The government’s review of regulators to reduce burdens for businesses post-Brexit

Last month, the government launched a review of regulators to reduce burdens for businesses post-Brexit and improve customer outcomes. Worthy activity? Possibly, but possibly not.

The purpose of regulation is to ‘protect and benefit people, businesses and the environment and to support economic growth,’ according to the National Audit Office. In effect it is a way for the government to discharge its purpose - namely to undertake the management of the UK in the best interest of its citizens.

As part of this, the government needs to find ways to make the UK wealthier, so as to be able to provide more by way of public services to the population of the UK – whether that be, for example, in the allocation of more money to the NHS or an increase in defence spending.

So, how best to achieve the overall objective?

The starting point in considering the review of regulators is to look at its objective. In this respect, the review is flawed. While the review focuses on determining the ‘areas’ that are working well, as well as where regulators could improve, the review highlights that ‘burdensome regulations have hampered growth’. Indeed, Secretary of State Badenoch states that she “wants to use our Brexit freedoms to scrap unnecessary regulations that hold back firms and hamper growth”.

The announcement of the review contained repetitious statements and phrases suggesting a belief by both the Department for Business and Trade (DBT) and the Secretary of State that if something is repeated it will carry more weight.

Be that as it may, the review is part of the government’s Smarter Regulation Programme. It has been commenced alongside six other DBT reviews as part of the Programme – two of which are open for consultation and four which have closed suggesting that the submissions made as part of such consultations are now being considered by government. In particular, the announcement of the review makes clear that it is complementary to the existing separate specific reviews of Ofgem, Ofwat and Ofcom.

A review which therefore considers whether regulators – being those charged with the application and enforcement of regulations – are fulfilling their statutory duties correctly should be welcomed. Indeed, one has only to recall the considerable adverse publicity concerning the discharge of untreated sewage by a number of water companies, which gushed over Ofwat earlier this year, to appreciate the effluent which can result when a regulator fails to do so.

Further, if a review should lead to an improvement (however such improvement is to be measured) in such application and enforcement by regulators, then the review of the regulators will have served a good purpose.

The regulators or the regulations

But the overall impression given by the announcement of the review and the claims made in the announcement that ‘39% of small businesses say red tape holds them back’ is that it is not necessarily the regulators that are ‘hampering growth’ but the regulations that they apply.

For UK exporters, the red tape in question is the need to comply with two sets of regulations – UK and EU. This was highlighted earlier this month by Peter Foster in the Financial Times who drew attention to a study undertaken for the British Beauty Council by Oxford Economics. The study was concerned with how exports of UK cosmetics and personal care products have shrunk since the UK left the EU from £3.6bn in 2017 to £2.7bn in 2022. In contrast, exports of UK cosmetics and personal products to the rest of the world over the same period fell by £73m.

In their report Oxford Economics stated: ‘the trade barriers that arise from increased costs and complexity of trading with Europe since Brexit have created obstacles to growth of the personal care industry’.

In turn, this suggests that this review is by a government casting about – as previous governments have done – to identify the ‘red tape’ which can be cut back or, possibly, the regulators that can be served up as scapegoats. But it is red tape which this government has effectively increased and seems determined to increase further through its objective to diverge from the ‘red tape’ of the UK’s largest trading partner. Or as Peter Foster has described it, Brexit 2.0.

As might be said in some parts of the EU, J’accuse.

Stephen Sidkin is a partner at Fox Williams LLP
foxwilliams.com

The views expressed in this article are those of Stephen Sidkin and are not necessarily those of the company he works for.