro-Euro group is the Nissan Motor Company (UK) which manufactures automobiles from its plant in Sunderland. In April 2000, John Cushnaghan, managing director of Nissan (UK) announced that the high value of the pound was imposing an “unsupportable burden” brought about by exchange rates fluctuations. By May of the same year, the company claimed the strength of the Sterling against the Euro necessitated the need to cut costs by 30 percent. This loss, according to them, could force the company to transfer the production of the next generation of the Micra to be built in French and Spanish Factories transferring a 150 million investment (North, 2005).

Another case would be that of the Toyota Motor Manufacturing (UK) LTD which required its British suppliers to use euro for its financial transactions with the company. The move was brought about by the 1999 operating loss in British operations (BBC, 2000). The requirement, Toyota claims, would reduce the risk to the company that it could lose money when converting euros to sterling in order to pay British suppliers (CNN, 2000). Toyota (UK) has a passenger car plant in Derbyshire producing Avensis and Corolla with an initial investment of 1.1billion. It also has an Engine Plant in North Wales with an initial investment of 400m. (Toyota Online, 2006)

Toyota has also expressed its propensity to shop around in euro-friendly countries for cheaper goods if the pound remained high. Yoshio Ishizaka, a senior managing director for Toyota, said his& would strive to reduce costs by buying more from suppliers in pro-euro countries.

Leave a Reply

Your email address will not be published. Required fields are marked *