EUROPEAN BUSINESS ENVIRONMENT second one - Essay Example

It brought about a vast expansion of the market. Moreover, this act established uniform rules throughout the EU in respect of trading practices. Some of the areas affected by this act were first, qualifications obtained in one Member State were accorded recognition in all the other Member States; taxation methodology and control over governmental assistance to domestic industries (ley Berry). In July 2006, the British Pound performed dismally in respect of the euro. This was in conformity with the general expectation that the difference in interest rates between the EU and the UK would adversely affect the UK currency.

The European Central Bank or the ECB and the Bank of England or the BoE did not allow the interest rates to change and in a survey by Halifax, it was clearly revealed that house prices had reduced by 1.2 percent in June 2006 (Sterling slips on UK/euro zone rate expectations, 2006). Further, in May 2006, there was a spurt in manufacturing and in the first quarter of 2006, the mortgage equity withdrawal increased to approximately twelve billion pounds sterling. In this context, the president of the European Central Bank, Jean-Claude Trichet stated that the interest rates would not be altered (Sterling slips on UK/euro zone rate expectations, 2006).

However, he hinted that the ECB was likely to increase the interest rates. In the month of July 2006, the forward exchange rate for one euro was 69.51 pence, however in comparison to the US Dollar there had been a 0.3 % increase in the value of the Great Britain Pound (Sterling slips on UK/euro zone rate expectations, 2006). The UK was not willing to make the euro their currency. On the 9th of January, 2005 the UK Prime Minister, Tony Blair, stated that on account of economic considerations, the UK was not in a position to change its currency to the euro.

In the BBC programme Breakfast with Frost, Blair stated that it was essential to consider what was