UK: 21st Century Regulation

In June, the Secretary of State for Business, Energy and Industrial Strategy published a white paper entitled "Regulation for the Fourth Industrial Revolution" (the White Paper). The White Paper forms part of the UK's industrial strategy. It aspires to maintain the UK's reputation for having a world-leading regulatory system in the face of rapid technological change. Set out below is a brief summary of the White Paper's explanation of why it is important to focus on and change the regulatory system in the light of current developments, followed by a round-up of the challenges identified by the White Paper and the plan outlined to address them.

The need for change

  • The UK's regulatory system is a national asset – we are ranked 9th among 190 economies for ease of doing business by the World Bank (2019), with the quality of the UK's regulatory practices given the highest overall country score by the OECD (2018).
  • Regulatory systems will struggle to keep pace with rapid, complex technological innovation which will occur during the Fourth Industrial Revolution, and so a more agile approach to regulation is needed to support innovation while protecting citizens and the environment.
  • Where regulation is poorly designed, it can inhibit productivity and innovation, and discourage firms from entering markets. Conversely, when it is well designed, it can stimulate ideas, reduce investment risk and influence consumer confidence.
  • Only 29% of businesses believe that the government's approach to regulation facilitates innovative products and services being efficiently brought to market (BEIS).
  • 92% of businesses think they will feel a negative impact if regulators do not evolve to keep pace with disruptive change in the next two to three years (PA Consulting).
  • Other countries are rapidly reforming their systems and this is a source of competitive advantage in the global economy (Nesta).
  • The UK is already making changes – for example, the Financial Conduct Authority's regulatory sandbox, the Regulators' Pioneer Fund, the partnership with the World Economic Forum, the Ministerial Working Group on Future Regulation and the Prime Minister's Council for Science and Technology, which has provided recommendations on how to enhance regulatory oversight of technological innovation.

The challenges and the plan

The following six challenges are identified in the White Paper.

  • A need to be on the front foot in reforming regulation in response to technological innovation.
    • The plan:
      • establish a Regulatory Horizons Council (an independent panel) to identify implications of technological innovation, advise government on regulatory reform and provide a regular report to government on this;
      • the Council will complement existing bodies such as the Better Regulation Executive and the Centre for Data Ethics and Innovation and work closely with UK Research and Innovation; and
      • the Council's recommendations will be considered by the Ministerial Working Group on Future Regulation.
  • A need to ensure that the regulatory system is sufficiently flexible and outcomes-focused to enable innovation to thrive.
    • The plan:
      • pilot an innovation test so that the impact of legislation on innovation is considered;
      • promote new ways to trigger when post-implementation reviews of legislation are undertaken;
      • develop tools for regulators which support them by reviewing guidance etc to ensure they provide flexibility; and
      • invite specified industry bodies to set out their vision for how the development and review of standards should evolve.
  • A need to enable greater experimentation, testing and trialling of innovations under regulatory supervision.
    • The plan:
      • examine the case for extending the Regulators' Pioneer Fund to local authorities to help support greater testing and trialling of innovations;
      • establish a Regulators' Innovation Network to foster a culture of experimentation across regulators;
      • ask regulators to go further in evaluating the impact of their initiatives on innovation; and
      • survey innovators and regulators to identify data that could be shared to enable disruptors to enter markets and deliver better outcomes.
  • A need to support innovators to navigate the regulatory landscape and comply with regulation.
    • The plan:
      • consult on a digital Regulation Navigator for businesses to help them find their way through the regulatory landscape;
      • provide greater investment in specialist regulatory advice services for innovators;
      • scope and consult on measures to enhance co-ordination between regulators to ensure that innovations are guided smoothly through the system; and
      • invite regulators to develop metrics on the service they provide to innovators.
  • A need to build dialogue with society and industry on how technological innovation should be regulated.
    • The plan:
      • ask the Regulatory Horizons Council to identify priorities for greater public engagement on regulation of innovation;
      • encourage the Better Regulation Executive to provide support, advice and share best practice with policymakers and regulators on public engagement techniques to support appropriate regulation of innovation; and
      • encourage regulators to build public dialogue into experimentation initiatives.
  • A need to work with partners across the globe to reduce regulatory barriers to trade in innovative products and services.
    • The plan:
      • continue the partnership with the World Economic Forum's Centre for the Fourth Industrial Revolution based in San Francisco to develop regulatory approaches for new technologies;
      • improve awareness of effects of regulation on trade among government departments and regulators;
      • seek to include ambitious chapters on good regulatory practices and regulatory co-operation in future free trade agreements;
      • work with international partners and multilateral forums to develop and promote standards for new and emerging technologies; and
      • continue to work alongside other nations in international and regional standards organisations.

Conclusion

The regulatory environment for governments and businesses has never been more challenging. The pace and scale of change is unprecedented and businesses are exposed to regulatory oversight at every stage in their lifecycle. In this environment it has never been more important for businesses to plan and implement their response to regulatory change, to influence it and to challenge poor regulation. It is encouraging that the UK government has recognised that a coherent approach to regulation across the board is essential in fostering an environment in which businesses can flourish and maximise the benefits available from technological change, and that it is seeking a wide range of views on how best to do this. It will be interesting to see how the various initiatives and new bodies work together towards a more nimble regulatory system capable of keeping pace with 21st century innovations.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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