The growth imperative: UK regulators under pressure to deliver

Change is well and truly afoot this week as the PM pushes hard for economic growth, challenging regulators to support one of the Government’s core missions. To this end, the news grid has been busy with regulator-related growth announcements. 

Monday saw the appointment of former Conservative Science Minister Lord David Willetts as Chair of the Regulatory Innovation Office (RIO). RIO was created by Peter Kyle last year and has been set the rather large task of improving the performance of regulators, albeit with an initial brief to focus on high-growth innovations.

On Wednesday, it was announced that the Payment Systems Regulator (PSR) will be abolished following complaints from businesses that the regulatory environment is too complex. The PSR will mainly be consolidated into the Financial Conduct Authority (FCA) to simplify processes.

These announcements culminated yesterday when Starmer gave a speech on reforming the “watchdog state”. Having told his Ministers this week to assess “processes and regulations which play no part” in delivering the Government’s priorities, he announced that compliance costs for businesses need to be cut by 25 percent – no small feat.

All this is in aid of one thing – economic growth. It is no surprise that this overriding ambition or North Star is expected to make its way onto the lists of duties of many UK regulators in the near future.

Some of the UK’s economic regulators are already subject to a duty to promote growth, but new ministerial letters, which are set to be sent out shortly, will likely extend the growth duty to a much wider group of organisations. The impending Spring Statement is likely to double down on this requirement, putting further pressure on regulators who are already getting to grips with competing duties in a fast-changing environment.

There is no doubt that the Government means business with regulators and quangos. Just look at the recent decisions to oust the chair of the competition watchdog the CMA and the CEO of NHS England, ahead of its abolition announced yesterday.

Clearly, the changes expected of regulators must be bold, headline grabbing and explicitly growth centric. Interestingly, there was recognition from Sir Patrick Vallance this week that bold change often equals increased risk. Given regulators are generally programmed to be risk averse, Vallance promised to give them “more political support to take risks” in the pursuit of growth. The details of this support are expected to be laid out in the upcoming and eagerly anticipated ministerial letters, along with information on additional funding and new targets.

There is, however, the fact that not all regulators can automatically have the same impact on growth. It’s obvious that the financial regulators can – indeed, a secondary growth and competitiveness objective was attached to their responsibilities in the Financial Services and Markets Act 2023. But how can the Charity Commission, say, achieve the same goal?

A significant raft of announcements are expected over the next six months, including the Spring Statement, and the Industrial Strategy, which is set to be published to coincide with the Spending Review in June. Regulators associated with its eight ‘growth-driving sectors’ will undoubtedly be expected to step up most prominently.

Forward thinking regulators need to prepare for the upcoming changes and clearly communicate how they are gearing up their organisations to promote growth. This includes political horizon scanning and stakeholder analysis and engagement. 

At Luther, we help organisations prepare for changes coming down the track. If you’re looking to get a head start, get in touch with our team at publicaffairs@luther.co.uk