http://www.tutor2u.net/blog/index.php/economics/ en tutor2u.net Copyright 2012 2012-02-12T07:41:03+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-can-china-stay-competitive http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-can-china-stay-competitive#When:18:07:29Z This new five minute video report from the Financial Times is excellent on the competitive pressures facing many manufacturing businesses located in southern China. Wages are rising quickly and some manufacturing businesses have already moved either to lower-cost locations within the Chinese economy or to other countries such as Bangladesh and Indonesia. But there are alternative approaches and this video emphasises the decision that some manufacturers have made to stay put but instead to move up the value chain and produce higher-end, higher-priced products for advanced western markets. Businesses are reluctant to move factories and sacrifice the human capital that has been accumulated over in some cases over thirty years. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Emerging Economies, China Economy, Business Economics, Management Issues, Economic Growth, Global Economy, Manufacturing Industry, Market Equilibrium and Price, Nature of Supply, 2012-01-25T18:07:29+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-3d-printing-and-a-manufacturing-revolution http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-3d-printing-and-a-manufacturing-revolution#When:16:56:38Z Additive manufacturing or 3D printing is an emerging technology that takes product design data which provides a geometric representation of a product such as a pen and that data is then sent over to a machine that allows products to be manufactured ‘on the spot’ typically using additive materials in liquid or powder format. This TED talk from Lisa Harouni (co-founder of Digital Forming) looks at examples of intricately designed products made using this new and increasingly affordable manufacturing technology. 3D machines can build structures, build replacement parts and parts within parts - the detailed resolution possible is incredible. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Economies of Scale, Management Issues, Cycles and Shocks, Aggregate Supply, Economic Growth, Economics of Technology, Environmental Economics, Manufacturing Industry, Market Equilibrium and Price, Nature of Supply, Teaching of Economics, 2012-01-23T16:56:38+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-exporting-to-the-booming-chinese-economy http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-exporting-to-the-booming-chinese-economy#When:14:47:32Z Before you read this blog please have a look at another blog written by our good friend Mark Johnston from New Zealand. Students of China and the US economy will find it fascinating! There are good grounds for no longer calling China an emerging economy - it has arrived! The multiple significance of the rapidly-growing Chinese economy is plain for all to see but for Britain, only a small percentage of our exports of goods and services go there and this must change if Britain is to fully engage with and benefit from the rising might of the Chinese consumer. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Balance of Payments, Emerging Economies, China Economy, Business Economics, Cycles and Shocks, Aggregate Demand, Economic Growth, Global Economy, International Trade, Macroeconomic Policies, Trade Policies, Manufacturing Industry, UK Economy, 2012-01-23T14:47:32+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/newsnight-on-rebalancing-the-uk-economy http://www.tutor2u.net/blog/index.php/economics/comments/newsnight-on-rebalancing-the-uk-economy#When:05:11:19Z Last night’s edition of Newsnight should be required viewing for all AS and A level economists - and it is a huge shame that it is only available on i-player for another 7 days. Introduced on the shock news that even Tesco is vulnerable to the downturn, it included reports from Andrew Verity looking at whether the British economy will ever wean itself off shopping and the City, and an excellent (and all-female!) discussion including Deborah Meaden and the FT’s Gillian Tett. Try challenging your students to watch and listen to this while noting down every aspect of the syllabus which is mentioned or referred to - that will keep them busy! There was also a debate between Employment Minister Chris Grayling and disability campaigner Sue Marsh about the government’s welfare reforms, defeated in the House of Lords the night before, and finally Tokyo correspondent Roland Buerk looking at Japanese economic stagnation of the late 1980s and 90s, to consider whether it was a “lost decade” and what could be learnt from it. A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Demand, Economic History, Economic Growth, Global Economy, Government Intervention, Macroeconomic Policies, Manufacturing Industry, OECD Economies, Japan Economy, Poverty and Inequality, Standard of Living, Teaching of Economics, UK Economy, Unemployment, 2012-01-13T05:11:19+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-does-manufacturing-matter http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-does-manufacturing-matter#When:14:16:52Z Vicky Pryce FRSA has a new article on the economic significance of manufacturing industry for UK economic renewal. It is available here from the January 2012 edition of the RSA Journal. In a related article Sir Christopher Frayling FRSA discusses the rise of the Maker Movement. Back in November 2011 Channel 4 news ran a special on the future for UK manufacturing here is a link to a related video AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, Business Economics, Management Issues, Manufacturing Industry, Teaching of Economics, UK Economy, Regional Economics, Unemployment, 2012-01-10T14:16:52+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-hope-bikes-a-commitment-to-excellence http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-hope-bikes-a-commitment-to-excellence#When:17:44:51Z Are you into your cycling? The huge expansion of interest in cycling in the UK from road racing through to BMX and mountain-biking has gone hand in hand with the fantastic success of British cyclists on the international stage. 2012 promises to be another strong year for the industry despite difficult economic conditions. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Management Issues, Economic Growth, Economics of Technology, International Trade, Manufacturing Industry, Teaching of Economics, Transport Economics, UK Economy, Regional Economics, 2011-11-30T17:44:51+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-does-uk-manufacturing-have-a-future http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-does-uk-manufacturing-have-a-future#When:11:11:47Z Here are links to two superb short reports on prospects for UK manufacturing as the British economy struggles to escape from recession and sluggish growth forecasts in 2011 and 2012. Both are from Channel 4 News that produced a special on the health of the manufacturing sector - excellent for evaluation and for some applied examples to build into essays. The links appear below AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Business Economics, Management Issues, Macroeconomic Policies, Supply-side policies, Manufacturing Industry, Teaching of Economics, UK Economy, Regional Economics, Unemployment, 2011-11-30T11:11:47+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-the-state-of-british-business http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-the-state-of-british-business#When:12:20:49Z How well is British business coping in the aftermath of recession and during a sluggish recovery? Are there signs of improvement or are there warning signs that the UK business sector is fragile and vulnerable as we head into 2012? Four AS macro students - James Richardson, Ludo Higgin, Joe Landman and Nick Russell collaborated on this excellent piece and searched for some revealing clues about the resilience of British businesses at this crucial stage of the economic cycle. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Business Economics, Macroeconomic Policies, Manufacturing Industry, Teaching of Economics, UK Economy, Recession Watch, Unemployment, 2011-11-13T12:20:49+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-richard-florida-on-the-great-reset http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-richard-florida-on-the-great-reset#When:10:16:03Z What changes are produced by great economic upheavals? The financial and economic crisis prompts a rethinking of the assumptions about how businesses succeed and how economies operate. In a recent edition of the Global Business programme on BBC radio 4, Peter Day met Richard Florida, a renowned economic geographer who has written a new book The Great Reset. Here are some of the notes I jotted down from the programme: AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Business Economics, Economic History, Economic Growth, Economics of Technology, Environmental Economics, Manufacturing Industry, Teaching of Economics, UK Economy, Regional Economics, 2011-11-05T10:16:03+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-is-the-sun-dipping-on-solar-subsidies http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-is-the-sun-dipping-on-solar-subsidies#When:18:35:34Z To promote the expansion of renewable energy sources, many governments have introduced subsidies for consumers who install solar panels. In April 2010, the Labour government introduced generous feed-in tariffs to encourage households to install solar photovoltaic systems. Anyone spending £13,000 up front to fit a system to their home was paid 41.3p per kilowatt hour (kWh) generated – enough to earn them a typical annual income of £900 a year in payments, on top of a £140-a-year saving in reduced electricity bills. The big six energy companies are required by law to pay householders who generate their own energy. It looks like the days of generous subsidies for solar panels are coming to an end and there is a rush on to install them before the feed-in-tariff system is changed. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, A2 Micro, AS Micro, Business Economics, Cost Benefit Analysis, Environmental Economics, GCSE Economics, Government Intervention, Subsidies, Market Failure, Externalities, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, 2011-10-27T18:35:34+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/can-the-invisible-hand-solve-africas-poverty http://www.tutor2u.net/blog/index.php/economics/comments/can-the-invisible-hand-solve-africas-poverty#When:21:51:10Z At last night’s Senior Economics Society at Oundle we had a riveting talk by Hywel Rees-Jones, Managing Director of CDC, which covered so many areas of the issues of development economics. The talk was entitled “Can the invisible hand solve poverty in Africa?” Whilst conceding that some of the statements were broad generalisations across a variegated continent, Hywel discussed some of the key issues facing Africa. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, AS Macro, Emerging Economies, African Economy, Development Economics, China Economy, Commodities Markets, Economic Growth, Environmental Economics, European Economy, Global Economy, Government Intervention, International Trade, Manufacturing Industry, OECD Economies, Teaching of Economics, 2011-10-13T21:51:10+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-science-cities-and-external-economies-of-scale http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-science-cities-and-external-economies-of-scale#When:12:14:59Z This feature article from the BBC web site is essentially about the vital importance of high-knowledge industries in sustaining competitiveness and growth in a globalising world. Europe lags behind many emerging countries in terms of the resources devoted to science and technology, research and development and creative industries in particular. But the article makes reference to the expansion of science cities - knowledge clusters that bring together higher education expertise and entrepreneurial zeal - their number continues to grow from California and Boston in the USA, Cambridge in the UK, Education City in Qatar, Science City in Zurich and Digital Media City in Seoul. All good examples to use of the commercial leverage from external economies of scale in high-tech industries. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Emerging Economies, Business Economics, Economies of Scale, Economic Growth, Economics of Technology, European Economy, Single Market, Global Economy, International Trade, Macroeconomic Policies, Supply-side policies, Manufacturing Industry, Teaching of Economics, UK Economy, 2011-09-29T12:14:59+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-cotton-prices-and-the-retail-price-of-clothing http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-cotton-prices-and-the-retail-price-of-clothing#When:10:51:00Z How does the world price of raw cotton affect the cost of buying new clothing on the high street and in the supermarkets? The answer is that the price of natural fibres is a key raw material into manufacturing garments and home furnishings. If prices rise, this increases the costs of production causing an inward shift of supply for clothing and furnishings at a given market price. The world price of cotton has been rising steeply in recent times. As our chart below shows, raw cotton prices are well down from their peak in the spring of 2011, but the index is still more than twice the level of two years ago. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Business Economics, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Price Mechanism in Action, Price Volatility, 2011-07-13T10:51:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-motorsport-valley-and-external-economies-of-scale http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-motorsport-valley-and-external-economies-of-scale#When:08:52:00Z The occasion of the 2011 British Grand Prix at Silverstone in Northamptonshire is an opportunity to showcase the extraordinary growth and success of the motorsport industry in the UK. It is a classic example of the benefits that can flow from external economies of scale, and also of the way in which genuine competitive advantage in the global economy can be built and nurtured. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Economies of Scale, Economic Growth, Economics of Technology, Manufacturing Industry, Transport Economics, 2011-07-12T08:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/evan-davis-made-in-britain-and-a-new-trade-data-tool-to-play-with http://www.tutor2u.net/blog/index.php/economics/comments/evan-davis-made-in-britain-and-a-new-trade-data-tool-to-play-with#When:06:52:00Z The first episode of a 3-part series, Made in Britain, was shown on BBC 2 last night, and was a really useful hour for economics (or business) students. It examined how and why Britain has lost thousands of manufacturing jobs over the last two or three decades in the low-value part of the sector, with some film of outsourcing shot in China as well as plenty of archive material from this country, but argued that the move to high-end, low scale manufacturing has become Britain’s area of comparative advantage in industrial manufacturing. This included Evan being taken for a test drive in the new McLaren sports car, which was clearly an amazing experience - watch the clip to see his reaction! And this surely emphasises the Economic Importance of Manufacturing to the UK economy - see below! Sadly this episode is not to be broadcast again, but is available on i-player for another 22 days and is thoroughly worth watching. I will certainly be setting the recording machine for the next two programmes, on Mondays at 9.00 on BBC2 - episode 2 is to focus on how innovation can help keep Britain ahead in the global economy. AS and A2 Specifications, AQA Economics Unit 4, A2 Macro, Balance of Payments, Commodities Markets, International Trade, Manufacturing Industry, Teaching of Economics, UK Economy, 2011-06-21T06:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-economic-importance-of-manufacturing http://www.tutor2u.net/blog/index.php/economics/comments/the-economic-importance-of-manufacturing#When:21:14:00Z I think Alan Sugar is a clown, he is about as comfortable with true entrepreneurship as Ryan Giggs is at a family wedding. His somewhat crass remarks about having never come across an engineer who has succeeded in business has prompted a wave of responses from the business community. Here is a selection of articles: And I have included an article by Luke Johnson which takes the Apprentice to bits and castigates it as a show that demonstrates that the BBC is not serious about real business. Manufacturing Industry, Teaching of Economics, 2011-06-20T21:14:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/do-you-agree-that-the-government-should-provide-support-to-the-uk-car-indus http://www.tutor2u.net/blog/index.php/economics/comments/do-you-agree-that-the-government-should-provide-support-to-the-uk-car-indus#When:09:25:00Z This is a fairly classic A2 macroeconomics question, and one that the European Automobile Manufacturers Association has been considering at their meeting in London last week. Their conclusion? That non-European governments should scale back assistance for their own automotive industries, but at the same time governments in Europe should support the industry’s efforts to cut car emissions. A2 Macro, Emerging Economies, Business Economics, Competitive Markets, European Economy, Government Intervention, Subsidies, Macroeconomic Policies, Supply-side policies, Manufacturing Industry, 2011-06-12T09:25:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-key-term-spare-capacity http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-key-term-spare-capacity#When:21:22:00Z Spare capacity measures the extent to which an industry, or economy is operating below the maximum sustainable level of production - there are spare factor resources of land, labour and capital. There are many measures of capacity utilisation including surveys of business activity, the estimated output gap and the rate of unemployment in the labour market. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Business Economics, Cycles and Shocks, Aggregate Supply, Economic Growth, Macroeconomic Policies, Manufacturing Industry, 2011-05-23T21:22:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/accessible-uk-budget-resource http://www.tutor2u.net/blog/index.php/economics/comments/accessible-uk-budget-resource#When:16:21:00Z It’s not always easy to navigate your way through the budget, with its mass of technical detail and complexity.  Not all of it is terribly interesting either (nor the manner of presentation). Government Intervention, Macroeconomic Policies, Manufacturing Industry, Oil and Gas, UK Economy, Unemployment, 2011-03-25T16:21:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/global-supply-chain-threatened-by-japanese-disaster http://www.tutor2u.net/blog/index.php/economics/comments/global-supply-chain-threatened-by-japanese-disaster#When:06:56:01Z One aspect of globalisation is that manufacturers source their supplies from around the world. This will depend on the comparative advantage those countries have developed in producing various types of components. Japan produces about 30% of the global output of ‘flash memory’ used in electronic cameras and smartphones, and about 15% of the DRAM memory used in PCs. If something happens to disrupt that supply chain, as is clearly the case after the horrific events in Japan, there will be global effects. AS and A2 Specifications, AQA Economics Unit 4, A2 Macro, Global Economy, International Trade, Manufacturing Industry, OECD Economies, Japan Economy, Teaching of Economics, 2011-03-16T06:56:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/patent-box-or-innovation-box-as-innovation-stimulant http://www.tutor2u.net/blog/index.php/economics/comments/patent-box-or-innovation-box-as-innovation-stimulant#When:19:54:00Z The UK coalition government does not yet have a growth strategy worth the name but they have invested plenty of capital in the idea of a Patent Box. This involves a lower corporation tax on profits drawn from patented products) and is a supply-side policy to make UK an attractive location for innovative industries. One proposal is that royalties and other profits from patented products and technologies would be taxed at just 10 per cent. But many economists argue that this is at best an ineffective way of lifting the amount of research and development in the British economy. They look instead to the Netherlands where an Innovation Box has had a significant impact - it reflects the view that patents are only a small part of the innovation process - you dont necessarily have to patent an idea to make small scale innovations commercially viable. Channel 4 news tonight visited Sandwich in Kent where the Pfizer research and development facility is set to close. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Supply, Economic Growth, Economics of Technology, Government Intervention, Subsidies, Macroeconomic Policies, Supply-side policies, Manufacturing Industry, Teaching of Economics, UK Economy, 2011-03-02T19:54:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/never-mind-plan-b-we-need-plan-v-for-the-uk-economy http://www.tutor2u.net/blog/index.php/economics/comments/never-mind-plan-b-we-need-plan-v-for-the-uk-economy#When:00:12:00Z George Osborne is convinced that the Coalition does not need a plan B. But for growth to be nurtured and sustained in the years ahead we need a Viagra-style boost to our competitiveness and capacity - Plan V. This was one of the main themes from a talk given by Professor John Van Reenen at a packed Hong Kong lecture theatre at the LSE (London) last night. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, A2 Macro, AS Macro, Business Economics, Management Issues, Economic Growth, Macroeconomic Policies, Supply-side policies, Manufacturing Industry, Teaching of Economics, UK Economy, 2011-02-18T00:12:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-solar-power-government-subsidies http://www.tutor2u.net/blog/index.php/economics/comments/economics-solar-power-government-subsidies#When:00:02:00Z A timely and relevant video here on the economics of the government feed-in-tariffs (or subsidies) for companies and individuals putting up solar panels on their roofs. Solar power is an industry booming with over 10,000 installations in the first six months since housing associations were given subsidies to install solar panels in many of their properties. The video looks at the costs of installment of a system and the electricity it generates and how much extra electricity is generated into the national grid. How important will solar power be in promoting energy independence? Peak solar output from the UK does not correspond with peak demand for electricity (from 5pm to 7pm on a winter’s evening). How many of the solar panels are made in the UK? Who really benefits from feed-in-tariffs? Rather like the CAP are the major commercial benefits skewed to large businesses willing to put up big-scale solar installations in empty fields? AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, A2 Micro, AS Micro, Business Economics, Cost Benefit Analysis, Environmental Economics, Government Intervention, Subsidies, Market Failure, Externalities, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, 2011-02-09T00:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/james-dyson-on-innovation http://www.tutor2u.net/blog/index.php/economics/comments/james-dyson-on-innovation#When:07:56:00Z This is a must read article for every student who wants to appreciate the impact of innovation on competitiveness and growth. Writing in the Business Guardian, James Dyson argues that “For me, the UK economy shouldn’t be built entirely on the City of London or the next digital fad. We need substance – patentable exports. They bring new money into our coffers. And what will generate economic growth is not just talk of spending cuts, but creating the right environment for research and invention.” Dyson is a strong supporter of tax credits and lower corporation tax for research and development projects and also for science and maths graduate teachers to be paid more. More here: Innovation: Britain’s other deficit Tories look to Dyson on hi-tech economy (BBC news video) AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Demand, Aggregate Supply, Economic Growth, Economics of Technology, Global Economy, Government Intervention, Macroeconomic Policies, Supply-side policies, Manufacturing Industry, OECD Economies, Teaching of Economics, UK Economy, 2011-02-01T07:56:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-qa-how-might-rising-food-prices-affect-food-retailers-and-manufac http://www.tutor2u.net/blog/index.php/economics/comments/economics-qa-how-might-rising-food-prices-affect-food-retailers-and-manufac#When:13:09:00Z Food retailers are service sector businesses selling food products to consumers. The leading retailers in the UK are Tesco, Sainsbury’s, Asda (Walmart) and the Co-Op/Somerfield. Although the food retail industry in the UK is dominated by a handful of national chains, there are many others including thousands of small-scale retailers. And discount retailers that have done well in recent years including Aldi and Lidl. Food manufacturers process foodstuffs into new products and they rely on buying raw materials from wholesalers. Good examples to use might be Nestle, Heinz and Sara Lee. The larger retailers manufacture some of their own-label foods although they may choose to out-source this to another manufacturer. And likewise, some food manufacturers have their own chain of retail stores or outlets - for example Gregg’s the Baker or Domino’s Pizza. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Business Economics, Commodities Markets, GCSE Economics, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Price Volatility, Teaching of Economics, UK Economy, 2011-01-16T13:09:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a-motorbiking-triumph http://www.tutor2u.net/blog/index.php/economics/comments/a-motorbiking-triumph#When:21:56:00Z Here is a product from over here that is doing really well over there! It is always positive to read of success stories from the UK manufacturing sector. This article from the Guardian highlights the success of the iconic motor bike bran Triumph in ousting the likes of Honda and Yamaha to rise to the summit of the market share rankings for new bikes sold in the UK. And sales are strong in the United States where Triumph is competing with Harley-Davidson. Students who read through the article ought to be able to glean two or three factors that lie behind Triumph building a competitive advantage in the market. Can they then come up with other ingredients in the mix that apparently makes Triumph competitive in price and non-price terms? More good background here: Triumph rides high as UK bestseller takes on Harley-Davidson (Guardian) Motorcycle Sales Not All Bad News says Motor Cycle Industry Association AS and A2 Specifications, AQA Economics Unit 1, AS Micro, Business Economics, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Transport Economics, UK Economy, 2011-01-13T21:56:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-qa-what-economic-factors-affect-the-demand-for-new-cars http://www.tutor2u.net/blog/index.php/economics/comments/economics-qa-what-economic-factors-affect-the-demand-for-new-cars#When:09:31:00Z The motor industry is one of the sectors whose fortunes seems to permeate nearly every part of the economy. Most of us know someone who works in the motor trade and changes in demand and production have sizeable effects not just on the industry itself but on many supply-chain businesses and economic activity in areas where car production is concentrated. In 2010 just over two million new cars were registered in the UK - a rise of 1.8% on the 2009 figure. The biggest single course of rising demand came from the fleet market which rose by over 10% in 2010, but demand for and spending on privately bought cars slipped following the end of the Car Scrappage Incentive Scheme. Crucially for the year ahead, the new car market is forecast to decline by 5% in 2011 to 1.93 million units - according to the Society of Motor Manufacturers and Traders “difficult market conditions continue.” So what are the main factors that affect the market demand for new cars? AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Business Economics, GCSE Economics, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Transport Economics, UK Economy, Regional Economics, 2011-01-09T09:31:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/manufacturing-growth-in-the-uk http://www.tutor2u.net/blog/index.php/economics/comments/manufacturing-growth-in-the-uk#When:13:19:00Z Sean O’Grady has a thoughtful and pertinent piece here in the Independent today on the challenges facing UK manufacturing industry as the British economy looks for new sources of growth. Crucially he focuses on advanced manufacturing which creates more value-added than traditional high volume textiles, processing and metal-bashing. “Advanced manufacturing” is more about research, innovation, design and software than sewing or metal-bashing, blurring the traditional border with the service sector…” Britain does have some world class manufacturing businesses but are they of sufficient size to compensate for the long-term decline in output, jobs and investment in traditional industries? For a positive slant on the future for UK manufacturing, this report from PWC published in the Spring of 2009 is a useful resource. “The new focus on climate change and greener supply chains opens up a whole range of new prospects for UK manufacturing, for example in the design and production of clean technologies and renewable energy generation.” AS and A2 Specifications, AQA Economics Unit 4, A2 Macro, Business Economics, Manufacturing Industry, UK Economy, 2010-12-30T13:19:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-a2-revision-where-next-for-the-uk-economy http://www.tutor2u.net/blog/index.php/economics/comments/as-a2-revision-where-next-for-the-uk-economy#When:06:44:00Z Students wanting to demonstrate up-to-date understanding of the UK economy should find this streamed revision presentation really useful.  It was delivered by Geoff at our AS & A2 Economics workshops in London & Manchester.  It provides a comprehensive coverage of recent developments in the UK economy and highlights some potential downsides and upsides as the economy attempts to sustain a recovery during 2010 and 2011. Has the era of macro economic stability been replaced by a new phase of macro economic uncertainty, slower growth and a recovery constrained by debt? Or are there grounds for being more optimistic about the near-term future for the British economy? Revision Presentation on the UK Economy AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR AS Economics Unit F582, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Capital Investment, Consumer Spending, Saving, Aggregate Supply, Economic Growth, Exchange Rates, Inflation and Deflation, International Trade, Macroeconomic Policies, Fiscal Policy, Monetary Policy, Supply-side policies, Trade Policies, Keynesian Economics, Manufacturing Industry, Monetarism, UK Economy, Recession Watch, 2010-05-02T06:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/end-of-the-road-for-the-car-scrappage-scheme http://www.tutor2u.net/blog/index.php/economics/comments/end-of-the-road-for-the-car-scrappage-scheme#When:18:48:00Z Today marks the end of the UK government’s car scrappage scheme. The scheme offered drivers of cars at least 10 years old £2,000 off the price of a new vehicle with half of the money is paid by the government and half by the carmaker in question. Over the course of the scheme is estimated that the scrappage initiative has been responsible for about a fifth of all new UK car registrations.  And there seems little doubt that the consumer subsidy has provided a shot in the arm for a car industry affected badly by the global financial crisis and subsequent recession. Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders is quoted as saying that it had provided a “much-needed stimulus for the UK motor industry”. A2 Micro, AS Micro, Business Economics, Cycles and Shocks, Aggregate Demand, Consumer Spending, Government Intervention, Subsidies, Macroeconomic Policies, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Teaching of Economics, OCR F585 Economics, Transport Economics, UK Economy, Credit Crunch, 2010-03-31T18:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/nissan-turns-over-a-new-leaf http://www.tutor2u.net/blog/index.php/economics/comments/nissan-turns-over-a-new-leaf#When:12:14:00Z This is a hugely important announcement and boost for the North east economy whose long term future must be built on competitive advantages in the emerging low-carbon industries of tomorrow. The decision to manufacture the lithium-iron batteries used in the Leaf electric cars is the key to the employment creation effects of the new investment by Nissan. Note too the role played by government financial support. The investment is backed by a £20.7m government grant and up to £220m from the European Investment Bank. The Nissan car plant is the most productive in the European Union. The plant opened in 1984 and has so far built 5.6 million cars. It produced a third of all cars built in Britain in 2009.  Digby Jones sings the praises of businesses such as Nissan in this super interview on the Politics programme a few days ago. A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Demand, Capital Investment, Economic Growth, European Economy, GCSE Economics, Government Intervention, Subsidies, Manufacturing Industry, OECD Economies, Teaching of Economics, Transport Economics, UK Economy, Regional Economics, Recession Watch, Unemployment, 2010-03-18T12:14:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-presentation-supply-side-indicators-for-the-uk-economy http://www.tutor2u.net/blog/index.php/economics/comments/revision-presentation-supply-side-indicators-for-the-uk-economy#When:17:02:00Z This updated revision presentation should be really useful for colleagues and students addressing the crucial supply-side issues during revision for AS and A2 Economics… AS and A2 Specifications, Economics Presentations, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Supply, Government Intervention, Labour Market, Macroeconomic Policies, Supply-side policies, Manufacturing Industry, Teaching of Economics, UK Economy, Unemployment, 2010-03-14T17:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/kaletsky-on-the-benefits-of-a-weak-pound http://www.tutor2u.net/blog/index.php/economics/comments/kaletsky-on-the-benefits-of-a-weak-pound#When:12:01:00Z Anatole Kaletsky writes from Japan in today’s Times and discusses the benefits that flow from having a weaker exchange rate. “A weak currency is something to be desired and encouraged during periods of recession, when employment output need additional stimulus. A strong currency, on the other hand, is desirable during boom periods, when economic activity needs to be restrained to prevent inflation. Right now, every big economy in the world, with the possible exception of China, needs extra stimulus — and therefore wants to have a weak currency. But that, of course, is impossible, since for every currency that weakens, another currency must go up.” The conventional benefits are well explained in the article and there is reference to the Chairman of Komatsu who is now relieved that the UK did not join the Euro several years ago - but whose equipment can now be exported from their UK manufacturing base to the rest of the European Union at an ultra competitive price. UK financial services are also reaping the rewards of a weak sterling / dollar or euro rate since they bill their clients in dollars or euros but have a cost base in sterling (that is if they choose to remain in the UK!) More here: Rejoice – the pound is down again A2 Macro, AS Macro, Business Economics, European Economy, The Euro, Exchange Rates, Manufacturing Industry, Teaching of Economics, UK Economy, Recession Watch, 2010-03-08T12:01:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/supply-side-policies-better-links-between-academia-and-industry http://www.tutor2u.net/blog/index.php/economics/comments/supply-side-policies-better-links-between-academia-and-industry#When:09:47:00Z A hat tip to Henry Coverdale from KES Birmingham for flagging up this excellent resource. For colleagues teaching supply side policies - the Warwick Manufacturing Group is celebrating its 30th birthday at the moment - there are a couple of videos on the Warwick University website on its history. Set up in 1980 to provide a better link between academia and industry. For a related link - on the importance of design and creativity in adding value to output - the BBC radio 4 today programme covered the design of the year awards - a neat slide show here Manufacturing Industry, Teaching of Economics, 2010-03-03T09:47:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/made-in-the-north-east http://www.tutor2u.net/blog/index.php/economics/comments/made-in-the-north-east#When:20:09:00Z On the day that Corus starts to mothball the steel plant at Redcar, there is important positive news for Tyneside with an announcement that a Windfarm blade plant is to open on Tyneside with the prospect of creating 500 new jobs in the next six or seven years. And this article from the Times is also optimistic for the region if they can develop and build a new expertise and competitive edge in creative industries, tourism and low-carbon eco-jobs. A2 Macro, AS Macro, Environmental Economics, GCSE Economics, Manufacturing Industry, Teaching of Economics, UK Economy, Regional Economics, Recession Watch, Unemployment, 2010-02-19T20:09:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/assorted-links-11-feb-focus-on-the-uk-economy http://www.tutor2u.net/blog/index.php/economics/comments/assorted-links-11-feb-focus-on-the-uk-economy#When:12:11:00Z 5 links on recent developments in the UK economy 1/ Volterra February 2010 UK economic insight - excellent short insights into recent data including the effect of the depreciation and recession on the UK trade balance 2/ Bank of England Inflation Report - the February 2010 report can be found here 3/ Small businesses lead manufacturing out of recession - a super piece from Lucy Saunders on the key role played by smaller, flexible and innovative businesses in UK manufacturing. 4/ OECD report on social mobility -  there have been plenty of news stories on relative poverty and social immobility in recent weeks. This is a new OECD report on the issue.  It is easier to climb the social ladder and earn more than one’s parents in the Nordic countries, Australia and Canada than in France, Italy, Britain and the United States - there are long term consequences for innovation and the underlying rate of economic growth 5/ Guardian - British economy faces slow recovery A2 Macro, AS Macro, Macroeconomic Policies, Manufacturing Industry, Teaching of Economics, UK Economy, 2010-02-11T12:11:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/finding-and-nurturing-competitive-advantage-in-the-uk-economy http://www.tutor2u.net/blog/index.php/economics/comments/finding-and-nurturing-competitive-advantage-in-the-uk-economy#When:22:14:00Z A superb comment piece from John Rose chief executive of Rolls-Royce plc that is well suited to students of competitiveness and globalisation and the challenges and opportunities for British business “We start with some real assets: a history of scientific excellence, the world’s sixth-largest manufacturing output, well-developed high-value service activities and four of the world’s top ten universities. If we exploit these advantages effectively, we can become a preferred location for high-value companies, with a clear understanding of where our competitive advantage lies, and with a better balanced, more resilient economy than we have chosen for ourselves today.” More here John Rose also delivered a lecture on these themes to the RSA a few weeks ago - a video can be found here   A2 Macro, Business Economics, Economic Growth, Economics of Technology, Global Economy, Manufacturing Industry, Teaching of Economics, UK Economy, 2010-02-03T22:14:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/making-trainers-in-the-uk-how-to-compete-with-the-world http://www.tutor2u.net/blog/index.php/economics/comments/making-trainers-in-the-uk-how-to-compete-with-the-world#When:14:05:00Z A cross posting from Jim This has to be one of the best short business videos ever produced by the BBC. The New Balance factory in Cumbria is quite different.  It makes running shoes and other trainers to compete with the low labour-cost factories in the Far East.  The 2 minute video highlights some really important points about how it competes effectively.  Here is the video Terrific stuff.  Some possible follow-up or discussion questions below: - Why does the New Balance factory need to undertake a “relentless search to boost output & improve productivity” - What is meant by contiunous improvement? - “If you love your job, it goes a long way to making people good workers” according to Billy Edgar.  To what extent do you agree with this view? - Evaluate the importance of location to the success of the New Balance factory - New Balance wants to triple the factory output from 1 million to 3 million pairs of trainers per year.  Outline the main challenges New Balance will have to overcome if they are to achive this objective A2 Micro, AS Micro, Emerging Economies, Business Economics, Competitive Markets, Economies of Scale, Management Issues, Manufacturing Industry, Market Equilibrium and Price, Nature of Supply, Teaching of Economics, 2010-01-28T14:05:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/is-uk-manufacturing-turning-a-corner http://www.tutor2u.net/blog/index.php/economics/comments/is-uk-manufacturing-turning-a-corner#When:18:47:00Z Whisper it quietly but there are signs of a rebound in orders and production in UK manufacturing industry. In recent weeks we have seen a cluster of articles suggesting that some of the industrial production that left the UK during an age of out-sourcing is now starting to return home. Having plunged last year manufacturing output appears to have stabilised and today we heard news from the Chartered Institute of Purchasing & Supply’s purchasing managers’ index that UK manufacturing activity grew at its fastest pace in more than two years in December 2009. Last week, a survey by the Engineering Employers Federation revealed that one in seven British companies had repatriated manufacturing operations to the UK in the past two years. Keep in mind that manufacturing contributes less than 12% of UK GDP - although many service sector jobs and businesses depend directly on the health of the industrial sector. Manufacturing may be making a comeback because of: 1/ Sterling: The weaker value of sterling against the Euro and the US dollar has given manufacturing industry a competitive boost 2/ Relative costs and supply issues: Higher than expected costs and quality problems have been cited by some businesses that have outsourced some manufacturing - high wage inflation in fast-growing emerging market countries has narrowed some of the unit labour cost gap between the UK and rivals 3/ Oil and transport costs: The high price of oil has increased the cost of shipping goods around the world encouraging producers to focus output closer to the market 4/ Overseas markets: Signs of a recovery in some of the UK’s main export markets - the majority of manufacturing production in the UK is exported, manufacturing industry in Britain is sensitive to the global economic cycle Sunday Times (3rd Jan) Made in Britain: How manufacturing is returning to the UK Scotsman: 15% of British firms switching production back to UK A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Demand, Capital Investment, Manufacturing Industry, OECD Economies, Teaching of Economics, UK Economy, 2010-01-04T18:47:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/assorted-links-31-dec-2009 http://www.tutor2u.net/blog/index.php/economics/comments/assorted-links-31-dec-2009#When:07:42:00Z 1/ Firms move production back to UK (BBC news) based on a new report from the Engineering Employers Federation 2/ Japan pledges to end economic spiral (The Times) - The ten-year plan would see Japan shift some of the focus of its giant economy, with new emphasis placed on environmental technology, science, tourism and medical care. 3/ Economics emerges from the rubble in fragile state (Larry Elliot in the Guardian) 4/ Freakonomics meets More or Less (BBC Radio 4) - Tim Harford gets together with Steve Levitt for a special edition of the excellent Radio 4 programme 5/ Counting the cost of high speed trains (BBC Global Business)  - how large are the economic and environmental benefits of investment in new high speed trains? A2 Macro, A2 Micro, AS Macro, AS Micro, Business Economics, Cost Benefit Analysis, Economic Growth, Economics of Technology, Manufacturing Industry, Teaching of Economics, Transport Economics, UK Economy, 2009-12-31T07:42:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/deindustrialisation-10-us-industries-in-jeopardy http://www.tutor2u.net/blog/index.php/economics/comments/deindustrialisation-10-us-industries-in-jeopardy#When:18:58:00Z A fascinating analysis from Business Insider highlights 10 major industries that have been a core part of the US economy which seem to be in terminal decline.  A great resource to begin a lesson looking at issues of business costs, competitiveness and the impact of globalisation on manufacturing. It would be interesting for students to prepare a similar list of UK industries which might suffer a similar fate (there must be some crossover) Business Economics, Competitive Markets, Economies of Scale, Economic Growth, Economics of Technology, Manufacturing Industry, OECD Economies, US Economy, 2009-12-14T18:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/losing-overtime-to-cut-capacity http://www.tutor2u.net/blog/index.php/economics/comments/losing-overtime-to-cut-capacity#When:06:32:01Z Here is another example of how firms are cutting capacity during the recession without making their staff redundant. The TUC report that, although four million workers do still work extra paid hours, over half a million people have lost the opportunity to work overtime in the last year. The average amount of weekly overtime last year worked out at almost £3,000 a year per employee, a total of £10 billion. However this is down by £1 billion on last year, representing a loss of income of hundreds of pounds per month for those employees for whom it is no longer available. Workers aged 20-24 have experienced the sharpest fall in overtime: in 2008, 20.1% of young people earned overtime pay, compared with 15.9 per cent this year. Workers in manufacturing, transport and communication, industries that traditionally offered overtime, were hit by a sharp fall in extra hours over the past year. In this video report from the BBC looks at one company in Bristol which was faced with the need to cut costs and offered staff the option of either cutting overtime for all of them, or making some of them redundant. They agreed to take the first option, but are having to cut their discretionary spending, and so their living standards, as a result. A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, Labour Market, Manufacturing Industry, Standard of Living, Unemployment, Recession Watch, 2009-11-29T06:32:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/structural-decline-in-russian-motoring http://www.tutor2u.net/blog/index.php/economics/comments/structural-decline-in-russian-motoring#When:17:33:00Z Here are two revealing BBC news videos about the decline in Russian car production and the economic and social challenges that result from it. In the first we visit a town heavily dependent on car manufacturing and one desperately seeking to generate new small businesses as part of a structural change in the local economy. In the second a report on the financial crisis facing loss making vehicle maker Lada and demands for state support to keep open an industry that perhaps should have closed years ago. The video is memorable partly for the continued use of the hammer to put the finishing touches to new cars!  How can a business survive by employing 100,000 people but making only 130,000 cars a year? A2 Macro, AS Macro, Emerging Economies, Russia Economy, Business Economics, Government Intervention, Manufacturing Industry, Transport Economics, 2009-11-22T17:33:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/great-examples-of-near-pure-monopolies http://www.tutor2u.net/blog/index.php/economics/comments/great-examples-of-near-pure-monopolies#When:13:42:00Z A big hat tip to one of my students Arno Albici for spotting a superb article in the Economist about a cluster of mid-sized Japanese manufacturers who continue to enjoy near pure-monopoly power in highly specific, high value-added businesses. decades of industry expertise and reinvesting profit to fund high levels of research and innovation continue to give these companies a remarkable competitive strength in the market. The barriers to entry for rival manufacturers are very high and this helps to explain the limited contestability in the global marketplace. For example: Shimano earns around $1.5 billion a year by supplying 60-70% of the world’s bicycle gears and brakes YKK makes around half the world’s zip fasteners by value, 75% of motors for hard-disk drives in computers come from a firm called Nidec 90% of the micro-motors used to adjust the rear-view mirror in every car are made by Mabuchi “Many technology products have become commodities, but certain components have not, since they require continual innovation. So entry barriers to the business of making them remain high, and although the margins on the final goods have deteriorated, the margins on specialised, high-end components are still juicy.: Much more here A2 Micro, Business Economics, Monopoly, Economic Growth, Economics of Technology, Manufacturing Industry, Teaching of Economics, 2009-11-07T13:42:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-trade-impact-of-car-scrappage http://www.tutor2u.net/blog/index.php/economics/comments/the-trade-impact-of-car-scrappage#When:10:14:00Z As expected, the UK government has announced an extension to the car scrappage scheme which will expand the consumer subsidy to another 100,000 cars. The ‘clash for clunkers’ scheme has at least helped to stabilise domestic car production but four fifths of the new cars sold in the UK are imported from overseas. According to the Guardian “For the year to date, production has declined by 44.6%. But the slight improvement recorded last month has prompted some carmakers to hope that the slump is bottoming out.” So the direct impact on UK car assembly plants is smaller than we might think. Factor in though the multiplier effects on the suppliers of car parts and the boost to retail and distribution businesses. Stephanie Flanders is on excellent form in her latest Stephanomics blog. She argues that the much larger German car scrappage scheme may have had an even bigger effect on our own producers than the UK government’s modest version. The German subsidy is worth ten times that of the UK and around 40% of German car sales last year were imports. More here. A2 Macro, AS Macro, Business Economics, Government Intervention, Subsidies, Manufacturing Industry, Transport Economics, UK Economy, Recession Watch, 2009-09-29T10:14:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/obama-treads-a-difficult-path-with-chinese-tyre-tariffs http://www.tutor2u.net/blog/index.php/economics/comments/obama-treads-a-difficult-path-with-chinese-tyre-tariffs#When:10:58:00Z One aspect of the global trade recession in 2008-09 has been the resurgence of protectionist tendencies as countries have lined up to introduce fresh barriers to trade in goods and services. The pressures for import protectionism in the form of tariffs, quotas and other barriers is largely driven by politics and there is a new example to dissect with the news that the US government is to raise the import tariff on low-grade Chinese tyres following a petition filed by the United Steelworkers trade union, which represents workers at many US tyre factories. Chinese exporters will be subject to 35% import tariffs (taking effect on September 26th) which will decline to 30% in the second year and 25% in the third. A2 Macro, AS Macro, Emerging Economies, China Economy, Global Economy, Government Intervention, Indirect Taxes, International Trade, Manufacturing Industry, US Economy, 2009-09-13T10:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/volkswagen-looks-to-china-on-the-road-to-being-the-biggest-car-maker http://www.tutor2u.net/blog/index.php/economics/comments/volkswagen-looks-to-china-on-the-road-to-being-the-biggest-car-maker#When:10:32:00Z Volkswagen has a hugely ambitious long term aim - by 2018 it wants to overtake Toyota as the world’s biggest car manufacturer. With this in mind it makes clear sense to focus capital investment in countries where the projected growth of demand for new vehicles is strongest. The relatively mature markets of Western Europe and North America look less attractive compared to emerging economies such as China and Brazil. This week Volkswagen has announced a Euro 4 billion plan to expand capacity and output in China. In the short term the commercial need is to have sufficient capacity in place to meet the surge in demand brought about by the deep cuts in taxes on new cars introduced by the Chinese government as part of its economic stimulus programme - there has been a temporary cut in the purchase tax on cars with 1.6 liter engines to 5%. In the first half of 2009 Volkswagen has already sold over 620,000 cars in China! Long term however the market demand for automobiles is forecast to rise by more than 10% per annum. Volkswagen has engineered joint ventures with Chinese manufacturers to build cars at plants in Nanjing and Chengdu - it is not beyond the realms of possibility that within eight years, it could be assembling over two million cars a year in China - a staggering volume of production and one designed to maximise the economies of large scale production. More here from the BBC news site AS Macro, AS Micro, Emerging Economies, Brazil Economy, China Economy, Business Economics, Economies of Scale, Cycles and Shocks, Aggregate Demand, Capital Investment, Manufacturing Industry, Transport Economics, 2009-09-13T10:32:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/signs-that-scrappage-is-driving-demand http://www.tutor2u.net/blog/index.php/economics/comments/signs-that-scrappage-is-driving-demand#When:22:08:00Z Just over one fifth of new new-car registrations in the UK are being attributed to the government-backed scrappage incentives, according to the Society for Motor Manufacturers and Traders. Hyundai Motor Co led the way in the sales charts for July. The UK version of the car scrappage scheme offers motorists £2,000 in discount on new vehicles when they trade in vehicles that are more than 10 years old. For the moment it is private buyers who are driving sales higher. My local Citroen dealer confirmed to me today that their sales have been boosted by the consumer discount - which is part financed by the government and by vehicle manufacturers. As our charts show new car registrations have moved higher and car production - affected greatly by winter plant shut-downs and extended holidays - is now showing signs of recovery. Sales and output for 2009 will be down as a whole - but perhaps the worst is now over? More on the impact of the car scrappage scheme here from the BBC news site Together with an excellent background section on the challenges facing the car industry during this downturn. A2 Macro, AS Macro, Business Economics, Government Intervention, Subsidies, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Transport Economics, Recession Watch, 2009-08-10T22:08:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/emerging-leaner-stronger-fitter-from-the-recession http://www.tutor2u.net/blog/index.php/economics/comments/emerging-leaner-stronger-fitter-from-the-recession#When:07:13:00Z Hamish McRae considers how businesses are responding to the challenges of recession in his Economics Life piece in the Independent this morning. Drawing on a new report from management consultants Arthur D Little he considers some of the strategies that businesses are adopting given the special nature of this downturn. Improving hygiene, fitness and building muscle ahead of the recovery figure prominently and there is a fascinating graphic illustrating some of the priorities of firms at this unusual time. “Businesses that do survive the present harsh climate will emerge in much better shape. All downturns speed up the process of structural change in the sense that things that were going to happen anyway happen much faster that they would have done. But the speed of this one has been so extreme that the world is cramming a decade of such change into a year or 18 months. As a result a lot of firms that still appear weak right now may emerge in rather good shape when demand returns.” Improving hygiene: Actions to cope short-term with the implosion of confidence and collapse of demand e.g. rationalising operations and cutting overhead costs, turning fixed costs into variable costs: 80-90 per cent of business respondents are giving these actions very high or high priority. Fitness: Keeping talent on board is a very high or high priority for 82 per cent of respondents. Maintaining R&D and innovation expenditures is a very high or high priority for 67 per cent of respondents. Muscle Building: preparing for the world to come beyond the downturn, for example building stronger relationships with regulators or a high priority to preparing for the low-carbon economy Arthur D Little Prism magazine A2 Macro, A2 Micro, Business Economics, Manufacturing Industry, UK Economy, Recession Watch, Credit Crunch, US Economy, 2009-07-24T07:13:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/taking-the-pulse-around-the-uk-economy-are-the-anti-virals-working http://www.tutor2u.net/blog/index.php/economics/comments/taking-the-pulse-around-the-uk-economy-are-the-anti-virals-working#When:18:54:00Z Here is a whole feast of reports about the current state of the UK economy from the BBC – albeit some of them quite unpalatable. On the day on which the Labour Force Survey shows the biggest quarterly rise in unemployment since records of the ILO measure began in 1971, the BBC has a survey that shows that two out of three people know someone who has lost their job due to the recession, and 40% fear losing their own job. The survey is part of their feature ‘Taking the Pulse around the UK’ which is being covered on TV, radio and the website today. As well as the survey there is a series of video reports; in one from a Northampton market where a fruit and vegetable trader says he has never worked so hard for so little, while a clothes stall owner says she has altered the clothing she sells, stocking cheaper goods than before, in order to survive. In another, Hugh Pym summarises key indicators about the state of the economy, and a third has Stephanie Flanders debating the state of the economy with herself. The set of reports are well worth browsing through, and following the links to related items. Environmental Economics, Government Intervention, Labour Market, Manufacturing Industry, UK Economy, Recession Watch, Unemployment, Credit Crunch, Supply-side policies, 2009-07-15T18:54:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/falling-productivity-a-cause-or-symptom-of-the-recession http://www.tutor2u.net/blog/index.php/economics/comments/falling-productivity-a-cause-or-symptom-of-the-recession#When:17:00:00Z The annual rate of growth of output per hour worked (seasonally adjusted) for the UK economy is falling for the first time since the mid 1990s. There are good reasons for thinking that labour productivity tends to directly related to the business cycle; when demand and output is strong, firms will be making full use of their existing factor resources and capacity utilisation will be high. In a downturn, there are spare factor resources and productivity growth may suffer if businesses do not wish to adjust their labour force in response to declining demand. The danger is that, in the absence of flexible pay that reflects lower output per hour, weaker productivity will cause a rise in unit labour costs and this will put further pressure on business profit margins and the internal funds available to finance investment. UK productivity continues to lag behind levels achieved by many of our major international competitor nations. A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Demand, Capital Investment, Aggregate Supply, Manufacturing Industry, UK Economy, Recession Watch, 2009-07-14T17:00:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/short-time-working-is-a-sign-of-labour-market-flexibility http://www.tutor2u.net/blog/index.php/economics/comments/short-time-working-is-a-sign-of-labour-market-flexibility#When:11:18:00Z The Times reports a sharp increase in the scale of short-time working in the UK economy as businesses respond to the challenges of the recession by offering workers reduced hours (and gross income) in return for a better chance of keeping their jobs. “Some 123,000 workers were working “short-time” between January and March this year, up from 36,000 in the same period last year, the most recent official figures show. Men were the worst affected, with a 286 per cent rise in the number of short-time male workers.” Manufacturing and service industries are both showing a move towards fewer hours, the car industry has been at the forefront of temporary plant closures, reduced shifts and extended holidays. The true test of a flexible labour market is during a downturn. Are workers prepared to be flexible in their pay demands? Do businesses maintain spending and a commitment to training even when finances are tight? Can the newly redundant be sufficiently occupationally and geographically mobile to find work even though the number of unfilled job vacancies has shrunk considerably? The trade unions are lobbying for a government subsidy for short-time working to encourage firms to hold onto their workers rather than make redundancies. A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Government Intervention, Subsidies, Labour Market, Manufacturing Industry, UK Economy, Recession Watch, Unemployment, 2009-07-14T11:18:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/spare-capacity-in-manufacturing http://www.tutor2u.net/blog/index.php/economics/comments/spare-capacity-in-manufacturing#When:15:31:00Z Spare capacity is a term that makes increasingly frequent appearances in AS macro multiple choice and data response questions. A survey from the British Chambers of Commerce finds that only 20% of manufacturing firms are operating at full-tilt whereas 40% of service sector businesses report that they are close to their capacity levels. Spare capacity rises when orders and demand tails off leaving under-utilised capital and labour resources. We have seen this in the steep contraction in production in new housebuilding and in car manufacturing and this inevitably has knock-on effects for supply-chain businesses. Operating below capacity can lead to a rise in the average fixed costs of production and therefore put pressure on profit margins. Little wonder that many manufacturing businesses have moved towards short-time working and have mothballed some of their production capacity. This BBC Midlands news article covers a march for jobs in the West Midlands   A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Demand, Capital Investment, Aggregate Supply, Manufacturing Industry, UK Economy, Recession Watch, 2009-05-26T15:31:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-slump-in-global-trade-and-uk-economy http://www.tutor2u.net/blog/index.php/economics/comments/revision-slump-in-global-trade-and-uk-economy#When:19:22:00Z An important area for students to understand are the ways in which global economic forces affect the domestic economy. Both the new AS and the legacy A2 syllabus for AQA expect students to be aware of the nature of and possible consequences of external demand and supply-side shocks. This chart from the Bank of England Inflation Report (May 2009) highlights just such a demand-shock - the collapse in world trade and the global recession. AS Macro, Cycles and Shocks, Aggregate Demand, Capital Investment, Manufacturing Industry, Teaching of Economics, UK Economy, Recession Watch, 2009-05-14T19:22:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/qa-what-is-a-scrappage-subsidy-and-will-it-work-in-the-uk http://www.tutor2u.net/blog/index.php/economics/comments/qa-what-is-a-scrappage-subsidy-and-will-it-work-in-the-uk#When:18:33:00Z A scrappage subsidy is a “pay-to-scrap” scheme where a government offers a financial incentive to car buyers if they scrap a car that has reached a specified age and in its place they are offered a payment towards the cost of a new vehicle. Germany and France both offer scrappage subsidies to consumers and there is a growing number of voices from inside the UK business community and motor vehicle industry clamouring for one to be launched in the UK. The Retail Motor Industry Federation and the Society of Motor Manufacturers and Traders (SMMT) are at the head of the queue lobbying for a scrappage scheme to be introduced as soon as possible. Economics Q&A, Q&A - Market Failure, Q&A - Markets, AS Macro, AS Micro, Cycles and Shocks, Aggregate Demand, Consumer Spending, Government Intervention, Subsidies, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Transport Economics, UK Economy, 2009-04-07T18:33:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/salad-days-a-new-leaf-for-japans-steel-economy http://www.tutor2u.net/blog/index.php/economics/comments/salad-days-a-new-leaf-for-japans-steel-economy#When:17:58:00Z A leading Japanese steel manufacturer has responded to the downturn in global demand by switching its production capacity to producing lettuceWhat a terrific example of creative thinking from a leading Japanese steel cable producer.  The bottom might have fallen out of the steel cable market, but that doesn’t mean that a newly constructed factory has to go to waste. Even in the depths of a global depression, people will still demand salad! Japanese factory diversifies into salad production Manufacturing Industry, 2009-03-20T17:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/what-will-be-left-of-uk-manufacturing http://www.tutor2u.net/blog/index.php/economics/comments/what-will-be-left-of-uk-manufacturing#When:22:20:01Z There is a real danger that over twenty per cent of the output of UK manufacturing industry might be lost before this recession is over. The Guardian reports that “closures, short-term working and the mothballing of plants led to a drop of more than 5% in UK manufacturing production in the final quarter of 2008, according to data from the Office for National Statistics.” Manufacturing output has now fallen by 10.5% in 10 successive months from the peak in February 2008. The signs of a deep downturn in what remains of our industrial heartlands are all there to see. Profitability has been squeezed – the net rate of return is already lower than it was during the 1990-91 recession. Employment is contracting and at some time this year the number of people classified as working in manufacturing will dip below 3 million – just 12 per cent of the employed labour force. The net trade deficit in manufactured products has continued to widen despite the possible benefits of a cheaper pound. One problem is that the weaker currency increases the costs of importing component parts but in a recession, producers find it difficult to pass on these costs to their own customers, hence a decline in profit margins. Manufacturing production accounts for just 18 per cent of UK real national output. Student handout UK_Manufacturing_Recession_Feb_2009.pdf A2 Macro, AS Macro, GCSE Economics, Manufacturing Industry, UK Economy, Recession Watch, 2009-02-06T22:20:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/negative-mulitplier-effects-of-a-brutal-outlook-for-carmakers http://www.tutor2u.net/blog/index.php/economics/comments/negative-mulitplier-effects-of-a-brutal-outlook-for-carmakers#When:00:09:30Z There seems to have been grim news from the car industry every day for the last week or so. Nissan and Jaguar are shedding jobs. In November Honda said they would shut down production for February and March, and today said they will extend that to cover April and May as well. A2 Micro, Business Economics, Competition Policy, European Economy, Government Intervention, Labour Market, Manufacturing Industry, Market Equilibrium and Price, Nature of Supply, UK Economy, Regional Economics, Recession Watch, 2009-01-17T00:09:30+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a-collapse-in-uk-vehicle-production http://www.tutor2u.net/blog/index.php/economics/comments/a-collapse-in-uk-vehicle-production#When:11:26:36Z Car manufacturing and commercial vehicle production in the UK slumped to its lowest level for over 21 years last month as the sector suffers from the squeeze on credit and the broader economic recession. A2 Macro, AS Macro, Cycles and Shocks, GCSE Economics, Government Intervention, Subsidies, Manufacturing Industry, Transport Economics, UK Economy, Recession Watch, Unemployment, Credit Crunch, 2008-12-19T11:26:36+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/diseconomies-of-scale-are-human http://www.tutor2u.net/blog/index.php/economics/comments/diseconomies-of-scale-are-human#When:18:36:21Z One of John Kay’s phrases in his piece in the Financial Times yesterday will stay with me for the remainder of my teaching career. In a piece which focuses on the malign influences of political lobbying by huge economies of scale businesses that have been in relative decline for many a long year, John writes: “That is true of the carmakers, whose problems are of much longer standing than the current downturn. In automobiles as in many industries, economies of scale are technological, the diseconomies of scale human. Human factors in business are generally more influential than technological ones in determining the long run fate of a company.” This is a terrific article to use when discussing the root causes of government failures that can result from subsidies and bail-outs given to companies deemed “too large to fail.” The remainder of John’s article can be found at his excellent web site Some companies are too powerful to fail A2 Micro, AS Micro, Business Economics, Economies of Scale, Management Issues, Government Intervention, Government Failure, Subsidies, Manufacturing Industry, 2008-12-11T18:36:21+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/tyre-makers-tread-carefully-as-car-sales-soften http://www.tutor2u.net/blog/index.php/economics/comments/tyre-makers-tread-carefully-as-car-sales-soften#When:22:34:00Z Pirelli is a global name in vehicle tyres - a brand which ought to be able to ride out the storm engulfing the world of vehicle manufacturing. But as this BBC video shows, a downturn in the market demand for new cars is having an immediate effect right the way through the supply chain of the industry and Pirelli is having to take strong action. Pirelli’s plant in Carlisle in Cumbria is slashing the hours available to their permanent workforce in response to a slump in orders for new tyres. Although most jobs look to be safe, the cutback in hours will hit the pay-packets of hundreds of workers in a region where per capita GDP is persistently below the national average. And this decline in real take home pay will affect retail businesses and the local housing market. The short video clip is a good example of derived demand and also the inter-relationships between markets - it is also a sign of a tyre company keen not to lose its grip. A2 Micro, AS Micro, Business Economics, GCSE Economics, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Inter-related Markets, Recession Watch, 2008-11-22T22:34:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/who-are-the-bank-of-englands-spies-on-the-ground http://www.tutor2u.net/blog/index.php/economics/comments/who-are-the-bank-of-englands-spies-on-the-ground#When:19:50:01Z The Bank of England has a network of Regional Agents operating across the length and breadth of the UK. Think of the Regional Agents as a form of intelligence network designed to give the Bank of England a feel for what is really happening on the ground. A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Capital Investment, Aggregate Supply, Inflation and Deflation, Manufacturing Industry, UK Economy, Recession Watch, Monetary Policy, 2008-10-25T19:50:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/manufacturing-reaches-a-cliff http://www.tutor2u.net/blog/index.php/economics/comments/manufacturing-reaches-a-cliff#When:00:25:01Z Here is a telling sign that confidence in UK manufacturing industry is ebbing away at an alarming rate. The latest Purchasing Managers Index doesn’t normally figure in the AS or A2 economics course - but the numbers for orders from buyers in industry look horrendous. A figure for the PMI of below 50 is said to herald a contraction in demand and output. The latest data shows sentiment and expected demand at its lowest levels for many a long year - indeed the weakest data on orders since the survey was created in 1992 - a recession year for the UK economy. I have tracked the PMI against manufacturing output for each month since 1992. The figures will put increasing pressure on the Bank of England to cut interest rates in a week’s time by 0.25% or perhaps 0.5% - indeed it may move on interest rates as part of a concerted attempt by the central banks of the EU, the UK and the USA to bolster business and consumer confidence. PMI data in PowerPoint PMI_Manufacturing.ppt A2 Macro, AS Macro, Cycles and Shocks, Manufacturing Industry, UK Economy, 2008-10-02T00:25:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-changing-pattern-of-output http://www.tutor2u.net/blog/index.php/economics/comments/the-changing-pattern-of-output#When:21:15:00Z In introductory macro today we were discussing the contribution that different industries make to the GDP of the UK economy. The chart attached to this blog shows the quarterly index of value added from four sectors plus the total value for GDP. Although this dataset runs only since the turn of the decade, it reveals the divergent fortunes in the value of output flowing from construction, manufacturing, oil and gas extraction and business & financial services. On some estimates, the financial services sector now accounts for over 10% of total UK GDP with manufacturing, oil and gas in long term relative decline and construction entering recession after the bursting of the housing bubble. Has the economy become too dependent on financial services for growth? I have attached the chart in a PowerPoint file in case it might be of use as a teaching handout for student annotations and calculations. More detailed statistics on UK national output can be found from the Statistics Commission. PowerPoint Chart UK_GDP_by_Output.ppt David Smith The Party is over for Shrinking Financial Sector (Sunday Times) A2 Macro, AS Macro, Cycles and Shocks, Aggregate Supply, Manufacturing Industry, Oil and Gas, UK Economy, 2008-09-23T21:15:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a-dad-and-his-son-go-mining-once-more http://www.tutor2u.net/blog/index.php/economics/comments/a-dad-and-his-son-go-mining-once-more#When:15:08:00Z This is a heart-warming story from the BBC about the rebirth of Hatfield Main colliery which is back in action once more, coal-mining having been made economically viable by the soaring world price of coal. A2 Micro, AS Micro, Business Economics, Economies of Scale, Manufacturing Industry, UK Economy, 2008-09-10T15:08:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/manufacturing-gets-a-boost-from-uk-government-investment http://www.tutor2u.net/blog/index.php/economics/comments/manufacturing-gets-a-boost-from-uk-government-investment#When:22:35:00Z British manufacturing industry perennially appears to move from one recessionary period to another. But although the sector as a whole has shrunk as a share of GDP and employment, we still have some world class manufacturing businesses out there often engaged in high-knowledge and high-value production - competing on quality and craftsmanship rather than mass volume. The decision this week by the UK government to build two new huge aircraft carriers is an important shot in the arm for a number of UK manufacturing firms and this BBC report says that seven UK-based firms have won contracts totalling £91.5m to build parts for the new carriers. Corus, based in Scunthorpe, will get £65m to provide steel whilst five other English firms, in Dorset, Greater Manchester, Surrey, Suffolk and Lancashire, will build products ranging from control towers to landing aids. Corus ofcourse is now owned by the Indian conglomerate Tata! But a good example of how government capital spending can have potentially large multiplier effects if the initial contracts are given to domestic businesses. The rest of the BBC article is here Cycles and Shocks, Aggregate Demand, Capital Investment, Manufacturing Industry, UK Economy, Fiscal Policy, 2008-07-05T22:35:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/fighting-industrial-decline http://www.tutor2u.net/blog/index.php/economics/comments/fighting-industrial-decline#When:10:36:00Z Peter Day’s perennially excellent series In Business looked this week at the survival of some maverick manufacturing businesses in the UK - how are they managing to survive and thrive when large parts of what is left of UK industry continues to suffer long run relative and absolute decline? Manufacturing Industry, UK Economy, 2008-05-19T10:36:00+00:00