UK ministers set out plans to make regulators better promote growth

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Rishi Sunak’s government has intensified a push to make key regulators do more to promote growth as it attempts to kick-start the UK’s flatlining economy. 

Ministers this week proposed strengthening the growth duty that applies to dozens of British watchdogs and said they would press ahead with plans to widen its scope to include the energy, water and communications regulators. 

They also wrote directly to the competition and accounting watchdogs, directing them to promote the attractiveness and competitiveness of the UK as a place to do business. 

The moves come as the government looks to reduce red tape for businesses, reinvigorate the City of London and boost Britain’s anaemic economic growth, which the Bank of England has forecast will be zero in 2024.

The Financial Conduct Authority and the Prudential Regulation Authority were also handed new competitiveness and growth objectives this year after resisting a more radical proposal that would have allowed ministers to intervene in the watchdogs’ decisions.

The proliferation of extra objectives being handed to regulators has raised concerns over their ability to carry out their roles effectively. 

Chancellor Jeremy Hunt and business secretary Kemi Badenoch on Wednesday informed the heads of dozens of regulators of plans to strengthen the growth duty imposed on them under the Deregulation Act 2015.

The duty requires watchdogs to “have regard to the desirability of promoting economic growth” when exercising their powers. 

It already applies to dozens of regulators, including the Gambling Commission, the Food Standards Agency and the North Sea Transition Authority, formerly known as the Oil and Gas Authority. 

The letter was also sent to the heads of Ofgem, Ofwat and Ofcom. With oversight of the energy, water and media sectors respectively, they are set to be added to the list in April subject to parliamentary approval.

Hunt and Badenoch said they “want to see our independent regulators take a more active role in creating a dynamic business environment which will result in the UK being seen as a great place for investment and innovation, whilst continuing to protect consumers and the environment”.

Their aim was “to ensure that the UK business environment is internationally competitive by preventing unnecessary burdens on business and ensuring that regulators operate in [a] proportionate way”, they added. 

The government has launched a consultation, which will run until mid-January, on the proposals. They include a possible requirement for the regulators to publicly report on the actions they have taken to fulfil the growth duty. 

Ministers also published details this week of a “strategic steer” to the Competition and Markets Authority, which they said was aimed at “protecting its reputation as a world class regulator, all the while ensuring the UK remains an attractive place to do business”. 

They said the CMA’s focus should include factors such as “minimising the burdens on businesses”, engaging with government and “creating a pro-competition, pro-growth, pro-investment environment”. 

The CMA came under fierce criticism after it initially blocked Microsoft’s $75bn takeover of Activision Blizzard in April, a decision that prompted the gaming group to claim the UK was “clearly closed for business”.

In May, Hunt said: “I would not want to undermine [the CMA’s independence] at all, but I do think it’s important all our regulators understand their wider responsibilities for economic growth.”

The CMA later waved through the deal after agreeing that the companies could “restructure” the deal.

Senior government figures insisted that no pressure was applied on the regulator to change its stance. At an event on Monday, CMA chief executive Sarah Cardell said she wanted to put to rest “once and for all” that the outcome was affected by political interference. 

Badenoch has also given the Financial Reporting Council a new remit to promote economic “competitiveness”. 

In a letter to the accounting and boardroom regulator on Wednesday, Badenoch said it “should contribute to promoting the competitiveness and growth of the UK economy, embedding its growth duty across its work”. 

The FRC was already subject to the broader growth objective, which the government is planning to strengthen. But the Capital Markets Industry Taskforce, a group of heavyweight City bosses, had lobbied for the government to give the body an explicit competitiveness objective. 

In a separate remit letter on Wednesday, Hunt laid out four priorities for the Bank of England committee responsible for financial stability that all concerned growth. That prompted criticism from green groups, which accused him of downgrading the importance of tackling climate change.

Additional reporting by Suzi Ring in London