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

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Chancellor Rachel Reeves will this week step up pressure on Britain’s regulators to rip up anti-growth rules, in the face of renewed criticism from business that the government is making things worse.

CBI chair Rupert Soames on Monday said business was “bruised” by government policies and new employment regulations would hamper growth and cause job losses.

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

Downing Street insists there is no contradiction between its deregulatory drive and its determination to introduce new rules in certain sectors.

“It’s a balance to be struck on regulation,” Number 10 said, arguing legislating for better workplace rights would help to create a more productive labour force.

But a spokesperson for Prime Minister Sir Keir Starmer added: “The government is going to take an unashamedly pro-growth approach. We will work with regulators to get rid of rules that needlessly hold back growth.”

Reeves’ allies say the chancellor will “haul in” some of Britain’s top regulators to press that message on Thursday, as she tries to prove she has an agenda for dragging Britain out of its growth lethargy.

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

“I think not only will they not employ, I think they will let people go,” he said. “I think there could be quite an ugly rush before some of these things come into force.”

Business groups accuse ministers of introducing a thicket of red tape as the government bans exploitative zero-hours contracts, ends “fire and rehire” tactics, introduces basic rights from day one and protects workers against unfair dismissal.

The Labour manifesto also included “increased registration and reporting requirements” for companies, and pledged to introduce “binding regulation” on companies developing artificial intelligence.

Ministers are committed to “decisive action to improve building safety, including through regulation”, in the wake of the Grenfell tower fire.

Starmer’s government is establishing a new independent regulator to ensure the financial sustainability of football clubs. The Treasury said new regulation of “buy now, pay later” companies would support growth in the sector and protect consumers.

Reeves argues that while Labour will not shy away from necessary new rules, it believes regulators must look at the existing rule book and adopt a completely new culture regarding risk.

In her Mansion House speech in November, the chancellor told watchdogs: “The UK has been regulating for risk, but not regulating for growth.”

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

The first tranche of regulators through the door will include Ofwat, Ofcom, Ofgem, the Environment Agency and the Office of Rail and Road, along with the Competition and Markets Authority.

The CMA is particularly in the sights of Reeves and Starmer. “They are the one that often come up in talks with business,” said one ally of the chancellor.

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

The agency has been at pains to point out this is not a new approach, stating in the plan that this is the “third year” it has pursued such a strategy.

The watchdog also announced it has set up a “growth and investment council” with bodies including the CBI and the 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 “will 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 $75bn acquisition of Activision Blizzard, which the agency ultimately approved in 2023 after controversially initially blocking the deal.

The pressure comes as the new competition regime for digital markets comes fully into force this month, which will affect large tech companies deemed to have an outsized impact in certain digital activities.

Reeves’ allies say she wants to work with the watchdogs, including encouraging them to push back against an ingrained culture where ministers “ask for more regulation every time something goes wrong”.

“Rachel wants them to turn around and say ‘this isn’t our problem, it’s a political problem — you sort it out’,” said one person. “She wants challenge from the regulators.”