Reeves steps up pressure on UK regulators to scrap anti-growth rules

Open Editor’s Digest for free

FT editor Rula Khalaf picks her favorite stories in this weekly newsletter.

Chancellor Rachel Reeves will step up pressure on UK regulators this week to rip up anti-growth rules amid renewed business criticism that the government is making things worse.

CBI chairman Rupert Soames said on Monday that businesses were being “bruised” by government policies and new employment regulations would hamper growth and lead to job losses.

Labour’s election manifesto included promises to regulate a range of sectors from the workplace to football.The government’s own impact assessment of the workers’ rights package estimates it will cost companies £5bn a year.

Downing Street insists there is no conflict between its push for deregulation and its determination to introduce new rules in some areas.

“It’s a balance that needs to be struck on regulation,” said No 10, arguing that legislation for better workplace rights would help create a more productive workforce.

But a spokesman for Prime Minister Sir Keir Starmer added: “The government is going to be unashamedly pro-growth. We will work with regulators to get rid of regulations that unnecessarily hold back growth.”

Allies of Reeves say the chancellor will “present” some of Britain’s top regulators to issue the message on Thursday as he tries to prove he has an agenda to lift Britain out of its growth slump.

Some business leaders are not convinced. Soames told the BBC that the government’s reforms to “make work pay” in the workplace would force companies to lay off workers and create “an adventure playground for employment rights lawyers”.

“I think not only they will not work, but they will also let them go,” he said. “I think there could be a pretty ugly rush before some of these things take effect.”

Business groups have accused ministers of red tape as the government bans exploitative zero-hours contracts, ends “fire and re-hire” tactics, introduces basic rights from day one and protects workers from unfair work.

The Labor manifesto also included “increased registration and reporting requirements” for companies and promised to introduce “mandatory regulation” for AI companies.

Ministers have committed to “decisive action to improve building safety, including through regulation”, following the Grenfell Tower fire.

The Starmer government is creating a new independent regulator to ensure the financial stability of football clubs. The Treasury said the new regulation of buy-now, pay-later companies would support the growth of the sector and protect consumers.

Reeves argues that while Labor will not shy away from necessary new rules, it believes regulators need to look at the existing rulebook and embrace a whole new risk-taking culture.

In him The speech of the mansion In November, the chancellor told the observers. “UK regulates risk but not growth.”

Starmer, Reeves and business secretary Jonathan Reynolds wrote to 17 observers on Christmas Eve asking them to identify proposals to boost growth.Thursday’s meeting at the Treasury is set to assess progress.

The first batch of regulators through the door will include Ofwat, Ofcom, Ofgem, the Environment Agency and the Office of Rail and Road, as well as the Competition and Markets Authority.

The CMA is particularly in the sights of Reeves and Starmer. “They are the ones who often negotiate with businesses,” says one of the chancellor’s allies.

The CMA published its annual plan on Monday, which used the word “growth” 111 times as the regulator sought to show the government it was responding to the mandate.

The agency took pains to point out that this is not a new approach, noting in the plan that it is the “third year” of implementing such a strategy.

The watchdog also announced it had set up a “growth and investment board” with bodies including the CBA and British Chambers of Commerce “to help identify opportunities for competition to unlock growth and investment”.

In October, Starmer told a room of about 200 senior executives that the government would “make sure that every regulator in this country, especially our economic and competition regulators, takes growth as seriously as this room does”.

The attention stems in part from the CMA’s handling of Microsoft’s $75 billion acquisition of Activision Blizzard, which the agency eventually approved in 2023 after initially controversially blocking the deal.

The crackdown comes as a new competition regime for digital markets comes into full force this month, which will affect big tech companies that are seen as having a big influence on certain digital activities.

Allies of Reeves say he wants to work with the watchdogs, including encouraging them to push back against an entrenched culture where ministers “ask for more regulation every time something goes wrong.”

“Rachel wants them to turn around and say, ‘This is not our problem, it’s a political problem, you fix it,'” said one person. “She wants a challenge from the regulators.”