UK companies have to pay the same real interest rates as Europeanand North American companies, but they are in general less profitable sothere is less breathing space between profits and interest. Consequencesinclude shorttermism by both the City which is reluctant to lend andcompanies which are reluctant to borrow when investment is so risky.Another consequence is that UK Boards of Directors are dominated byaccountants rather than those who lead production, research andmarketing. The real rate of return is best raised by increasingproductivity more than wages and by moving upmarket where highermargins can be earned. Industrys difficulty is that moving upmarketinvolves R&D which cannot easily be financed when profit rates areonly slightly above interest rates. Emphasizes the advantages toindustry of low inflation, low government borrowing and a tight controlover public expenditure leading to internationally low tax rates.
International Journal of Manpower – Emerald Publishing
Published: Jun 1, 1993
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