1. Governmental Opportunities and Constraints

2. Content Government policies affecting business: UK and EU Law
Health and safety
Employment
Consumer protection
Competition
Economic policy
Fiscal and monetary policies
Intervention vs. laissez faire
Privatisation

3. Business Law
There are a number of different laws that govern how businesses operate
There are three main sources of these laws:
Acts of parliament
Common Law
European Law

4. Health and Safety Law
This aims to discourage dangerous practices by businesses and protect the workforce
Main act is the health and safety at work act, 1974
Health and safety executive oversee the act
This has increased costs but also ensures that accidents are reduced

5. Employment Law
Employment laws cover individual and collective labour laws
Individual labour laws look at the rights and obligations of individual workers
Collective labour laws look at the activities of trade unions and the conduct of industrial relations

6. Individual Labour Laws
The Sex Discrimination Acts, 1975, 1986
The Race Relations Act, 1976
The Disability Discrimination Act, 1995
The National Minimum Wage Act, 1998

7. Collective Labour Laws
Employment Acts, 1980,1982
The Trade Union Act, 1984
The Trade Union Reform and Employment Rights Act, 1993
The Employment Relations Act, 1999

8. Employment Laws and Business
Employment laws may increase costs of labour
However they can increase motivation as workers are better paid and feel more secure
Collective labour has allowed the workforce to become more flexible

9. Consumer Protection
Consumer protection legislation aims to safeguard consumers against:
Businesses charging excessive prices / rates of interest
Unfair trading practices
Unsafe products
Having insufficient / incomplete information to base purchasing decisions on

10. Consumer Protection Laws
Sale of Goods Act, 1970
Consumer Protection Act, 1987
The Weights and Measures Act, 1986
The Consumer Credit Act, 1974
The Control Of Advertising – this is controlled by:
The Trade Descriptions Act, 1968
Advertising Standards Authority

11. Impact of Consumer Protection Laws
To meet all these laws / requirements can prove expensive to businesses
It can also lead to higher consumer expectations which add further costs to businesses
Small businesses feel the impact of these costs the most

12. Competition Law
This is meant to create free and fair competition in the UK and the EU
Unfair competition may arise because:
Monopoly power is abused
Mergers and takeovers
Restrictive practices
The Competition commission investigates unfair competition practices
The office of fair trading ensure all firms comply with relevant legislation
Watchdog organisations monitor some firms that have over 25% of the market e.g. OFTEL and BT

13. Key Competition Laws Fair Trading Act, 1973
Restrictive practices acts, 1956, 1968 and 1976
The Competition Acts, 1980, 1990
The EU’s competition policy:
Laws prevent any activities restricting free competition in the EU
Laws stop any firm abusing a dominate position in any EU market
The EU controls any merger creating a new firm with a turnover greater than £4.2 million

14. Economic Policy
Economic policies are the actions through which the authorities try and create the best possible economic environment for businesses and individuals
Economic objectives are what the government wants to achieve and include:
Stable prices
Steady and sustained economic growth
Low unemployment
A balanced balance of payments

15. Economic Policy
The governments key economic policy objective is to achieve high and stable levels of growth and employment
The government uses a range of policies to attempt to achieve their objectives

16. What is fiscal policy
Fiscal policy monitors how government spend their money and how
they control their taxes.
Contractionary fiscal policy: this is done when the government reduces spending or increases taxes higher, they try to increase their PSBR( public sector borrowing requirement) to fund the tax drops they also do this to reduce its surplus on its budget for the fiscal year.
Expansionary fiscal policy: This is when the government cut taxing or increase government spending. They will increase the amount the government borrows to fund the expenditure.

17. Direct & indirect taxes
Direct taxes are taxes of income and expenditure e.g. income tax, corporation tax(levied on company profits).
Indirect taxes are taxes such as VAT (value added tax), changes in this type of tax has a rapid effect on the level of economical activity. E.g. an increase in VAT will cut consumer spending and in turn lower levels of economic activity

18. Government Expenditure
Governments spend in two ways:
Transfer payments – money spent on unemployment benefits, pensions etc
The infrastructure – this includes spending on houses, roads, education etc

19. Monetary Policy
This looks at controlling the amount of money in circulation and therefore spending and economic activity
Monetary policy covers:
Changing interest rates (the most commonly used tool by recent UK governments)
Controlling the money supply
Manipulating the exchange rate

20. Changes to Interest Rates
If interest rates increase it is likely that consumer spending will decrease reducing the level of economic growth which can lead to falling sales for businesses as demand may be reduced
If interest rates decrease then demand is likely to increase leading to an increase in economic growth which leads to an increase in sales for businesses

21. Impact of changes to interest rates
Small firms are most vulnerable to changes in rates especially if they have a high level of borrowing
Firms with lots of overseas trade may also be heavily affected as a rise in interest rates tends to increase exchange rates

22. Intervention vs. Laissez Faire
Government intervention is where the state has a high level of involvement in business matters
Laissez faire is a policy where governments reduce taxation and spend less on supporting business activities

23. Government Intervention vs. Laissez Faire
Government intervention tends to increase costs and decrease competitiveness of businesses
The laissez faire approach helps to increase the level of entrepreneurs in an economy
A disadvantage of the laissez faire approach is it doesn’t protect struggling industries and poor regions

24. Privatisation
Where the ownership of businesses is transferred from the state to private individuals
This was a common occurrence in the UK in the 1980s and 1990s
Advantages of privatisation:
Removes potentially inefficient monopolies offering consumers more choice and better products
Private businesses are more likely to adopt longer term strategies
It creates revenue for the government

25. Disadvantages of Privatisation
In reality it may not create more efficient industries
As these businesses now have shareholders they have not adopted long term strategies instead adopting shorter term strategies to get the returns demanded by shareholders

26. Summary
There are a number of EU and UK laws which govern how businesses operate
Health and safety law aims to protect employees and ensure that the work environment is safe
Employment law includes individualist and collectivist legislation
Consumer protection laws protect the consumer and ensure that they know what they are getting
Competition law aims to prevent unfair competition
All laws incur costs for businesses that can impact their profitability
Economic policy is the actions that the government takes to meet economic objectives such as an increase in economic growth
Monetary polices aim to control the amount of money in the economy usually through the manipulation of interest rates
Fiscal policies look at government incomes and expenditure
Government intervention describes where the government plays a key role in business activities whereas a laissez faire policy is one with little government involvement
Privatisation is the sale of public companies to private individuals