Please find below our initial critique of Section 1, paragraph 1 of this years’ OCR GCSE Business Studies A293 Case Study on The Regeneration of Bowton, Tom’s Toys and GG Toys plc. This is just a tiny Extract of what will be included in our highly acclaimed Teacher’s Companion / Student Revision Buddy produced to support teachers and their students on the pre-released case study.
Explanation of Key Terms, Concepts and Issues Raised
SECTION 1 Is it the end for Bowton?
The Difficult Economic Conditions between 2008 and 2011
P.2, Section 1 – lines 6-9.
What the Case Study says
The case study tells us that between 2008 and 2011:
- ‘Unemployment rose by 6,000, meaning that by 2011 14,000 out of a workforce of 80,000 were out of work’.
- ‘Incomes fell by 8% on average’.
- ’42 businesses closed and only 15 start-ups occurred’.
What is meant by ‘unemployment’ and ‘incomes’?
Unemployment is the number of people in the working population who are unable to find work. It is measured by subtracting the number of people actually in employment from the total number of people able and willing to work. From the information provided in the case study, we can also calculate the unemployment rate, ie the number of unemployed people expressed as a percentage of the number of people willing and able to work. This was 17.5% for Bowton in 2011 (6,000 / 14,000 x 100). A quick search on google reveals this to be more than double the national average at this time; this ranged from 7.7% to 8.4% between January and December 2011. (Source: https://www.google.co.uk/search?q=the+UK+unemployment+rate+in+2011&oq=the+u&aqs=chrome.0.69i59j0j69i59j69i60l2j69i57.1503j0j7&sourceid=chrome&ie=UTF-8)
The reference to ‘incomes’ falling concerns consumer incomes, not ‘income’ related to business accounts. It is the money individual consumers earn from working, investment (eg interest on savings accounts, dividends on any shares held in companies), or other sources (eg gifts from family and friends). Consumer incomes can actually be classed into:
- disposable income – the money left over after compulsory deductions, such as tax and national insurance payments, have been made.
- discretionary income – the money left over after people’s basic necessities eg food, drink, mortgage, clothes, travel to work, etc have been paid.
Household income is also often used as an economic indicator ie a measure to assess the state of the economy at a particular point in time. This is the combined gross income of all the members of a household who are 15 years old and older. (NB Household members do not have to be related to be considered members of the same household).
>How can a rise in unemployment, fall in incomes and business closures affect consumers, businesses and the government / local authority?
When people are unemployed, sales of goods and services generally fall, particularly for businesses selling (or manufacturing) non-essential items ie luxuries (such as toys), as well as income-sensitive goods (such as houses and cars), as opposed to necessities (such as food and medicines). This is because unemployed people have less income to spend on goods and services.
With less sales a business has less revenue and is likely to make less profit, and with less revenue coming in to cover fixed costs, it may also suffer from cash flow problems. Poor financial reward in terms of profit and / or inability to meet debts as they fall due can, ultimately, result in business closure. In the case of Bowton, although there were 15 start-ups during the period, 42 businesses closed. These businesses could very well have been those selling non-essential items, or income-sensitive goods.
Bowton Council would have been concerned about the rise in unemployment, fall in incomes and business closures because higher unemployment and business closures means less revenue for the Council / government from taxes (eg PAYE, NI, VAT, corporation tax and business rates). Furthermore, falling incomes means greater spending on welfare benefits. This includes, for example:
- paying unemployed people income-based Jobseeker’s Allowance.
- providing people on a low income any one, some or all of the following benefits: housing benefit and income support (soon to be replaced by universal credit), council tax reduction, working tax credit, child tax credit, help with one-off expenses through the Social Fund, and / or help with health, education and legal costs.
It is, therefore, not surprising that Bowton Town Council sort to address the situation through their ‘Regeneration Plan’ (discussed further in a subsequent section below).
On a positive note, businesses that manage to survive a period of high unemployment (and falling incomes) may benefit from the following:
- easier recruitment – as there should be more applicants for each vacancy.
- less pressure to increase wages – as there will be a greater supply of unemployed labour.
- increased staff retention / lower labour turnover – as employees will be less likely to leave, with fewer alternative job opportunities available elsewhere.
In the case of Bowton, businesses benefited from the Council’s decision to offer grants to businesses that wanted to locate or expand in the town, as the area became in need of regeneration (lines 13-16). (These grants are discussed in detail in a subsequent section of this Companion / Revision Buddy).
In detail our Complete Teacher’s Companion / Student Revision Buddy contains:
- a step-by-step explanation of the key terms, concepts and issues raised (directly or indirectly) in the Case Study. These are discussed in the order in which they appear in the Case Study.
- a wide range of mini quizzes, (including answers) – to check and consolidate students’ understanding of the above, and to help make revision fun. This includes word searches, missing word exercises, classification, opposite activities, match making exercises, crosswords, and short question and answer exercises.
- a mock examination paper – to enable students to be tested in more formal examination conditions.
- mark schemes and a highly comprehensive range of responses to each question posed in the mock examination paper.
- a list of useful web addresses – providing access to information and videos on topics raised in the Case Study – for students to carry out further research independently.
- tips on how to maximise performance in the exam.
The Complete Teacher’s Companion / Student Revision Buddy is due out 31 October 2017 – £75 (+vat) download version (+£2.50 for CD)
Two additional mock papers will also be published by the 30 November 2017 – £25 (+vat) download version (+£2.50 for CD)
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