Advantages:
Reduction of opportunity cost, which may occur as a result of loss of investment and trade from eurozone countries. Our businesses would be able to trade freely in the Single Market, perhaps for the first time.
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Reducing the opportunity costs that may arise from the loss of investment and trade in the euro countries. SMEs will be able to act freely in the market, perhaps for the first time.
Stability would increase as vulnerability to short term shocks would be reduced, (such as house price and interest rate rises), as would changes in the exchange rate which affect the level of exports.
Stability would increase as vulnerability to short term shocks would be reduced (such as housing prices and rising interest rates) that will change in the exchange rate, which affects the level of exports.
The UK may find it is increasingly sidelined in terms of political decisions within the EU, particularly following enlargement, if it is not a full member in economic terms.
UK can find it self getting more and more marginalized in terms of political decisions within the EU, especially after enlargement, if not a full member in economic terms.
It would cut business costs by removing the need to convert from the pound to the euro, and the associated changes in the exchange rate which may unexpectedly cut profits.
Reducing business costs by eliminating the need to convert pounds to euros, and associated changes in exchange rates that could reduce an unexpected surplus
Businesses will be able to make longer term decisions as unpredictable currency movements would be reduced.
Competition would be stimulated, benefiting the consumer as prices throughout Europe would be more 'transparent' - differences could not be masked by changes in the exchange rate.
Disadvantages:
In the present climate, it would be an unpopular decision, with the majority of Britons not being in favour of joining. This may lead to a lack of confidence in the economy. Many worry about the UK losing control over its own economy.
The UK would not be able to set its own interest rate. Instead, it would be set by the Central Bank for all eurozone countries. This reduces the government's ability to react to shocks in the market. Any change in the interest rate will benefit the eurozone countries as a whole, which may mean it benefits some countries more than others.
Mortgages in the UK are different to those in the rest of Europe. In the UK, there is a high proportion of owner-occupiers with variable rate mortgages. In the rest of Europe, however, there is a higher tendency for long term renting, and those that do have mortgages are on long term fixed rates. Therefore, homeowners in the UK are more likely to be affected by interest rate changes than their counterparts in other EU states.
Joining the euro may restrict the amount of long-term borrowing the UK is able to carry out. Eurozone countries are subject to the Stability and Growth Pact, which means that countries must not spend beyond their means. If the UK wishes to borrow money for long-term investment, this would be against the guidelines.
Some take the view that as the British economy is doing well at the moment, and outperforming the eurozone states, why move over to the euro?
http://www.bized.co.uk/learn/economics/international/eu/notes/eu3.htm#Heading305
Impact of joining the eurozone on the business in UK!!!!
1) Ability for business planning: - Membership of the Euro would reduce exchange rate uncertainty and make it easier for companies to make long term investment decisions.
2) Borrowing costs:- for a sustained period, UK interest rates have been higher than long-term continental rates. For the last 20 years, UK rates have averaged 3.5% more than those of Germany. Eurozone rivals benefit from the low rates by taking on larger loan and investing in future technology.
3) Cross-border transactions:- Cross-border transaction and investment will be easier and
speedier. Transaction costs will drop as well.
4) Price transparency:- With Euro, it will be possible to compare prices for the same goods or services in different Eurozone countries. The ability for consumers to compare prices more easily will tend to move prices downwards and make it harder for businesses to maintain a differential pricing policy [1, p136]. Price transparency will also help companies to know their competitors’ prices and vice versa.
5) Scope for pan-Euro sourcing, marketing, labelling and packaging:- With the Euro, it will be easier and cheaper to find and to work with new suppliers outside home market. This raises the prospect for real business savings [1, p137]. The Euro, by providing a common unit of account for commercial activities, ensures that companies will face a bigger, more integrated European market.
6) Business taxes:- There are concerns that membership of Euro may put UK on a path towards higher business tax, which threats UK orders and jobs.
7) Competitive environment: - Companies who see foreign exchange risk and transaction costs as major barriers to cross-border trade are more likely to move into the new markets once the barriers are removed. New business start-ups may also be encouraged. As a result, the forces of competition will be strengthened in many product markets.
Impact of joining the eurozone on the people in the UK!!!!
1) Travel: - If travelling in the Eurozone, no foreign Currency exchange is necessary. Any immediate benefits may flow mainly to better-off consumers, who are more likely to travel or shop abroad
2) Job opportunities:- If UK economy becomes compatible with the Eurozone countries, joining Euro means better investment environment for business and hence more job opportunities.
3) VAT: - With Euro, there will be VAT on children clothes and food. The VAT rate will rise as well.
Impact of joining the eurozone on the pricing of commodities in the UK!!!!
1) Car prices:- Because of price transparency, higher car prices in UK will be very hard to maintain.
2) Energy Prices:- With Euro, energy prices will rise.
3) Mortgages:- With Euro, interest rate will be most likely lower than UK current interest rate, therefore the cost of borrowing for home owner will be lower. Housing market will be booming.
4) General shopping prices:- Because of price transparency, no currency exchange cost and home shopping through internet or mail order, consumers can just go for the best price in the whole Eurozone. For shopping outside Eurozone, Euro did not prove to be a stable currency so far.
Impact on UK Economy
1) UK exports to Europe:- If staying outside Euro, Pound appreciation will damage UK exports and make UK less attractive to investors; Pound depreciation may result in retaliation with protection from Eurozone.
2) Flexibility on coping with economic crisis, such as inflation, depression or asymmetric shocks if they occur:- If not joining Eurozone, UK has the freedom to manipulate its own exchange rate as a safety valve in times of depression, to set interest rates in tune with its own domestic conditions and to operate fiscal policies free from external control [1, p148]. If joining Euro, UK has to adopt the exchange rates and interest rates, which are decided in the ECB [1, p148] and we can only hope that the UK economy is compatible with the continental Europe and one rate suits all. Even if the compatibility would be a reality, there would be still asymmetric shocks hitting one part of EU than the others [1, p149]. For example, a decline in world oil prices could hit UK harder than other Eurozone state.
3) Impact on UK financial industry:- One economic concern is that outside Eurozone, the position of the City of London as Europe’s premier financial capital might be undermined. This claim appears to be over exaggerated. London has a booming Eurobond and is performing well outside the Eurozone at the time being.
4) Proportion of UK contribution to EU funding and UK budgetary burden:- Any system of fiscal transfer as a measure of coping with economic crisis in Eurozone [1, p148] implies a degree of fiscal federalism and raises concerns over the proportionality of EU funding and the UK budgetary burden.
5) Possibility of UK tax-payer financing continental pension liabilities:- Currently continental Europe states pay the overwhelming proportion of pensions and generally they are not provided for on a funded basis. On the contrary, UK pension is not state bound and future unfounded liabilities are only a fraction of those of the continental countries. Some people think that UK joining Euro may also mean that UK “join” the continental pension liabilities [1, p150]. The worry may be unnecessary. Maastrich Treaty stipulates the non-transferability of pensions liability.
6) Investment Environment:- Sterling’s strength
Advantages:
Reduction of opportunity cost, which may occur as a result of loss of investment and trade from eurozone countries. Our businesses would be able to trade freely in the Single Market, perhaps for the first time.
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Reducing the opportunity costs that may arise from the loss of investment and trade in the euro countries. SMEs will be able to act freely in the market, perhaps for the first time.
Stability would increase as vulnerability to short term shocks would be reduced, (such as house price and interest rate rises), as would changes in the exchange rate which affect the level of exports.
Stability would increase as vulnerability to short term shocks would be reduced (such as housing prices and rising interest rates) that will change in the exchange rate, which affects the level of exports.
The UK may find it is increasingly sidelined in terms of political decisions within the EU, particularly following enlargement, if it is not a full member in economic terms.
UK can find it self getting more and more marginalized in terms of political decisions within the EU, especially after enlargement, if not a full member in economic terms.
It would cut business costs by removing the need to convert from the pound to the euro, and the associated changes in the exchange rate which may unexpectedly cut profits.
Reducing business costs by eliminating the need to convert pounds to euros, and associated changes in exchange rates that could reduce an unexpected surplus
Businesses will be able to make longer term decisions as unpredictable currency movements would be reduced.
Competition would be stimulated, benefiting the consumer as prices throughout Europe would be more 'transparent' - differences could not be masked by changes in the exchange rate.
Disadvantages:
In the present climate, it would be an unpopular decision, with the majority of Britons not being in favour of joining. This may lead to a lack of confidence in the economy. Many worry about the UK losing control over its own economy.
The UK would not be able to set its own interest rate. Instead, it would be set by the Central Bank for all eurozone countries. This reduces the government's ability to react to shocks in the market. Any change in the interest rate will benefit the eurozone countries as a whole, which may mean it benefits some countries more than others.
Mortgages in the UK are different to those in the rest of Europe. In the UK, there is a high proportion of owner-occupiers with variable rate mortgages. In the rest of Europe, however, there is a higher tendency for long term renting, and those that do have mortgages are on long term fixed rates. Therefore, homeowners in the UK are more likely to be affected by interest rate changes than their counterparts in other EU states.
Joining the euro may restrict the amount of long-term borrowing the UK is able to carry out. Eurozone countries are subject to the Stability and Growth Pact, which means that countries must not spend beyond their means. If the UK wishes to borrow money for long-term investment, this would be against the guidelines.
Some take the view that as the British economy is doing well at the moment, and outperforming the eurozone states, why move over to the euro?
http://www.bized.co.uk/learn/economics/international/eu/notes/eu3.htm#Heading305
Impact of joining the eurozone on the business in UK!!!!
1) Ability for business planning: - Membership of the Euro would reduce exchange rate uncertainty and make it easier for companies to make long term investment decisions.
2) Borrowing costs:- for a sustained period, UK interest rates have been higher than long-term continental rates. For the last 20 years, UK rates have averaged 3.5% more than those of Germany. Eurozone rivals benefit from the low rates by taking on larger loan and investing in future technology.
3) Cross-border transactions:- Cross-border transaction and investment will be easier and
speedier. Transaction costs will drop as well.
4) Price transparency:- With Euro, it will be possible to compare prices for the same goods or services in different Eurozone countries. The ability for consumers to compare prices more easily will tend to move prices downwards and make it harder for businesses to maintain a differential pricing policy [1, p136]. Price transparency will also help companies to know their competitors’ prices and vice versa.
5) Scope for pan-Euro sourcing, marketing, labelling and packaging:- With the Euro, it will be easier and cheaper to find and to work with new suppliers outside home market. This raises the prospect for real business savings [1, p137]. The Euro, by providing a common unit of account for commercial activities, ensures that companies will face a bigger, more integrated European market.
6) Business taxes:- There are concerns that membership of Euro may put UK on a path towards higher business tax, which threats UK orders and jobs.
7) Competitive environment: - Companies who see foreign exchange risk and transaction costs as major barriers to cross-border trade are more likely to move into the new markets once the barriers are removed. New business start-ups may also be encouraged. As a result, the forces of competition will be strengthened in many product markets.
Impact of joining the eurozone on the people in the UK!!!!
1) Travel: - If travelling in the Eurozone, no foreign Currency exchange is necessary. Any immediate benefits may flow mainly to better-off consumers, who are more likely to travel or shop abroad
2) Job opportunities:- If UK economy becomes compatible with the Eurozone countries, joining Euro means better investment environment for business and hence more job opportunities.
3) VAT: - With Euro, there will be VAT on children clothes and food. The VAT rate will rise as well.
Impact of joining the eurozone on the pricing of commodities in the UK!!!!
1) Car prices:- Because of price transparency, higher car prices in UK will be very hard to maintain.
2) Energy Prices:- With Euro, energy prices will rise.
3) Mortgages:- With Euro, interest rate will be most likely lower than UK current interest rate, therefore the cost of borrowing for home owner will be lower. Housing market will be booming.
4) General shopping prices:- Because of price transparency, no currency exchange cost and home shopping through internet or mail order, consumers can just go for the best price in the whole Eurozone. For shopping outside Eurozone, Euro did not prove to be a stable currency so far.
Impact on UK Economy
1) UK exports to Europe:- If staying outside Euro, Pound appreciation will damage UK exports and make UK less attractive to investors; Pound depreciation may result in retaliation with protection from Eurozone.
2) Flexibility on coping with economic crisis, such as inflation, depression or asymmetric shocks if they occur:- If not joining Eurozone, UK has the freedom to manipulate its own exchange rate as a safety valve in times of depression, to set interest rates in tune with its own domestic conditions and to operate fiscal policies free from external control [1, p148]. If joining Euro, UK has to adopt the exchange rates and interest rates, which are decided in the ECB [1, p148] and we can only hope that the UK economy is compatible with the continental Europe and one rate suits all. Even if the compatibility would be a reality, there would be still asymmetric shocks hitting one part of EU than the others [1, p149]. For example, a decline in world oil prices could hit UK harder than other Eurozone state.
3) Impact on UK financial industry:- One economic concern is that outside Eurozone, the position of the City of London as Europe’s premier financial capital might be undermined. This claim appears to be over exaggerated. London has a booming Eurobond and is performing well outside the Eurozone at the time being.
4) Proportion of UK contribution to EU funding and UK budgetary burden:- Any system of fiscal transfer as a measure of coping with economic crisis in Eurozone [1, p148] implies a degree of fiscal federalism and raises concerns over the proportionality of EU funding and the UK budgetary burden.
5) Possibility of UK tax-payer financing continental pension liabilities:- Currently continental Europe states pay the overwhelming proportion of pensions and generally they are not provided for on a funded basis. On the contrary, UK pension is not state bound and future unfounded liabilities are only a fraction of those of the continental countries. Some people think that UK joining Euro may also mean that UK “join” the continental pension liabilities [1, p150]. The worry may be unnecessary. Maastrich Treaty stipulates the non-transferability of pensions liability.
6) Investment Environment:- Sterling’s strength
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