Regulators may be cut down as government guns for growth

UK Government Considers Reducing Industry Regulators to Boost Economic Growth

The UK government, led by Business Secretary Jonathan Reynolds, is considering a significant overhaul of the regulatory framework governing British industry and commerce. In a recent announcement, Reynolds hinted at the possibility of reducing the number of regulators overseeing businesses, as part of a broader effort to stimulate economic growth. He made these remarks during the launch of a consultation aimed at reforming the Competition and Markets Authority (CMA), the primary body responsible for regulating mergers and acquisitions in the UK. Reynolds emphasized that the current landscape of multiple regulators could be acting as a barrier to economic success, particularly for businesses navigating complex and often overlapping regulatory requirements.

The CMA Reform and Calls for a Simpler Regulatory Framework

Reynolds’ comments come on the heels of a significant shake-up at the CMA, where the former chair was forced to resign last month. This move was part of a broader effort by ministers to remove perceived barriers to economic growth. Businesses are now being invited to contribute to the reshaping of the CMA’s priorities, signaling a shift toward a more business-friendly regulatory environment. Reynolds highlighted that the reform of state watchdogs, whose roles include consumer protection, may not stop at the CMA. "We have to ask the question: have we got the right number of regulators?" he said, adding that business leaders frequently express frustration with the slow and often theoretical approach of regulators, which they argue lacks an understanding of how markets and businesses operate in practice.

The Complex Landscape of UK Regulators Across Sectors

The UK’s regulatory landscape is indeed complex, with multiple bodies operating across different sectors and government departments. For instance, Ofwat oversees the water industry, while Ofcom regulates telecoms and parts of the media. In financial services, the post-2008 crash regulatory framework has led to the establishment of several overlapping bodies, including the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), and the Financial Policy Committee (FPC). This multiplicity of regulators can create challenges for businesses seeking to navigate the regulatory environment, particularly smaller firms with limited resources.

Drawing Comparisons with the US Regulatory Approach

Reynolds drew a direct comparison between the UK and the US regulatory approaches, particularly in the aftermath of the 2008 financial crisis. He pointed out the stark divergence in economic outcomes between the two countries, with the US experiencing higher GDP growth and average incomes. Reynolds argued that the US has taken a bolder approach to regulation, which he believes has contributed to its economic success. However, he was quick to reassure that the focus on growth does not mean compromising on consumer protection. "Effective regulation cannot be protecting people from risks by simply closing down or preventing whole areas of business activity," he said. Instead, the goal is to strike a balance that allows for innovation and risk-taking while safeguarding consumer interests.

Addressing Consumer Concerns and the Need for Bold Reforms

Reynolds acknowledged that there may be concerns about the potential impact of deregulation on consumer protection. However, he argued that the current approach is not sustainable, as it risks stifling economic growth and failing to deliver the living standards and public services that people expect. "The biggest risk is continuing as we are, because that is not going to give people the living standards, the public services they expect," he said. Reynolds emphasized the need for bold reforms, suggesting that the UK cannot afford to maintain the status quo if it hopes to remain competitive in a global economy.

Looking Ahead: Potential Exemptions and Global Engagements

In addition to domestic regulatory reforms, Reynolds also touched on international trade issues, particularly the UK’s efforts to secure exemptions from US tariffs on aluminium and steel for defence-related exports. He expressed optimism about the potential for engagement with the US on this issue, stating that the UK has a strong case to make. "I believe we can engage with them on their agenda, and I do feel that where there are concerns about the global steel and aluminium industries, I have a very strong case that the UK is not the problem within that, and I think there’s a basis for a discussion," he said. This approach reflects the government’s broader strategy of positioning the UK as a key player in global trade and commerce, while also addressing domestic regulatory challenges.

In summary, the UK government is signaling a shift toward a more streamlined and business-friendly regulatory environment, with the goal of stimulating economic growth and improving living standards. While the details of the proposed reforms are still under consultation, the emphasis on reducing the number of regulators and learning from international approaches like that of the US suggests a bold new direction for UK economic policy.