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Chancellor Rachel Reeves will step up pressure on UK regulators this week to roll back anti-growth rules, in the face of renewed criticism from the business world that the government is making things worse.
CBI chairman Rupert Soames said on Monday that business had been “damaged” by government policy and that new employment regulations would stifle growth and cause job losses.
Labour’s election manifesto included promises to regulate a range of areas from the workplace to football. The government’s own impact assessment of its workers’ rights package estimates it will cost businesses £5 billion a year.
Downing Street insists there is no contradiction between his deregulatory drive and his determination to introduce new rules in certain sectors.
“It’s a balance that needs to be struck in regulation,” Number 10 said, arguing that legislating for better rights in the workplace would help create a more productive workforce.
But a spokesman for Prime Minister Sir Keir Starmer added: “The Government will take a no-nonsense approach to growth. We will work with regulators to get rid of rules that needlessly hamper growth.”
Reeves’ allies say the chancellor will “drag in” some of Britain’s top regulators to deliver the message on Thursday, as she tries to prove she has a plan to lift Britain out of its growth lethargy.
Some business leaders are not convinced. Soames told the BBC that the government’s workplace reforms, called “paying for work”, would force companies to lay off workers and create “an adventure playground for labor rights lawyers”.
“I think not only will they not hire, but they will let people go,” he said. “I think there could be a big rush before some of these things go into effect.”
Business groups have accused ministers of introducing a raft of red tape as the government bans exploitative zero-hours contracts, scraps “fire and re-hire” tactics, introduces basic rights from day one and protects workers from unfair dismissal.
Labour’s manifesto also included “increased registration and reporting requirements” for companies and promised to introduce “binding regulations” for companies developing artificial intelligence.
Ministers have pledged “decisive action to improve building safety, including through regulation”, following the Grenfell Tower fire.
The Starmer government is setting up a new independent regulator to ensure the financial viability of football clubs. The Ministry of Finance said the new regulation of “buy now, pay later” companies will support growth in 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 adopt a whole new risk culture.
In her Speech in the palace in November, the chancellor told watchdogs: “The UK has regulated for risk but not for growth.”
Starmer, Reeves and Jonathan Reynolds, the business secretary, wrote to 17 watchdogs on Christmas Eve asking them to identify proposals for growth. The meeting at the Ministry of Finance on Thursday is intended to assess progress.
The first tranche of regulators will include Ofwat, Ofcom, Ofgem, the Environment Agency and the Office for Rail and Road, along with the Competition and Markets Agency.
The CMA is especially in the sights of Reeves and Starmer. “They are the ones who often appear in conversations with business,” said an ally of the chancellor.
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 tried to emphasize that this is not a new approach, stating in the plan that this is the “third year” that it has followed such a strategy.
The watchdog also announced it had established a “growth and investment council” with bodies including the CBI 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 top 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 focus stems in part from the CMA’s handling of Microsoft’s $75 billion acquisition of Activision Blizzard, which the agency finally approved in 2023 after controversially initially blocking the deal.
The pressure 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 huge influence in certain digital activities.
Allies of Reeves say she wants to work with watchdogs, including encouraging them to push back against the 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 solve it,'” said one person. “She wants a challenge from regulators.”
