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Revision:AQA A2 Business Studies Unit 4 - PrivatisationTSR Wiki > Study Help > Subjects and Revision > Revision Notes > Business Studies > Privatisation
Why were so many British industries nationalised after 1945?Economy in chaos following the war therefore government decided to take control and regulate businesses in this way. Little money in the economy as whole and therefore saved businesses from going into liquidation. Economy needed reshaping following the war therefore better in the regulated hands of the government. Before the war there was the great depression therefore businesses already on the way down and needed support. Economies of scale could be gained from becoming one super company as it were.
What problems did these industries suffer from?Lack of competition meaning tat prices did not find their natural level. Made large financial losses which as a problem for the government who subsidised their running. Inefficiently run as government minister interfered without specialist business knowledge. Lack of adequate investment as a result of being government controlled not open for private funding. Had big industrial relations issues due to poor communication and lack of motivation for the workforce – e.g. the coal miners. Complacency in their running reduced efficiently because they were not run to be commercial successes therefore to the edge to the business. Diseconomies of scale affected them hugely because they were such huge companies.
What different forms of privatisation are there?The setting up of franchises is one form of privatisation. In this way different areas or zones are set up and companies run the service for that area, e.g. trains. Not true privatisation because they do not compete with each other. Sale of shares; this is where the Government has shares (equity) in the enterprise and then it offers those shares to the public. In most cases management of the enterprise has stayed the same. Sale of assets; here Government can sell the assets (buildings, vehicles, stock, and fixtures) piece meal. This is when the business is unprofitable. Sale of Enterprise; here the business is sold as a going concern. It is expected that the enterprise will continue to operate. Management contract/ service contract; it is an arrangement where a team of experts or enterprise is identified to run the state owned enterprise on behalf of the government. The government pay a fee to the expert or enterprise involved. Not dissimilar to outsourcing.
What are the aims of privatisation?To provide a better quality of service to the consumer as a result of competition. To allow prices to find a natural and not artificial level as often happens in nationalised industries therefore making them reflective of the economy as a whole. To increase competition and reduce monopoly. To raise money for the government as they sell of state owned companies. To allow more of a free market economy rather than a controlled economy as in the old USSR.
What problems have arisen with privatised industries?That they are not truly privatised and competing, e.g. the rail network and therefore the aim of allowing prices to find their natural level is not truly achieved. Lack of efficiency as companies needed huge changing when taken over. Price hikes and loss of custom as a result of the artificially low prices imposed by the government. Too much competition is causing saturation of the market place e.g. the gas market now has a huge number of companies and is creating confusion for the consumer. Quality of service has not risen as private companies do not have the effectively limitless resources that the government have.
Also SeeRead these other AQA A2 Business Studies Unit 4 revision notes:
CommentsThese notes are aimed at people studying for AQA A2 Business Studies Unit 4, but will also be suitable for other courses and exam boards. Originally submitted by eksman on TSR Forums. |
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