Fixing the regulators - one year in

Reforming the UK's regulators is now a pillar of the growth agenda, but time is running out to make it work - for the economy and this government

A year ago, we published “Fix The Regulators”, a manifesto for overhauling the sclerotic regulatory state that unduly constricts growth and innovation in the UK. Crucially, this wasn’t about “cutting red tape” but was a far deeper look at regulators’ risk appetite, their resourcing, and the rules they operate by.

A year on, regulating for growth has become a core plank of the new government’s growth agenda. Ministers realise that their fiscal straightjacket makes regulation one of the most promising levers they have. But the thinking is embryonic and the delivery is yet to come - we’re still far from having fixed the regulators and most of the opportunity lies ahead.

Here’s a stocktake one year in - what’s going well, what’s not, and where we need to go next.

Fixing

✅ The new administration created the Regulatory Innovation Office (recommendation #1).

✅ The Chancellor used her strategic steer to the FCA to call on it to prioritise growth - precisely the bolder growth-focused use of these steers that we called for (recommendation #4).

✅ Rachel Reeves also set the regulators Christmas homework on the 24th December, via a letter calling for their ideas to enhance growth (recommendation #4), before summoning them to No11 Downing Street to discuss the answers.

✅ The AI Opportunities Action plan called for regulators to be adequately resourced to deal with the challenge of regulating AI in a way that promotes innovation (recommendation #3).

Trying

🤷 The Industrial Strategy consultation published in October asked some tentative questions about the role of regulation and mentioned the RIO. We need to get well beyond this toe-dipping.

🤷 The Prime Minister wrote an article in The Times in late January committing to tackle a “morass of regulation”. He was talking almost exclusively about barriers to building physical infrastructure and housing, where reform is definitely needed. But “red tape” is not the issue for rest of the economy, nor for innovative startups.

🤷 The Business Secretary took aim at the FCA’s flagship regulatory creation, the Consumer Duty, to which the FCA chief executive fired back on the need for a “metric for tolerable failure”. It’s great that this conversation is happening (recommendation #4), but it shouldn’t be happening in public nor after the fact. More on this below.

🤷 The Chairman of the UK’s competition and consumer body, the CMA, was ousted in an unusual intervention which has sent reverberations through the business and policy communities. Certainly bold, but no substitute for ministers being clear about the political direction they are giving the CMA - the strategic steer published this week in draft form asks the CMA to “take particular care to ensure growth and innovation benefits are prioritised”, which is a start.

🤷 The UK declined to sign the global declaration on AI agreed in Paris this week by 60 countries. This is mainly about geopolitical signalling, particularly to the Trump administration, but the focus on national security as grounds for not signing is concerning if it leads the UK to be more closed and interventionist in the way that AI is used and developed in the UK.

Missing

❌ Tackling the bottlenecks our regulators create. We called on government to make the UK the place that has the fastest regulatory approval timelines in the world, including new “pay for speed” options for applicants and new international recognition procedures (recommendation #1).

❌ Funding regulators to upgrade capability to “do innovation”. The RIO launched with a £1.6m pot for the Food Standards Agency to create a new sandbox for cell-cultivated products. Regulators need far more than this - permanent new innovation budgets and a new £100m pot specifically to take opportunities around new technologies (recommendation #3). This is a tiny amount in the fiscal context.

❌ An overall strategy under which disparate actions are housed - rather than Ministers freelancing on regulatory reform, largely tied to speech cycles and the comms grid.

Where next?

2025 is a “do or die” year for UK growth. The window to make changes that will have a meaningful impact in this Parliament is rapidly closing. Ministers need to seize on the decent start made above and quickly:

1. Define a plan, quickly. Bring together the aryhthmic spasms of “regulation can help growth” (see above) into a coherent plan that sits at the heart of the forthcoming industrial strategy. This is worthwhile even if just for the sake of optics and business confidence, but also because it is core to the UK’s ability to become the destination of choice for new technologies (see 6, below).

2. Clear the backlog. Provide funding for every regulator to clear its authorisation backlog on a one-off basis, thereby bringing a year (or more’s) worth of new businesses into market in one go. Lord O’Shaughnessey did this for the egregious clinical trials backlog at the MHRA - it requires focus, funding and political commitment - but the growth rewards are there.

3. Fund the regulators. Recognise the huge ROI in putting a modest amount into regulatory capacity - £100m - to take the unnecessary resource constraint off the table. This includes allowing regulators to baseline a “one month, not 12 months” approach to authorising new firms, as well as bringing in the expertise and capacity to develop routes to market for new tech & business models. Ignore siren calls, like this one from Andy Haldane, to cut regulatory budgets on the vague guise that this will somehow lead to “less regulation”.

4. Ensure the RIO is a capable, respected and impactful body in Whitehall. The RIO has around six months to prove its worth; that needs quick, demonstrable wins but also the clout in government to get things done - sticks as well as carrots.

5. Take the “but we’d need to change primary legislation…” push-back off the table. If necessary, move quickly to create a Regulators Bill that deals with any legislative barriers to ensuring regulators can become growth-promoting, not just safety-optimised. At the same time, implement our recommendation to create a mechanism to surface, triage and prioritise legislative change requests from regulators on an ongoing basis.

6. Create and delegate risk budgets. Quantify the level of acceptable risk that regulators can take in pursuit of growth and innovation (trading off against safety/other objectives) and explicitly delegate these, from Ministers to regulators. Unless ministers are prepared to provide political cover for considered regulatory risk-taking, regulators have no incentive to do so - and won’t. This will need the creation of new metrics to capture the benefits of innovation (and the downside of innovation foregone) that can be quantified. This is complicated but possible.

7. Adopt a “window” based view of new technologies and their regulation. The UK is choosing to let the cellular agriculture opportunity pass the UK by, by failing to equip the regulator to do what’s necessary to create new regulatory pathways and approve new innovation. Applicant firms have been stuck in the first (month long) phase of the authorisation process for 14 months. The Singapore and the US will almost certainly now win this market. Windows of time for the UK to become the place for new economic activities come and go - inaction is just as much of a choice as action, so we need to be clearer about which windows are open, which are coming up - and which we choose to allow to close. This is what industrial strategy means for a developed, fiscally constrained economy.