Post-Brexit Redesign of the UK's Regulatory Framework: Harmonizing Growth and Safeguarding Interests
By Patrick Adams,Consultant
Considering the declining productivity fuelling the UK's economy, the Government is seizing the opportunity Brexit provides to recalibrate the delicate balance between economic growth, innovation, and consumer protection. The Smarter Regulation to Grow the Economy paper released in May outlines the Governments aims to foster economic growth via intelligent regulation.
The Government's strategy is not to repeal EU laws en-masse from the UK statute book but to diverge from EU regulations with economic goals in mind rather than ideology. Previously, when Boris Johnson was Prime Minister, critics felt there was divergence for the sake of divergence. However, the Government has since stepped back with the Retained EU Law Bill and has removed the sunset clause.
Sunak’s Government appears to target divergence in specific areas which is already apparent in measures such as the UK AI White Paper and the Edinburgh reforms, positioning the UK as a science and technology superpower. The smarter regulation paper which emphasises early independent scrutiny, aligns regulatory activities with government priorities, and reduce regulatory burdens, aims to stimulate investment and productivity to make the UK thrive globally. The smarter regulation paper also states we can expect announcements on the Working Time Regulations and the Government has opened a call for evidence on Smarter regulation non-financial reporting.
A new framework outlined in the Smarter regulation paper, aiming for better regulation, is being developed by the Department for Business and Trade to stimulate UK businesses' competitiveness globally. This framework seeks to usher in independent scrutiny early in policy development, ensuring a proportionate and balanced consideration of credible risks. Set to launch this summer, it will focus on dynamic factors beyond immediate compliance costs and encourage intelligent, forward-looking regulation. Following principles laid out in the Benefits of Brexit report, the Department seeks to ensure regulation is a last resort, not a default choice. Timely reviews to assess the regulation's post-implementation effectiveness are also being emphasized.
The Smarter regulation paper states that Professor Dame Angela McLean is leading a Government review of its regulatory framework to stimulate growth. This includes considering statutory reporting for regulatory bodies and extending the growth duty to significant sector regulators such as Ofwat, Ofgem, and Ofcom. This approach was demonstrated when the Prime Minister introduced secondary growth and competitiveness objectives to the mandates of the Financial Conduct Authority and the Prudential Regulation Authority during the Prime Minister's time as Chancellor. Strategic steers, including strategy and policy statements for energy policy and the Competition and Markets Authority guidance, will guide regulators towards growth-oriented innovation and investment.
Reforming out-of-date regulations inherited from the EU and UK's own domestic legislation is part of the Government's commitment to reducing regulatory burdens and stimulating economic growth. To manage regulatory divergence, UK Common Frameworks, developed in conjunction with the Scottish, Welsh, and Northern Irish governments, will inform decision-making across the UK.
The first series of reforms focus on employment law, striving to maintain high UK labour standards while leveraging the opportunity for improvements post-Brexit. Proposals include streamlining the administrative load of the Working Time Regulations, simplifying regulations for business transfers, and reforming non-compete clauses to enhance competition and innovation. These changes aim to free businesses from substantial time and resource burdens, uphold workers' rights, and foster a more dynamic and thriving economy.
Further to this, the call for evidence will examine, non-financial reporting, which typically includes a company's strategy, future performance factors, and insights into its business culture, is a vital tool for investors to understand a business beyond its financial metrics. However, the increasing complexity and length of these reports, with an average of 200 pages, has arguably placed a burden on businesses. In response, the government aims to streamline the corporate reporting regime, ensuring annual reports are more focused and contain clear, useful information. The review will also consider the size thresholds determining the level of detail required in annual reports, specifically for micro-enterprises, with the potential for legislation changes based on collected views.
The UK government is embracing the opportunities offered by Brexit to craft a reinvigorated regulatory framework aiming to bolsters economic growth and innovation without compromising consumer protection. The current divergence from EU laws, rooted in economic rationale rather than ideology, positions the UK as a force in science and technology.