Government must listen to all businesses on economic growth - not just the regulation refuseniks
Rocio Concha, Director of Policy and Advocacy
| Which?
New Which? research reveals most UK businesses support strong consumer protection regulations as a contributor to consumer confidence and economic growth.
No-one should be in any doubt that this government is prioritising economic growth.
Upon being elected, the Chancellor, Rachel Reeves, announced that “restoring economic growth is now our national mission”.
Indeed, the government has not wasted time in signalling to regulators like the Financial Conduct Authority that they have a key role to play in this push for growth.
The government’s aim of boosting economic growth is laudable. Strong economic growth means higher real wages, helps to fund better public services and better living standards in general.
The big questions and debates are about how growth is to be achieved - and what levers should be pulled by government and regulators to get there.
Some business groups would have us believe that the answer is easy. The boss of UK Finance recently suggested this country has become “too cautious” in its approach to regulation. The Association of British Insurers claims the Chancellor should “channel Alexander the Great” and rip up bureaucracy.
But do they speak for all businesses in their assessment of the factors holding back growth and how it is best achieved? A new Which? survey of 1,000 UK businesses, carried out by YouGov, suggests they are, in fact, the outliers.
Excessive regulation doesn’t even make it into the top seven areas of concern for companies. Fewer than one in five (16 per cent) see it as a top issue - it sits behind complaints about issues including rising operational costs, digital concerns like cybersecurity, workforce issues and business taxes.
When it comes to consumer protection rules in particular, around eight in 10 businesses (85 per cent) feel there is either the right amount of regulation, or too little, in their sector. Nine in 10 see at least one benefit to regulation (89 per cent) and three quarters (76 per cent) think there are multiple benefits, such as increasing consumers' confidence to try new and innovative products and protecting businesses who have high standards.
Most businesses in the survey did not struggle to identify how consumer protection regulations help their firm to thrive.
Indeed, businesses were twice as likely to embrace consumer protection regulations as a driver for innovation and investment (33 per cent) rather than suggest it as a factor that makes it harder for companies to innovate (15 per cent).
The government’s new industrial strategy is clear that competition and consumer policy have an important role to play in driving innovation whilst protecting consumers and businesses. It has been encouraging to see this government already recognising where stronger protections could increase consumer confidence and help boost certain sectors.
There are recent examples of how regulation can be designed in ways to encourage economic growth. Take the new mandatory reimbursement scheme for victims of bank transfer fraud. Annual figures from UK Finance show there were £1.2bn of losses from fraud during 2023. This can have a devastating impact on individuals, but it also means the loss of productive capital that leaks out of the economy into the hands of criminals, often based abroad, and to the detriment of British firms.
Until October, a voluntary system was only signed up to by the country’s largest banks and fraudsters simply targeted financial firms outside the system, as these had less incentive to prevent fraud and so remained the weak links in the system. The new regime covers all 1,500-plus payment providers that offer this type of payment, better incentivising firms across the sector to invest to prevent fraud.
Which? research has also consistently shown dangerous products being sold on online marketplaces, taking business away from honest sellers who meet legal requirements. The government’s Product Regulation Bill, and a proper regulatory framework, should crack down on this. It will protect consumers, but it will also help growth by levelling the playing field for businesses, increasing the incentive to invest in products and compete fairly for sales.
The American critic HL Mencken once said that for every complex problem, there is a solution that is clear, simple and wrong. Reckless deregulation isn’t the solution to the UK’s economic growth challenge.
Tackling consumer rip-offs are not only good for growth, but in testing times ensuring fair treatment for consumers who are spending their hard-earned cash is crucial.
As the Prime Minister today sets out how the government’s economic growth mission will boost living standards, it’s vital that he doesn’t let the regulation refuseniks drown out the views of the majority of UK businesses, and the needs of millions of consumers.
Rocio Concha, Which? Director of Policy and Advocacy, Chief Economist
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