'Red tape can help as well as hinder our growing businesses'

Indeed, just last week the Chancellor hauled in regulators in an array of sectors for discussions on how they can contribute more to the growth agenda.

But what we mustn’t end up with is a situation where we encourage a quick hit of unsustainable economic growth, but put consumers at risk of harm and ultimately damage the economy.

Again, here it helps to look back through history, where there are cautionary tales.

Looser mortgage lending in the run-up to the financial crisis of 2008, and exorbitant levels of interest on ‘payday loans’ in the aftermath, disproportionately affecting the most vulnerable consumers in society, are both examples of the more pernicious effects of laxer regulation.

Indeed, it is thanks to tighter regulation that payday loans are much less of an issue now.

It is against this backdrop that comments made by the Business Secretary last week on the Consumer Duty, a set of requirements introduced by the FCA in June 2023 after worries about decreasing standards of service, are so concerning.

To hear a firm in the Square Mile rally against what they believe to be suffocating red tape might be par for the course.

But when Jonathan Reynolds said that, in a discussion with an insurer, the cost of being compliant was considered money that could be better spent on investment, and that the Duty was the ‘biggest thing’ that comes up in chats with businesses, we should all be sitting up.

This should not be misconstrued as a plea for regulation for regulation’s sake.

Where regulation is duplicated or unnecessarily stringent, it of course makes sense to trim it. But what is being lost in this debate is the pro-growth characteristics of consumer protections in and of themselves.

Nor should it be interpreted as a paean to the Consumer Duty. There is much to admire about the Duty and its commitment to ensuring businesses deliver good outcomes for consumers, but a lack of enforcement action from the regulator against firms failing to deliver – especially in the insurance sector, where our research has uncovered a litany of concerns – risks giving the impression that the FCA is toothless in the face of wrongdoing

Far from being a barrier to growth, better regulation not only acts as guardrails for honest businesses to compete within, but ensures consumers have access to effective redress when things go wrong. Consumers that can trust products and services are more likely to try new ones.

A recent Which? survey of 1,000 UK businesses, carried out by YouGov, found that excessive regulation didn’t even make it into the top seven areas of concern for companies. Fewer than one in five saw it as a top issue.

Drown out the loudest voices in the financial services and tech sectors, and the view, increasingly widespread, that if only more red tape were cut and we’d achieve an economic nirvana, looks increasingly shaky.

Which? would never stand in the way of regulation that doesn’t work. But regulation, well-implemented and proportionate, creates better conditions for dynamic competition between businesses.