Is it morally correct to subsidise overseas companies?
With Lord Mandelson set to deliver a £400 million subsidy to Magna, the probable acquirer of GM Europe, there are concerns as to whether state aid, at least to such a level, is both morally and politically correct.
The truth is that a £400 million subsidy, along with a guarantee of employment for thousands of UK workers in the short to medium term, is probably worth significantly more to the UK economy and the UK government in taxes. Whether we like it or not overseas companies will look to place their manufacturing needs in the cheapest country and cheapest markets around the world. Without assistance from the local authorities and the government of the day, thousands upon thousands of jobs will be at risk which can lead to deprivation and massive unemployment in some areas.
The truth is that busy areas and busy markets attract new entrants and new companies. We have seen the North of England decimated by the collapse of the UK mining industry, even though some progress has been made on other employment options, and the Midlands and the North West of England have also suffered from the collapse of the UK car industry. While a £400 million subsidy may well be a significant figure, it does actually pale into insignificance in the long run.
Share this..
Related stories
Cadbury receives £10 billion takeover offer
The UK stock market came alive this morning with news that Kraft Foods Inc of the US has launched a £10.2 billion takeover offer for UK giant Cadbury. While the initial offer, a mixture of cash and Kraft Foods shares, has been rebuffed there is a feeling within the city that further offers could materialise from other third parties and indeed Kraft Foods could come back with a higher offer. So is...
Read MoreIs Centrica Set To Offer The Government Cash For Their British Energy Stake?
While the UK government has been at the centre of plans to resurrect the British Energy / EDF takeover, with £4 billion expected for its stake, it seems as though Centrica may have an answer. There are strong rumours in the market that the group is willing to offer the government around £4 billion in cash for their stake and use this as a springboard for a full all share takeover. But will thi...
Read MoreFinal salary pension schemes under more pressure
A report by KPMG has suggested that around 22% of UK FTSE 100 companies will be unable to pay off their current pension fund deficits in the future. Such is the seriousness of the situation that every four pounds from each five pounds paid into final salary pension schemes in the future will be used to pay off deficits. This is a damning indictment of the final salary pension scheme and is certain...
Read MoreDispute over business lending levels
A dispute has broken out between the UK banking industry and the British Chambers of Commerce with regards to an apparent increase in lending activity in the UK business arena. After many months of political pressure UK banks have reported a significant increase in business lending although the British Chambers of Commerce is unable to confirm the figures which have been suggested. Indeed, the Bri...
Read MorePublic sector service cuts are inevitable
As the Labour Party and the Tories continue to fight over investment in the UK public sector they seem to missing the point that UK votes know and expect a reduction in investment in due course. As UK national debt moves into the trillions of pounds anybody in their right mind would know that public sector investment, which has been ramped up by the Labour government, cannot continue at the curren...
Read More