The UK government’s Action Plan for regulators – a new approach?

According to the Action Plan, businesses have told the government that under the current system: 

• regulation can be too complex and duplicative, stifling progress and innovation; 
• businesses suffer from a lack of certainty and predictability from regulators and regulation; 
• the regulatory approach has become too risk averse.

In order to address the above challenges, the government will overhaul the regulatory system so that it: 

• supports growth - by not only protecting consumers and supporting competition, but also encouraging new investment, innovation, and growth. Regulators also have an ‘important role’ in delivering international regulatory cooperation which also supports the UK’s international objectives; 
• is targeted and proportionate, regulating only where necessary and allowing space for discretion and good behaviour rather than focusing on preventing a few bad actors, or very low probability events; 
• is transparent and predictable, fostering the certainty essential for investment and, where change is required, giving business the necessary time to adapt to new rules; and 
• adapts to keep pace with innovation, including AI, digitalisation, decarbonisation and increased automation, and avoids disproportionate risk averse behaviour. 

In addition to the immediate actions in the Action Plan, realising this vision means making real, system-wide reforms over the course of the Parliament that focus on: 

• simplifying the structure of the system; 
• ensuring regulation is proportionate and at a minimum cost for business; 
• driving regulator performance and capability, as well as ensuring accountability is robust; and 
• making sure that the purpose and duties of all regulators are clear, so they are empowered to focus on what matters. 

The government also continues to recognise the importance of economic regulation for the growth mission, and is continuing to assess the effectiveness of the UK’s overall approach in delivering essential infrastructure and investment. 

Action 1: Tackle complexity and the burden of regulation 

The government commits to cut administrative costs for business by 25% by the end of the Parliament. It will take a whole of government approach toward achieving this, with actions including: 

• Establishing a baseline for the administrative costs of regulation by undertaking a baselining exercise to understand how much regulation is costing and where it can be reformed to remove unnecessary burden and achieve its policy objectives more efficiently. 
• Delivering an ambitious regulation reform programme, targeting reforms that remove or streamline administrative processes. The forthcoming Industrial Strategy will detail a suite of reforms across the growth-driving sectors which include financial services. 
• Simplifying regulatory structures, making a regulatory system which is easier to navigate for businesses, and that reduces duplication. In many cases, this will require legislative change so the government is taking active steps to remove or consolidate regulators, where it makes sense to do so. There is mention of the previously announced decision to consolidate the PSR, primarily within the FCA, and the planned consultation on the details of this over the course of the summer with legislation to follow as soon as possible. 

Action 2: Reduce uncertainty across the regulatory system 

Key points in relation to Action 2 include: 

• Duties and roles of key regulators 
  • The government will simplify the duties of the key regulators, so they are able best to support growth and investment. This will include HMT looking to review the number of the PRA’s and FCA’s “have regards” to identify opportunities to rationalise them and ensure a focus on their priorities. 
  • The government will also work to ensure that regulators within sectors align to deliver best outcomes. oIn relation to financial services, there is specific mention of the need for the FOS to be set up in such a way that it works well for consumers, small businesses and for financial services firms, to ensure the sector remains world-leading. 
    • Building on the announcements the Chancellor made at November’s Mansion House, and steps to modernise the FCA’s rules for dispute resolution, the government will go further. 
    • The Economic Secretary to the Treasury has been asked to examine whether the FOS, as it stands today, is delivering its role as a simple, impartial dispute resolution service which quickly and effectively deals with complaints against financial services firms and which works in concert with the FCA which regulates the sector. 
    • The Economic Secretary will focus, in particular, on a range of points that have been raised as part of its consultation on the growth and competitiveness strategy. This will include addressing concerns around: 
      • the framework in which the FOS operates which has resulted in it acting, at times, as a quasi-regulator; 
      • whether the FOS is applying today’s standards to actions that have taken place in the past; and 
      • the practices that have grown up over time on compensation. 

This work is expected to conclude by the summer and the government says that it “stands ready to legislate in order to ensure that we have a dispute resolution system in the UK which is fit for a modern economy”. 

• Transparency and performance of key regulators 
  • The government is working with regulators to strengthen transparency, so that business and the public can see how regulators are performing and the government can drive culture change. Going forward, it expects regulators to: 
    • publish clear, time-bound targets for processing authorisations; and their performance against these targets; 
    • stress-test these targets with industry to ensure these are properly calibrated for the sector; and 
    • ask their stakeholders how they can improve their service and draw up action plans to do so, with an update to Government by June. 
  • Where businesses and regulators agree there is a case to expedite decisions and authorisations, the government will work with regulators to identify process improvements including the introduction of paid-for “fast lanes” for regulatory approvals. This work will identify where legislation may be needed but also ensure the necessary checks and balances are in place to ensure there is no deterioration in high quality services elsewhere. 
• Financial services 
  • Building on announcements made at the Chancellor’s Mansion House [this is a link to an existing OT article] speech in November 2024 - and the issuing of new remit letters for growth – the government will also continue to build on proposals brought forward by financial regulators, including: 
    • HMT will work with the regulators, the Office for Investment and the City of London Corporation, and the government will establish a concierge service that enhances the attractiveness of the UK as a destination for global financial services, by making it easier for firms to navigate the UK regulatory landscape and broader barriers to entry. 
    • A package of measures to enable the FCA to support early-stage innovative firms to start conducting regulated activities, including more dedicated support, issuing “minded to approve” notices to support fundraising, and considering whether the legislative framework can be updated to allow relevant firms to conduct limited regulated activities with streamlined conditions. 
  • Annex A also details a wider range of recent commitments made by a host of regulators - across all sectors - working closely with government. See further below for details. 

Action 3: Challenge and shift excessive risk aversion in the system 

A more consistent approach across departments and greater focus on the activities of regulators is required to make sure that the right balance is being struck between consumer protection and growth. This requires a whole-of-government approach, so the government is strengthening the model of accountability and formalising performance reviews which will be conducted by all sponsoring government departments. These reviews will: 

• hold regulators to account for their performance against their statutory duties and strategic steers from government; 
• hold regulators to account for reducing administrative costs; 
• monitor their regulator’s performance with business through their published KPIs and industry feedback; and 
• improve strategic alignment between Secretaries of State and their regulators. 

Other points to note on Action 3 include: 

• Artificial Intelligence (AI) 
  • The government’s response to the AI Opportunities Action Plan outlined the actions that it will take to build on its pro-innovation regulatory approach to AI. 
  • Government departments will work proactively with their regulators to identify regulators’ future AI capability needs and provide clear strategic direction on the importance of promoting safe AI innovation. 
• Innovation 
  • The Action Plan recognises that, with the right approach, regulation can be a strategic asset to enable innovation, provide more certainty for innovators and support the UK’s international competitiveness. 
  • In 2024, the government set up The Regulatory Innovation Office (RIO)to “position the UK as the best place in the world to commercialise technologies and innovation”. The RIO’s key functions are to: 
    • work with innovative businesses, regulators and departments to address regulatory barriers that are holding back innovation; and 
    • drive wider change in regulators’ behaviour and attitudes towards innovation. 
  • The RIO has been working alongside departments and regulators on certain priorities. These include in relation to the quantum sector. The Action Plan refers to the fact that, drawing on insights and recommendation from the Regulatory Horizon Council’s report on “Regulating Quantum Technology Applications”, in October 2024 the UK became the first country to publish a strategy for regulating quantum technologies. As part of this, the Department for Science, Innovation and Technology (DSIT) is now establishing a new forum for regulators to prepare for the quantum revolution, supporting industry-led principles to guide the development of the technology and scoping measures to upskill regulators and ensure they work with industry to adapt their regulatory frameworks.