The UK’s exit from the EU presents both opportunities and risks for regulatory reform. In the short term, small businesses need as much stability and certainty as possible. This is why FSB supports the intent of the Repeal Bill to ensure that the same rules and laws apply on the day after we have left the EU, as the day before. After we have left the EU, the UK Government must carry out a holistic and strategic review of the regulatory framework. This should identify where change could boost small business growth and productivity. The UK Government should also identify where the UK would not seek changes, acknowledging potential consequences for cross border trade with the EU single market and providing protections for customers. The UK Government must take a balanced, nuanced and, above all, evidence-based approach, informed by frontline insight from small businesses with ‘boots on the ground’.
FSB research shows that small businesses think the current regulatory framework is too burdensome, with two thirds of small businesses stating that the burden of regulation outweighs its benefits. However, our data also indicates that small businesses are not, in the main, challenging the policy objectives of regulation per se, particularly when those objectives are to build trust among customers, provide a level playing field with competitors and promote productivity and innovation. Rather, their concerns focus primarily on the quantity and quality of regulation overall, and the effectiveness of the implementation and enforcement of regulations. Yet it is a complex and nuanced picture. Indeed, almost three quarters of small businesses can also identify some form of helpful regulation.
This research finds that the majority of small businesses believe that leaving the EU will provide either significant or some scope for reforming the regulations that impact them. Therefore, it is essential that the UK Government establishes a robust institutional framework to undertake a wide-ranging review of all regulation impacting small businesses. Understanding how best a regulation can be designed and implemented is equally as important as examining why it is needed. Importantly, the institutional framework for this review should be in place before we leave the EU.
Alongside the comprehensive review of the stock of current regulation, the UK needs to better govern the flow of future regulation. That is why we are recommending the UK Government should demonstrate strategic leadership by establishing an Office for Regulatory Reform (OfRR) in the Cabinet Office, reporting to the First Secretary of State and Minister for the Cabinet Office. Every two years it should produce a ‘state of regulation’ report to Parliament.
The UK Government and devolved administrations should also implement measures which improve the ‘regulatory experience’ of small businesses, supporting their efforts to understand and comply with important regulations. It should create a central hub to help smaller businesses and start-ups understand which regulations are relevant to their business and where to get the best advice on compliance. This could be run by the Small Business Commissioner (SBC), operating in conjunction with the proposed OfRR.
After our exit from the EU, key decisions about how to develop new rules, bodies and processes will need a partnership approach between the UK Government and the devolved Governments of Scotland, Wales and Northern Ireland. Each will need to be flexible, sharing expertise and working in good faith in order to ensure smaller businesses are not burdened with new barriers to trade.