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 At this time there are 27 members with 500 million people generating over 30% of the world’s economic activity

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

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

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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

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

There are four main areas that these laws affect 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

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

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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

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

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