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29 November 2022

Most UK businesses see no benefit in post-Brexit deregulation

The government’s plan to remove all remaining EU regulation could do even more damage to the UK’s weakened economy, say businesses.

By Emma Haslett

Most businesses have no interest or understanding of the government’s plans for post-Brexit deregulation. And a majority of companies could not name a single EU law that they would change or remove to become more profitable, according to findings shared exclusively with the New Statesman by the British Chambers of Commerce.

The argument that EU laws were limiting UK small businesses’ potential for growth was central to the Brexit campaign. Vote Leave claimed that EU regulations cost small firms “over £600m every week”; a letter signed by Michael Gove, Boris Johnson and the peer Gisela Stuart stated that “by 2:1 SMEs [small and medium-sized enterprises] think the EU is bad for their business”.

Six years on, British companies are beset by spiralling inflation, a fiercely competitive labour market, and the end of energy price support from April. The removal of EU regulations, promised by Liz Truss and pursued by the government through the Retained EU Law (Revocation and Reform) Bill, is of relatively little concern.

In a new survey of 938 businesses, made up largely of SMEs (and therefore representative of the UK economy), just 14 per cent specified an EU regulation they would remove; 58 per cent of firms had no preference over the amendment or removal of any EU regulation. Half said that deregulation is either a low priority or not a priority at all.

Although Britain officially left the EU almost three years ago, removing EU regulations from law has proved difficult. Until recently, it was thought 2,400 laws that had originated with the EU – covering everything from fishing to health and safety – were still on the UK statute books, but early last month research by the National Archives identified another 1,400: bringing the total up to 3,800.

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“A lot of our employment and equality rules draw on EU law,” said Lizzie Barmes, professor of labour law at Queen Mary, University of London, “but they’re so interconnected at this point, because the UK… didn’t just take things and plonk them in, it often built on them, developed them, took them further. In lots of areas, it’s hard even to work out what the EU bit is.”

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The Retained EU Law Bill, introduced by Jacob Rees-Mogg as part of the Truss government’s promise to remove EU law, was designed to “sunset” all remaining EU laws in one go, causing them automatically to expire at the end of 2023. But two months after it was introduced, the bill has begun to unravel: in October, Rishi Sunak, whose prime ministerial campaign had included plans for a “Brexit delivery unit”, was said to be still deciding whether or not to press ahead with it, and last week an impact assessment by the government’s Regulatory Policy Committee warned it was “not fit for purpose”. Two days later a letter signed by 13 business organisations, including the Institute of Directors, the Trades Union Congress and the Chartered Institute for Personnel and Development, urged the government to scrap the bill.

Just how little interest businesses have in it is revealed by the British Chambers of Commerce survey, which found that just 4 per cent of British companies claim a comprehensive understanding of the changes the bill proposes; almost three quarters said they didn’t know any details or weren’t aware of it at all.

And yet, the British Chambers of Commerce says if the bill is introduced into law without careful consideration, it could profoundly impact the way small firms do business. The body’s head of trade policy said, “Businesses did not ask for this bill, and… they are not clamouring for a bonfire of regulations for the sake of it.

“While removing barriers to SMEs’ growth would be welcomed, any proposals to amend or repeal thousands of pieces of retained EU law must be carefully examined and should not be rushed. That’s why the deadline on this bill must be pushed back to the end of 2026, to give everyone more time for the process to be consulted properly. Safeguards for businesses are also required, particularly for exporters and those trading within the UK so that additional barriers to doing business are not unwittingly created.”

Around 20 per cent of businesses were keen to remove rules governing employment and the environment, but many of the regulations were either specific to the UK or a direct result of Brexit itself: 19 per cent wanted to scrap planning regulations, which have always been decided by the UK government, while the proposed UK Conformity Assessed (UKCA) mark, which will be introduced as a result of Brexit, and IR35, which is a British regulation, both came under fire.

Earlier this year, polling by the British Chambers of Commerce found that 71 per cent of British exporters saw the government’s trade deal with the EU as hampering growth. The risk with the Retained EU Law Bill is that it would introduce even more complexity and uncertainty for businesses of all kinds. “In legal terms, it is an extraordinary notion that will waste so much time when our legal systems are so entangled,” said Barmes. “It’s technically very, very difficult to untangle. And it’s arbitrary.”

[See also: The Tories are leaving the housing crash for the next government]

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