Privatisation means the transfer of assets from the public (government) sector to the private sector.
In the UK the process has led to a sizeable reduction in the size of the public sector. State-owned enterprises now contribute less than 2% of GDP and less than 1.5% of total employment.
List of Major Privatisations in the UK
Privatisation – Is it Good or Bad for Economic Efficiency?
Opponents of privatisation argued that state owned enterprises had already faced competition when part of the public sector and that in several instances the transfer of ownership merely replaced a public sector monopoly with a private sector monopoly that then required regulation.
There were criticisms that state assets were sold off by the government at too low a price and that the consequences of privatisation has been a decrease in investment and large scale reductions in employment as privatised businesses have sought to cut their operating costs.
Deregulation of markets
Deregulation involves opening up markets and encouraging the entry of new suppliers. Examples of this in the UK include the opening up of markets for bus services, household energy supplies, the liberalisation of household mail services and financial deregulation affecting both banks and building societies.
The expansion of the European Single Market has accelerated the process of market liberalisation. The Single Market seeks to promote four freedoms – namely the free movement of goods, services, financial capital and labour. In the long term we can expect to see the microeconomic effects of the EU Single Market working their way through many British markets and the general expectation is that competitive pressures for all businesses working inside the European Union will continue to intensify.
Product market liberalisation involves breaking down barriers to entry, boost market supply, bring down prices for consumers, and encourage an increase in competition, investment and productivity leading to a rise in economic efficiency. In the long term, if product markets become more competitive and investment flows into these industries, there are macroeconomic implications for example an increase in an economy's underlying trend rate of economic growth which might contribute to an improvement in average standards of living.
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