As we enter a new normal following the economic shock of COVID-19, and the UK looks to make its way in the world outside of the EU, there is an opportunity to reflect on whether our economic structures remain fit for purpose. It is crucial that the regulatory framework remains fit for the future to assist in achieving the UK’s net zero target and facilitating innovation across industries.
Economic regulation has been the bedrock of the market structures in our most critical sectors, from energy to telecommunications. The COVID-19 pandemic has demonstrated the resilience of these sectors in responding to economic shocks, such as large shifts in domestic energy demand and ensuring stable internet connectivity across the UK. A new CBI report, Reimagining regulation, explores the cross-cutting challenges facing businesses in a modern and evolving economy.
In the future, the UK will need a system of economic regulation that is smart enough to adapt to new challenges and make the best of the opportunities they present. The evidence of the performance of economic regulators over the last decades shows that the UK needs an evolution, not a revolution, of our regulatory model.
The report identified three key areas that government and regulators should prioritise, to deliver a regulatory framework suitable for the new challenges facing economically regulated industries:
- There must be a clear framework that encourages genuine long-term investment, including a statutory duty on regulators to contribute to reaching the net zero target by 2050
- Economic regulators must act as enablers of innovation through competitive markets. This requires greater coordination between regulators to ensure consistency of approach and prevent duplication
- The government and regulators must work together to rebuild trust in economic regulation through increase transparency and scrutiny.
Economic regulators have delivered significant investment since their inception, but they will need to adapt their ways of working if they are to drive the step change in investment and innovation to support a green recovery and ultimately deliver for consumers and the economy.