The number of businesses in private sector is growing every year in United Kingdom, according to fsb.org.uk there were 5.4 businesses registered in UK which grew by about 2.7% from 2014. These are the list of top 3 economic reasons why businesses fail, based on our finding from other resources.
In perfect competition there are a lot of businesses that offers identical products and services. Higher the number of companies register the higher the competition. According to gov.uk the problem in market sector is when market is working well companies compete by offering cheaper and better product to their customers.
Fail to pay tax
According to simplybusiness.co.uk one of the reasons why businesses fail in UK is because they are unable to pay taxes. It is highly likely that most companies are unable to pay their tax on time and according to Simply Business the firms should HMRC immediately when they are having difficulties in paying their tax.
Another economic reason why businesses fail in UK is due to the lack of enough budget. According to the intuit.co.uk 29 percent of the small business failure is due to not having enough cash. Based on an article published at telegraph.co.uk the businesses fail due to lack of banks lending. The companies likely to fail with small budget and when there is limitation in borrowing money from banks to finance the operation of their business.
Malaysia is open economic country with stable economy. According to World Bank Malaysia has the largest economy in South East Asia with the growth of over 7 percent per year for over 25 years. Based on the 2016 report by heritage.org the freedom score increased by 0.7 points with new score being 71.5, it makes Malaysia 29th in Global Ranking. The corporate tax rate in Malaysia is 25 percent and income tax rate is 26 percent.
Malaysian education is among the top around the world, the quality and affordability of education is one of the greatest contributors for skilled employees in Malaysia. In 1997 the government established government loan called Perbadanan Tabung Pendidikan Tinggi Nasional or in short it is know as PTPTN loan. The loan is made by the government with 1 percent interest per annum and every Malaysian who wish to study should not be denied to get a loan due to financial background. This loan encourages Malaysians to study and be educated employees. Malaysia is among the best countries in terms of skilled employees and it makes it ideal location to invest and conduct business.
The technology is one of the main exported goods of Malaysia, according to OEC the 12 percent of Malaysian export in 2014 was Electronic Microcircuits, 1.8 percent was computers and 1.9 percent was computer parts. The electronics such as computers are essential in conducting business and these products are relatively cheap in Malaysia and it helps the investors to reduce cost in their initial startups. There are other technologies available to export from Malaysia the quality of Malaysian products are considered favorable around the world.
The current interest rate in Malaysia is 3.25 percent and the inflation rate is at 3.5 percent, if Bank Negara Malaysia or Central Bank of Malaysia reduced the interest rate the inflation rate would increase in Malaysia. In an economy when there is too much money the inflation rate increases, reduction in interest rate will discourage from depositing and it will encourage in borrowing. The low interest rate reduces the cost of borrowing due to this most of the people will finance their cars, houses, businesses and investments by borrowing money from the bank. The interest rate is relatively low in current economy of US and Europe, but the central bank put restriction on Banks in lending money, that is why the inflation rate is low even that the interest rate is low. The central bank of US and other developed countries control the banks through Macroprudential policy.
Why would inflation rate increase if Bank Negara Malaysia reduced interest rate?
The inflation rate will increase if Bank Negara Malaysia reduced interest rate because they would be too much money in the economy of Malaysia. For many years Malaysian government has been battling with high inflation rate that is why they have been giving subsidiary in petrol, utility and other things. If the central bank of Malaysia reduces the interest rate then there will be an increase in inflation rate, but if the central bank of Malaysia also introduces Macroprudential policy then they will be slowing down of output. The restriction on banks to give loans to consumers and businesses will reduce the output because most of the people finance their houses and cars through bank loans. The current interest rate of Malaysia is in optimal point and it takes time to reduce inflation rate.