Effects of Globalisation on the UK Economy
Some of the effects of globalisation on the UK economy
- Comparative advantage. UK firms can benefit from specialising in goods where they have a comparative advantage. This will also lead to lower prices for consumers. see: comparative advantage
- Shifting sectors Globalisation will lead to a shift in the sectors of the economy. For example the UK no longer has a comparative advantage in many manufacturing industries, Developing countries now have an advantage due to lower labour costs. This process can lead to temporary structural unemployment. But these effects can be offset by specialisation in other areas e.g. in Financial and insurance services.
- Increased competition. Globalisation means that domestic monopolies will now face more international competition. This will help reduce costs and prices for firms.
- Migration. Globalisation makes it easier for migrants to enter and work in the UK. This can help the UK fill job vacancies. However, it can also place greater stress on UK housing and public services because of the net migration of people into the UK.
- Global economic cycle. The UK is more affected by the global economic cycle. For example, a deep recession in the EU will affect the UK, because we rely on EU to export many goods. The global credit crunch had a very damaging impact on UK economy because we are affected by financial crisis in other countries.
