How Governments can help businesses

Lesson Outcomes: To understand the ways that a government can help businesses

How Governments can help businesses

Governments often positively encourage businesses in three main reasons: 1. To encourage business development in poorer areas of the country 2. To encourage enterprise by assisting small firms to set up and survive 3. To encourage firms to export

Regional assistance
Serious social and economic problems can result from a country having some very rich areas and some very poor areas. It is common for governments to try to make economic development more evenly spread. This can be done by imposing controls on businesses wishing to set up in wealthy areas Also financial grants and subsidies can be used to attract new firms to areas of high unemployment or to persuade existing firms to relocate there

http://www.ukti.gov.uk/investi ntheuk/whytheuk/financeince ntives.html

The statutory objectives of the RDAs were:

to further economic development and regeneration; to promote business efficiency and competitiveness; to promote employment; to enhance the development and application of skills relevant to employment, and to contribute to sustainable development.

How many businesses are there in the UK?

There are an estimated 4.7 million businesses in the UK

What percentage of these are small (< 50 employees)?

99.3%
Small businesses provide 47.5% of UK privatesector employment

Benefits of small businesses to the economy

Job creation Often run by dynamic entrepreneurs with new ideas for consumer goods and services Small firms provide choice and variety for customers. This acts as competitions for larger firms Often supply specialist goods and services The large firms of the future are the small firms of today

Small firms help from the government

Setting lower rate of tax on profits so that more finance can be put back into the business Giving grants or cheap loans top people setting up in business Providing advice and information centres for SME Providing college courses and training for potential entrepreneurs

Exporting of goods and services

Exporting is very important to the government because: Exports earn a country foreign exchange. This can be used to pay for imports or to pay off foreign loans The more goods and services exported, the more people have to be employed to produce them Successful exporters will make profits and this will increase the tax the government receives

http://en.wikipedia.org/wiki/List _of_countries_by_exports

Exporting of goods and servicesgovernment help

Encouraging banks to lend to exporters at lower interest rates Offering subsidies or tax reductions to exporters Trying to keep the exchange rate of the currency as stable as possible so that exporters know how they can earn from selling goods abroad

Questions Pg 76