UK’s Deregulation Drive Sparks Legal Debate Over Risks, Conflicts, and Uncertainty

The UK government's latest push to scale back regulations in a bid to attract businesses and investment is generating divided responses among legal experts, with many raising concerns about potential risks and systemic flaws. As part of a broader effort to stimulate economic growth post-Brexit, officials are encouraging regulators to not only enforce rules but also act as economic enablers—an approach that some lawyers warn may create inherent conflicts of interest.

"Deregulation could bring an increase in risk," cautioned Parham Kouchikali, a partner at law firm Taylor Wessing. "We expect there could be an uptick in investigations and disputes in the next three to five years as a result." The UK currently operates with over 100 regulatory bodies, excluding industry-specific associations like those for lawyers or accountants.

Giles Crown, also a partner at Taylor Wessing, echoed these concerns, warning that “government pressure on regulators to promote growth creates a potential conflict in relation to the actual or perceived independence of their actions and may discourage robust enforcement, particularly in those sectors which the government is targeting for growth, such as tech and AI.”

Since the 2016 referendum decision to leave the EU, both major UK political parties have explored deregulation as a path to economic competitiveness. However, the current Labour government under Prime Minister Sir Keir Starmer has significantly escalated efforts to remove red tape. On March 17, Chancellor Rachel Reeves unveiled an action plan urging regulators to support the markets they oversee while continuing their policing role.

The plan criticized the existing regulatory system as being “too risk averse”, “not functioning as effectively as it should”, and claimed that it “too often holds back growth and inhibits private sector investment.” It highlighted problems such as “high administrative costs” and “overly onerous and disproportionate reporting requirements.” The document also stated that businesses found regulation “complex”, “duplicative”, “poorly designed”, and “cumulative”.

It further argued that the remits and powers of regulators have evolved inconsistently over time, making it harder to simplify or align their activities. “Our regulatory approach has become too risk averse,” the government stated, explaining that political and regulatory incentives to avoid criticism for missed risks have led to excessive caution.

The plan suggested that rules-based regulatory frameworks can “limit regulator discretion, making it difficult to strike the right balance between risk and growth and managing the risk of legal challenge.” It claimed that regulatory burdens may cost the UK economy between 3 to 4 percent of GDP—roughly £70 billion annually—although the data underpinning that estimate dates back 20 years.

Looking abroad, the government pointed to Singapore and Australia as examples of regulatory environments that successfully encourage business. Financial services remain a key focus for deregulation. On March 18, Reeves met fintech leaders and promised to reform remaining EU-era rules, including the Markets in Financial Instruments Directive (MiFID). The government wants the Financial Conduct Authority (FCA) to replace duplicative regulations with a fresh framework and shift its stance to being “minded to approve” firms more readily, while reducing reporting burdens and expediting authorisations.

The FCA followed up on March 25 by releasing its five-year strategic plan, pledging to become a “smarter” regulator. Other watchdogs have also responded positively. On March 17, the Information Commissioner’s Office (ICO) announced steps to ease compliance with data laws and promised businesses “comfort from enforcement” while experimenting with innovative data tools. The Competition and Markets Authority (CMA) committed to speeding up its merger reviews and competition investigations to foster a more deal-friendly environment.

Yet skepticism remains over the government’s ability to deliver on its reform agenda. “It is too soon to know if any of the proposals will actually go anywhere,” said Neil Robson, a partner at Katten Muchin Rosenman. “It all seems more like soundbites rather than real action.”

Despite the emphasis on deregulation, legal experts insist that compliance must remain a priority. Environmental rules, for instance, will still be subject to what officials call “constrained discretion to deliver desired outcomes within the law,” a phrase critics say lacks clarity.

Matt Jones, director at Burges Salmon, stressed that reducing red tape does not necessarily mean discarding useful frameworks. “Rather than cutting rules, there appears sense in streamlining rules where it makes sense to do so, so that the relevant regulatory regime is proportionate and useful for firms both in operating their businesses, but also in planning for the future,” he said. “For example, in financial services, streamlining prescriptive rules should hopefully foster greater flexibility and innovation for firms.”

Robson added that certain rules may indeed be needlessly redundant. “A lot of FCA reporting is mandatory and seems to have no real benefit to firms themselves, their customers, or the markets,” he said. “There are scenarios where both sides of a transaction have to report, so the FCA gets the same information twice, which is duplicative and unnecessary.”

Efforts to simplify rules around artificial intelligence and data handling could help the UK attract tech businesses. But Lillian Tsang, senior data protection solicitor at Harper James, warned against going too far. “Cutting red tape always sounds appealing for businesses, but when it comes to data protection and protecting consumers, the risks often outweigh the rewards,” she said.

Tsang noted that the UK is already working to ease compliance burdens under the proposed UK Data Protection and Digital Information Bill, which seeks to loosen the UK’s adaptation of GDPR. She cautioned that additional deregulation, especially in sensitive areas like AI, consent, and cross-border data transfers, could damage public confidence and jeopardize the UK’s adequacy decision with the EU. A more prudent strategy, Tsang argued, would be “to refine existing processes – such as making the ICO’s regulatory sandbox more accessible – rather than dismantling fundamental protections.”

Ultimately, whatever changes are pursued, enforcement must remain a constant. “Regulatory shifts often bring a period of uncertainty, but businesses should not take this as a signal to ease up on compliance,” said Weng Yee, partner at Forensic Risk Alliance. “Enforcement won’t pause in the meantime. Streamlining regulation should mean smarter and more efficient compliance, not weaker safeguards.”

By fLEXI tEAM