tech2035 opinion - How can the UK's regulatory system achieve its full "growth-driving" potential?

The UK has a world-leading regulatory system that supports the economy while protecting society. However, strategic reforms to the UK’s regulatory regime could help unlock its full potential as a vital catalyst for growth, bringing considerable rewards across industry.

We welcome the Government’s recognition of this potential in the Industrial Strategy Green Paper, where effective regulation was identified as a key enabler of growth and investment, and hope this impetus is sustained in the final publication.

In our recent report, ‘Evolving Digital Regulation for Growth and Innovation’, we welcome the vision set out by the draft strategy and call for a similar statement of direction from the Government on how regulators can prioritise growth. The report advances 10 core recommendations to reform and develop the regulatory landscape to better promote growth, with Part 1 focused on promoting a shared growth mindset across regulators.

The majority of our recommendations are aligned on the fundamental premise set out in the strategy: effective regulation provides the market stability needed to attract investment and promote growth.

Within this insight, we will explore the role of effective regulation within the Industrial Strategy Green Paper and how this interacts with the vision for pro-growth regulation we have advanced.

Creating the Stability to Stimulate Investment

The Industrial Strategy Green Paper identified regulation as one of the key barriers to investment that the Government seeks to engage with to drive growth and promote business. We welcome the specific focus in the strategy on regulation, reframing this important area of governance from a ‘barrier’ and instead identifying productive structural changes that can allow the UK’s advanced regulatory regime to function to its full potential.

Stability and certainty are essential business conditions for stimulating investment, which effective regulation is critical to sustaining. For regulation to be effective, it needs to be created in partnership with business and regulators, both for implementation and enforcement. Within the draft strategy, the Government welcomed input to understand how regulation currently impacts the growth-driving sectors (advanced manufacturing, clean energy, creative, defence, digital and technologies, financial services, life sciences, professional and business services) and to determine where change is needed.

This is a belief we champion in our report, dedicating Part 3 to recommendations to strengthen the relationship between regulators and industry. Fundamental to this relationship are strong lines of communication, which can be supported by our proposals, namely the implementation of a Regulatory Initiatives Grid for the digital sector outlining regulators key milestones over the next 24 months (p.20) and improved procedural transparency (p.21).

We recognise the ever-growing remits of the DRCF regulators in recent years, brought in part by the raft of regulatory focused legislation. This includes the Online Safety Act, Digital Markets, Competition and Consumers Act and forthcoming Data (Use and Access) Bill. As a result, we emphasise the importance of regulators being well resourced to effectively engage with industry, which business engagement teams are particularly vital for facilitating.

Government Action to Drive Change

Since the draft strategy’s publication, the Government has already taken welcome action to reform the current regulatory system with their Regulatory Action Plan, published in March, alongside an announcement of their intent to cut the cost of regulation by 25% by the next parliament.

Part 2 of our report looks at how regulators can foster innovation and market dynamism, which is reflected in the strategy. Regulators have an important role in ensuring new and innovative technologies are effectively regulated and approved; a role which the forthcoming Regulatory Innovation Office should be a conduit for.

In particular, we welcome the FCA and ICO’s existing work to promote sandboxes and testbeds and note RIO’s potential to widen access to such initiatives, especially for SMEs and scale-ups. To enhance the efficiency of sandboxes, we advance the recommendation for specific KPIs and time frames to be set beforehand, to ensure there are clear metrics of success for technologies and thereby simplifying the process for their market introduction.

Beyond this, we advocate for the establishment of a Commercialisation of Tech Taskforce within RIO, who would work to run focused policy sprints and accelerate progress in key emerging technologies.

The draft strategy makes specific reference to the vital role of the CMA in protecting competition and consumer rights. It acknowledges that competition is essential for incentivising innovation, promoting growth in markets, and attracting investment. We welcome the recent work from the CMA to improve their procedural transparency, in particular through the launch of their ‘4Ps’ framework (pace, predictability, proportionality and process). Likewise, we note the strong direction provided by the Government’s strategic steer to the CMA, which championed the principles of transparent, timely, predictable and responsive regulation.

Regulators and the Industrial Strategy

At our launch event for our regulatory reform report, Stuart Hudson, Partner at Brunswick Group, noted there were two roles for regulators in respect to the Industrial Strategy, relating to their own decision-making and also their advice to Government.

On the first, he noted the responsibility regulators have to ensure they are not making surprise decisions which could disrupt investment. Turning to the advisory role of regulators, Stuart noted that they can help the Government design industrial policy interventions which do not unnecessarily harm competition. They can also help ensure the Government receives as wide a range of views as possible in their discussions with industry.

The relationship between Government, industry and regulators is symbiotic, especially when it comes to promoting growth and investment. Regulators have a unique balance to strike in ensuring the conditions for stability, competitiveness and fairness, whilst retaining the procedural agility to regulate an ever-evolving tech landscape.

The final Industrial Strategy should both formalise and entrench the integral role of regulators in supporting the nation’s economic growth, and provide the leadership and governance required for them to do so decisively.

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