As the UK grapples with sluggish growth, Chancellor Rachel Reeves has a pointed message for the nation’s regulators: you have a vital role to play in unleashing economic dynamism by sweeping away barriers to business expansion. But while regulatory reforms can undoubtedly help at the margins, the reality is that regulators are not the primary drivers of growth. The most potent tools – from tax policy to planning rules to direct business support – remain firmly in the hands of the government itself.
The Limits of the “Growth Duty”
Reeves’ recent summit with watchdogs like the Competition and Markets Authority, Ofcom, and the Financial Conduct Authority aimed to impress upon them the urgency of their secondary “growth duty” – a 2017 mandate to consider the economic impact of their decisions. But regulators’ core purpose remains protecting consumers and the public interest. Diluting those responsibilities in the name of growth would be a perilous path.
Regulation as Investment Magnet
In fact, robust, consistent regulation is often what attracts investment by providing a stable, fraud-resistant business environment. As the Financial Services and Markets Bill aims to sharpen the UK’s competitive edge post-Brexit, regulators’ steadying hand is more critical than ever. Investors prize high standards over a regulatory race to the bottom.
If Reeves wants regulators to greenlight riskier endeavors, she may need to issue explicit orders. Vague exhortations to be pro-growth won’t cut it – not when watchdogs know they’ll bear the blame if things go awry.
Streamlining Without Sacrificing Safeguards
None of this precludes judicious efforts to prune regulatory red tape. The FCA’s partial pullback on new environmental, social, and governance reporting rules that duplicated other requirements is one common-sense example. But in most cases, any pro-growth regulatory tweaks will be marginal, not transformative.
The Real Engines of Growth
For all the attention on regulators, the biggest barriers to UK growth are bread-and-butter issues squarely in the government’s court:
- Planning rules that constrain homebuilding
- Sky-high energy costs for businesses and consumers
- An uncompetitive tax regime
- Shortages of skilled workers
- Punishing business rates
These are the fronts where the battle for growth will be won or lost. By all means, Reeves should encourage regulators to be supportive partners in the endeavor. But she mustn’t expect them to magically conjure the 2% growth the government craves while leaving these deeper structural issues unaddressed.
If the UK is serious about becoming the world’s next Silicon Valley, we need more than regulatory tinkering. We need bold reforms to create a pro-growth ecosystem from the ground up.
Nils Pratley, The Guardian
In the end, regulatory policy is a useful tool for greasing the wheels of economic activity and removing artificial roadblocks. But it is not a substitute for a holistic, strategically coherent pro-growth agenda from No 10 and No 11. That, ultimately, is where the buck stops. Regulators can help steer the ship, but only the government can truly set its course.
