Government intervention has a huge influence on the regulation of firms operating in the leisure goods industry, and on the spending power of consumers and other businesses.

The government needs to reform the UK tax system to make it more competitive, simpler, greener and fairer. Major tax reform is necessary to enhance the international competitiveness of the leisure goods industry and the UK in general. Reforms to the corporate tax regime set out in the Budget will partly achieve this. Also, better tax policy making needs to be underpinned by greater transparency, a central theme in the Coalition Programme for Government. These reforms will restore the UK tax system’s reputation for predictability, stability and simplicity and indeed make the leisure goods industry internationally more competitive.

The firms operating in the leisure goods industry are paying corporate tax for the year 2010-2011 at the rate of 28%. This is not very competitive compared to other countries such as Ireland 12.5% or Montenegro 9%.

As from 4th of January 2011 the new standard VAT rate for the UK will be 20%. This 2.5% increase from the previous 17.5% could affect sales and revenues in the leisure goods industry. This increase could also fuel inflation which will furthermore affect the industry. The impact on the overall industry will be that they will need to find new cost effective strategies in order to maintain their low prices.

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Economic factors:

The leisure goods industry was an early casualty of the global economic recession. The demand for these products has decreased in the past two years because spending on leisure goods is discretionary.

The Bank of England’s Monetary Policy Committee voted on the 10th of February 2011 to maintain the official Bank Rate paid on commercial bank reserves at 0.5% for the 23rd month since March 2009 despite pressures of inflation.

The UK rate of inflation is now at 4%. Two main reasons for this are the rise in VAT and the continued increase in crude oil prices. Both of these factors are impacting negatively on the competitiveness of the leisure goods industry as it now faces higher costs. This surge in inflation could also provoke higher wage demands from employees. This rate is well above the interest rate which means that consumers have decreased spending power. This will have adverse effects on the leisure goods sector resulting in decreased demand for leisure goods.

A bold monetary policy that balances inflation and interest rates is needed to allow medium-term growth in the leisure goods industry and in the overall economy and to ensure borrowers’ finances are sustainable.

The rate of unemployment in the UK in 2011 is 7.9% but for 16 to 24 year olds it is 20.3%. This means that general consumer incomes are low and demand for leisure goods is also low.