AQA A-Level Economics CONTEXTUAL ANALYSIS

Give a real life example of a firm making a sustained loss and cutting costs as a result.

- In January 2024, the Aberdeenshire- based brewer "Brew dog" announced that they were to abandon paying employees at least the real living wage of £12 an hour, and instead will only pay the UK's NMW of £11.44 an hour.

- The firm said this was necessary as part of an effort to return to profitability after making a £24million operating loss in 2023.

Give an example of technology negatively impacting the labour market (banking industry) [2]

- In January 2024, Lloyds Banking Group announced that it was to cut 1,600 jobs across its branch network.

- Because it was shifting its operations more towards its online provision and will create 830 new roles within this division.

Figures released by The Resolution Foundation in January 2024 said that what proportion of UK service sector exports are generated in London? [2]

- 46%

- London's share of the total rose from from 38% to 46% between 2016 and 2021

Give an example of regulators fining a firm for misconduct (Amazon France) [2]

- In January 2024, Amazon was fined 32 million euros by French regulators for excessive surveillance of its workforce

- Amazon France Logistique recorded data captured by workers' handheld scanners

Shoplifting increase statistic [2] (link to poverty and cost of living)

- Shoplifting rose to a 20 year high in England and Wales in the year to September 2023.

- This was up by 32% on the previous 12 months

Example of monopoly power merger being called off, and regulator disagreements [2] (link to depends upon point about regulator discretion/ value judgement)

- The $1.4bn planned merger between Amazon and iRobot collapsed in January 2024

- It was called off following concerns from EU regulators that competition would be harmed, ALTHOUGH UK regulators had already given the go ahead to the merger

Example of recent bank failing (HSBC)

- In February 2024, HSBC was issued a £57million fine by the Bank of England's Prudential Regulation Authority for serious failings in protecting some customer deposits over several years.

IN 2022, what was the value of UK exported goods and services vs imported (from ONS)

- UK exported £825bn of goods and services, while it imported £902bn

Example of income inequality within a HIC (NORWAY)

- The average household net-adjusted disposable income per capita is $35,725 a year, higher than the OECD average of $33,604 a year

- However, the top 20% earn four times as much as the bottom 20%

Life expectancy in Norway and level of atmospheric PM2.5 (useful for example of economic development and low environmental damage- support of Kuznet's curve) (NORWAY part 2)

- LE= 83 years, three years higher than the OECD average of 80 years

- Level of atmospheric PM2.5 is 4.6 micrograms per cubic meter, considerably lower than the OECD average of 13.9 micrograms per cubic meter.

In Norway, what percentage of employees work very long hours?

- 3%, much less than the OECD average of 11%

How much did house prices fall by in 2023? (link to wealth effect)

2%

UK steel industry protection- post brexit

- There is a UK steel safeguard measure- a quota on imports of certain steel products and a 25% tariff on imports above the quota

- This aims to protect the UK domestic steel industry from a surge in imports

- Scottish Rent Freeze + government failure [5]

- The Scottish government introduced a rent increase cap on rented housing and a pause on some evictions in 2022

- The rent cap increase was set at 0%, effectively freezing rents

- The intent was to protect tenants during the cost of living crisis

- Critics of the policy however, argued freezing rents risks hitting new supply of rented property especially in the private sector, which may then worsen affordability and availability problems over the longer term.

- It may negatively impact on other Scottish government objectives around net zero and energy efficiency- as freezing rents could reduce landlords' “incentive to accelerate this transition”, given the high cost of “going green”.

Exam gold on Market failure [4]

- All real world markets fail- such as product, labour and financial markets

- If markets are not self-correcting and efficient in allocating scarce resources, there is a case for government intervention

- Intervention comes in different forms affecting both the demand and supply-side of a market

- With intervention, there is the risk of government failure

2 reasons for the long-run decline in UK trade union membership

- Structural change in employment: from heavy manufacturing and large public sector employment to a more flexible labour market dominated by services where unionisation rates are much lower

- Globalisation and flexible hiring: many multinationals make it harder for trade unions to organise. The rise of the gig-economy has led to a rise in contingent, non-contacted, self- employed workers- most of whom are not TU members.

Online retailers worker exploitation (Boohoo)

- In 2023, activists asked online fashion retailer Boohoo if it will pay £125million in underpaid wages to workers in Leicester factories.

Comment on the PED for carbon permits [5]

- Is likely to be relatively price inelastic in the short term but more elastic in the long term

- In the short-run, the cost of switching to greener energy sources is high

- Over time, we expect to see a wider range of more affordable low-carbon technologies

- The PED for carbon permits is likely to vary by industry

- PED might also be affect by the extent to which the EU market prices are expected to remain high

Example of how firms can use data on XED to increase revenue and profit

If firms compete in a duopoly, given their interdependence, if the competing firm increases price, and there is high positive XED, the other firm would rather keep prices low to boost revenue, such as (coke and pepsi).

Electric car charging part 1 [3 points]

- As of 1 January 2023, there were 37,055 public electric charging devices installed in the UK

- But this is not enough. In 2020, analysis into achieving a fully zero-emission capable UK car market detailed that 1.7 million public charge points were required by 2030, rising to 2.8 million by 2035.

- This is expected to cost £16.7 billion

Electric car charging part 2 [3 points]

- Without enough charging points - EV ownership is not practical

- Many people have "Range anxiety"- fears over the distances EV's can travel between charges- often cited as one of the key barriers to people buying electric vehicles

Bank Failures- Northern Rock

- Northern Rock failed as a bank in 2007 and was nationalised in 2008.

- It was split into "bad" and "good" sets of assets and operations, with Virgin Money buying the latter

- Northern Rock's demise was a shock to the regions economy, as was the banking crisis that followed, as about 2,500 jobs were lost.

Which firms revealed they made huge profits in 2023 despite the economy growing by only 0.1% in that year?

- NatWest revealed a pre-tax profit of £6.2bn

- Centrica (British Gas Owners) showed a 10-fold jump in profits to £750m.

Which UK Cosmetics firm went into administration in 2023

The Body Shop

The Chairman of Rekom- the UK's biggest night-club chain- blamed what for the closure of 17 venues across the UK?

- The cost of living crisis

- He claimed that it caused a number of students to cut back on spending by reducing the number of mid-week visits to nightclubs

During February 2024, an agreement for tariff-free trade between the UK and which country was extended? [2]

- UK and Ukraine tariff-free trade agreement was extended to 2029

- UK farming representatives showed concern on how the agreement may impact on the UK's domestic production.

Which Nation in February 2024 announced an increase in its minimum unit price for alcohol? [2]

- The minimum price for alcohol in Scotland was announced to increase by 30% under refreshed plans to tackle deaths and hospital admissions

- The increase was from 50p to 65p per unit.

In February 2024, the Treasury announced that they are reviewing and potentially reversing which policy implemented in 2020? [2]

- Making foreign tourists pay VAT on purchases.

- It is estimated that allowing VAT-free shopping for tourists would cost the Treasury £2bn a year but may boost the economy through increased tourism and spending.

Example of economic growth being more important than going green (for developed countries) [2]

- In Feb 2024, The Labour Party announced a reversal of its policy of spending £28bn per year on green ventures

- The policy had been a flagship promise of the party, but Party leader Keir Starmer said that the spending pledge was not currently affordable for the UK government.

THE WATER INDUSTRY background (Natural Monopoly) [4]

- The Water industry in E&W was privatised in 1989

- Most water and sewage companies are regional monopolies, with dedicated pipe networks and water supplies

- There was no provision for the introduction of competition, the main aims of water privatisation were to raise revenues and rely on the capital market to future large capital requirements of the industry.

- OFWAT is the economic regulator of the water sector in E&W, and the regulator assess investment plans every 5 years.

PROBLEMS WITH THE E&W WATER SECTOR [3]

- Water cost households in E&W on average, £405 a year (2018/19)

- Water leakages remain a problem

- At the moment, 3 billion litres are lost every day, enough to fill over 1,000 Olympic-sized swimming pools.

THAMES WATER POINTS FOR RE-NATIONALISATION [2]

- Over the past decade- for most of which it was controlled by Australian Bank Macquarie- Thames water paid out approx £2bn in dividends, paid little UK corporation tax, and had subsidiaries in a tax haven, the Cayman islands

- In March 2017, Thames water was fined £20m for releasing raw sewage into the Thames

(Point: Has ability to significantly reward its shareholders, yet is inefficient)

BACKGROUND TO RAILWAYS IN UK (Natural Monopolies 2) [3]

- British Rail was Privatised under a Conservative Government in 1993

- It was divided into 2 main parts: one being the national rail infrastructure (such as the track and bridges), and the second being the operating companies whose trains run on the network

- Network Rail is the state-owned company which owns and maintains the infrastructure, and the rail services are run by privately-owned train operating companies

Problems with the Rail Sector [5]

- Profit Margins in the rail industry have declined on average, from 3.6% in 1998 to 2.9% in 2014-15

- Rail fares have gone up by an average of 121% between 1995 and 2017, with long distance fares increasing most

- Rail fares are roughly 70% higher than in 2007, compared with a 30% increase in motoring costs over the same time period- meaning rail fares have increased in relative terms

- Passenger satisfaction has been in steady decline since the Passenger Satisfaction Survey began in 2011.

- The cost of peak and anytime rail tickets in Britain are some of the highest in Europe.

3 Reasons for NATIONALISING the Rail System

How much was spent on debt interest and health in 2023?

DI= £116bn

H= £245bn