Regulators Are Stifling British Business. They Must Be Reined In

JOHNATHAN EIDA

WITH senior officials from some of the UK’s most powerful regulatory bodies appearing before the Business and Trade Select Committee this week, it is worth analysing the economic harm caused by some of the most prominent of them. This is what the TaxPayers’ Alliance has just done. From financial services to utilities, it finds the extent to which this bloated regulatory apparatus is stifling investment, driving up costs and preventing the UK economy from realising anywhere near its full potential.

Reports had suggested Chancellor Rachel Reeves will use her Mansion House speech to promise a ‘bonfire of financial services regulation’.  But her vow to cut regulatory red tape to boost growth was countered by her rallying cry to ‘regulate for growth’. More damp squib than bonfire. The problem that Reeves patently doesn’t understand is far more than a few outdated rules, it’s the sprawling regulatory state itself – the delegation of regulatory powers to so-called independent bodies, quangos, with their own vested interests. These have ballooned regulation in Britain far beyond any original purpose. Intrusive, expensive and counterproductive, they fail any serious cost-benefit test.

This, with Labour’s failure to back businesses in its first year in office, has led to a confidence drop among UK firms, falling into negative territory for the first time in over two years in early 2025, according to the Institute of Chartered Accountants in England and Wales. Business leaders cite high taxes, rising cost pressures, and fading sales growth as key concerns.

The TaxPayers’ Alliance’s Britain’s Quangos Uncovered project published a dossier this week which identifies specific ways in which the regulators are throttling growth and imposing unnecessary burdens on businesses and consumers alike.

• At the Financial Conduct Authority, the much-trumpeted Consumer Duty rules have had a chilling effect on the availability of financial advice. In a recent survey, half of financial advisers reported that they had stopped serving clients because of the cost and complexity of implementing the duty. This creates a dual problem: consumers have less access to advice, while firms face higher compliance costs which are disproportionate to the commercial value of the service. The rules were meant to improve outcomes. In reality, people who have received financial advice no longer have access to this service.
• Worse still, the FCA’s proposals on non-financial misconduct – known as CP25/18 – represent a duplication of standards that already exist in law and HR policy. By extending the regulator’s remit into areas of personal behaviour that are not directly related to financial conduct, the FCA risks becoming a moral arbiter rather than a market regulator. This is a clear-cut case of mission creep, one that adds to the compliance burden without delivering clear benefits to consumers or markets. It is a concern echoed by shadow minister for Business and Trade Andrew Griffith.
• At the Competition and Markets Authority, a culture of over-enforcement is stalling business consolidation and innovation. The CMA has too often blocked mergers that would allow firms to compete globally, including in the tech and digital sectors. This heavy-handed approach not only reduces the attractiveness of the UK as a place to do business but also injects uncertainty into deal-making. Businesses are less likely to invest if they cannot predict how regulators will react to standard corporate activity.
• At the Bank of England’s Prudential Regulation Authority, they have adopted a one-size-fits-all approach to capital requirements, applying the Basel Framework across the board – including to smaller domestic lenders who do not pose international risks. This lack of proportionality restricts the flow of credit to small and medium-sized enterprises and infrastructure projects, stifling growth where it is most needed. Worse still, the PRA has no formal mechanism for evaluating the real-world costs of its policies after they have been implemented. Without post-implementation reviews, reforms can continue doing damage long after their theoretical justification has expired.
• Ofgem, the UK’s energy regulator, is another key offender. Its regulatory processes have become so cumbersome that vital grid upgrades and energy projects are being delayed. Investors face rising uncertainty and capital costs due to slow approvals and micromanagement.
• At the same time, Ofgem’s price controls, while politically popular, undermine long-term planning by making it harder for utilities to reinvest in infrastructure. By distorting market signals, they deter private investment and limit innovation in one of the most critical sectors of the economy.
• The situation at Ofwat, which oversees the water industry, is just as concerning. Like Ofgem, it imposes price controls that restrict companies’ ability to raise capital. The recent PR24 price review has drawn criticism from investors who say it fails to account for wider economic conditions. As a result, the sector is seen as increasingly unattractive, with long-term implications for the UK’s ability to fund water resilience and infrastructure upgrades.
• Finally, the Environment Agency’s charging regime for environmental permits has created its own set of problems. Businesses report that the process is overly complex, unpredictable and expensive. Rather than encouraging compliance, these burdens risk disengaging firms from the regulatory system altogether, undermining both economic activity and environmental protection.

In each case, the problem is not the principle of regulation itself, but the scale, scope and intrusiveness of the current approach. Britain’s quango-state has become a web of overlapping mandates, overzealous enforcement and bureaucratic inertia. If Rachel Reeves is serious about restoring growth, she must take the bold step of rewiring this regulatory machine. That means having more political oversight of these regulators, removing functions from these regulators and in some cases, abolishing the regulator all together.

Anything less would be tinkering at the margins. And Britain’s economy cannot afford delay.

This article (Regulators are stifling British business. They must be reined in) was created and published by Conservative Woman and is republished here under “Fair Use” with attribution to the author Jonathan Eida