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Government Policies Affecting Businesses

Government Policies Affecting Businesses. BUSS4 Political and Legal. The European Union (EU) Britain is a member of the EU The EU is a community of countries that form a single market There are laws on the free movement of people, goods & services, and capital between all of these countries

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Government Policies Affecting Businesses

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  1. Government Policies Affecting Businesses BUSS4 Political and Legal

  2. The European Union (EU) • Britain is a member of the EU • The EU is a community of countries that form a single market • There are laws on the free movement of people, goods & services, and capital between all of these countries • At this time there are 27 members with 500 million people generating over 30% of the world’s economic activity

  3. EU Expansion • There are advantages to the UK from the enlargement such as • A larger market to export to without paying import taxes or customs duties • The EU is a huge market (500m) • Compare this to the US which is a market of 300m giving the US a competitive advantage

  4. EU Expansion • Freedom of movement of people gives businesses a source of labour that is often cheaper and skilled • Gives the economy an opportunity to grow in the long term (more factors of production) • This is often argued as a disadvantage because it puts downward pressure on wages but this does help to prevent wage inflation

  5. Insert A grade application P288

  6. Single European currency • The UK does not want to move from the pound to the Euro • The main reason for this is that they would lose their main tool to combat inflation • This means that UK Businesses have to worry about changes in the exchange rate • The pound is relatively weak compared to the Euro • This means imports are expensive (WIDEC) • Companies like Majestic Wine that import a lot of European wine will find their profit margins changing as the exchange rate fluctuates

  7. Free Trade • The EU is part of the World Trade Organisation which seeks to promote free trade • If EU starts a trade war with any other country this will affect UK businesses • China is currently being accused of dumping cheap solar panels in the UK which is damaging EU competitors • The EU placed an anti dumping tariff on China which makes their panels more expensive • China retaliated by putting a tax on wine • Who knows what they could decide to put a tax on next • The UK recently tripled its business with China to GBPb15.9bn

  8. Legislation • UK businesses have to abide by laws set by the UK government and the European parliament • There are four main areas that these laws affect • Employment • Consumer protection • Environmental protection • Health and Safety

  9. Employment Legislation • Employment legislation often creates extra costs for businesses • It is designed to give rights to fair pay, sick leave, maternity and paternity leave , relationships with trade unions, rights to sack or make staff redundant • It is meant to protect workers • Just keeping up with the law costs money and then there are the administrative costs • A Business may need to pay for advise • Legislation takes flexibility away from businesses which often means they are paying higher wage bills than they would like See video - http://www.bbc.co.uk/news/business-12949382

  10. Insert table on P290

  11. Consumer Protection Legislation • Consumer protection legislation makes sure • The product does what it says it does • The products are correctly labeled and measured • The products meet safety standards • The consumer has the right to return or exchange faulty goods • It tries to prevent unfair competition by firms that take short cuts or use unsafe and cheaper materials to gain a competitive edge

  12. Environmental protection legislation • Perhaps more than others these laws are seen to add cost without having an upside • It is difficult when you compete with other countries that have less stringent environmental laws ; their costs will be lower and hence prices may be lower Health & Safety Legislation • This is designed to ensure the safety of employees and customers Add A grade application P290

  13. Evaluation • Legislation seeks to ensure that all firms compete on a level playing field • This is a noble goal but with increased international trade this legislation can affect costs and make firms uncompetitive; global laws are never going to be identical • There is a lack of evidence to show that market forces will drive out unscrupulous firms and therefore government should not intervene

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