As the UK reaches the end of the transition period, the future of the UK’s competition regime and particularly the role of state aid, remains unclear. The CBI set out the concerns of members and the key principles needed to resolve these issues to the HMT-BEIS Penrose Review.
Through our engagement with various members we identified three areas of concern to businesses:
- COVID-19 and the end of transition present challenges to the future of competition policy
Clarity on the final agreements of the Brexit deal is needed to help businesses prepare. A recent CBI survey revealed that business preparations for 31 December have stalled or gone into reverse since January, as firms respond to the coronavirus pandemic. COVID-19 compounds existing challenges and brings additional risks such as increased market concentration in industries where the pre-pandemic trend indicated greater market power. Theory suggests that in the event of a downturn increased concentration could occur due to ‘killer acquisitions’ – where large businesses are able to acquire competing or potentially more innovative firms – or by many viable businesses being forced to close.
- The competition regime should facilitate greener practises and to deliver on the government’s commitment to build back better
Competitive markets increase business dynamism and improve productivity, and both are vital for a strong economic recovery. The smooth functioning of markets will be key to facilitating a green, sustainable recovery and achieving the UK’s net-zero target. As part of this, the competition regime should enable businesses to adopt greener practices and support wider initiatives that provide environmental benefits. Enabling businesses to function effectively will require strong independent institutions, with a clear remit. The government should consider all the tools available to policymakers, before embarking on major reforms of the competition regime. For instance, where competitive markets may not be delivering equitable outcomes, the regulatory framework, rather than the regime itself, should be assessed first.
- Policy coherence and institutional coordination is needed to enable businesses to innovate and scale quickly
Regulation and the competition regime should be treated as complementarities. In its Building a world-class innovation and digital economy report, the CBI outlined the framework required to develop a pro-competition and pro-innovation approach to regulation. To do this will require government to resource the regulators well, support coordination between regulators and ensure regulatory consistency across departments. Where regulators are already actively working with the industry, the competition regime needs to be aware of this and have the correct expertise to deal with inter and intra-sector differences.
We are continuing to expand our work into the future of the competition regime and what the competition landscape might look like post-transition. Please contact Rahat Siddique for further information on the CBI’s growing work on competition policy, our response to the Penrose Review, and how you can get involved.