Fixing regulation
The UK has inherited too much process-driven regulation from the EU, which tends to apply the precautionary principle - regulate early and heavily if there’s even a theoretical risk - even before clear evidence of harm. Critics say this leads to excessive caution that stifles innovation, especially in such areas as biotech, chemicals, and AI.
The EU tends to micromanage, often regulating not just outcomes but the means. For example, detailed specifications for product labeling, food standards, and workplace rules sometimes prescribe precise processes rather than setting outcome-based goals.
The EU prioritizes harmonization across 27 states, rather than flexibility. This can produce very detailed rules (to avoid loopholes) that may feel disproportionate when applied in one member state.
The UK has yet to grasp its post-Brexit opportunity. Outside the EU, the UK can set its own rules without needing consensus. Advocates argue this allows a shift away from “Brussels bureaucracy” toward more flexible, proportionate standards. We could apply cost-benefit analysis: A results-driven framework would weigh regulatory burdens against economic and social gains, aiming for proportionality rather than blanket precaution.
Freed from the EU’s slow, consensus-based rulemaking, the UK could adapt faster and with more agility to new technologies or business models, tailoring rules for domestic needs. We could be more innovation-friendly. Less rigid rules could encourage sectors like fintech, AI, green tech, and life sciences.
Lighter-touch regulation could make the UK more competitive and more attractive to investment compared to the EU market. By focusing on outcomes instead of procedures, compliance costs could be cut, especially for SMEs that bear disproportionate burdens under detailed EU rules.
For example, the REACH regulation (Registration, Evaluation, Authorization and Restriction of Chemicals) requires exhaustive testing, registration, and approval of all chemical substances before they can be marketed. It is precautionary, in that the burden of proof lies on companies to demonstrate safety upfront, often at great cost.
This means that SMEs face high compliance costs and long delays. Even relatively low-risk substances are subject to detailed bureaucratic requirements. A UK regime could shift to a more risk-based model, allowing use where evidence of harm is minimal, reducing paperwork, and focusing resources on genuinely high-risk chemicals.
A second example lies with genetically modified organisms (GMOs) and gene editing. EU regulation treats gene editing as equivalent to older, less precise GMO techniques (which it isn’t). The approval process is so strict that few GM crops are grown in the EU. This has held back agricultural innovation and limited Europe’s competitiveness in biotech.
Fortunately, the UK has already begun diverging, easing rules on precision breeding techniques, which are argued to be safe and could boost crop yields and sustainability.
EU Approach: MiFID II (European Union's Markets in Financial Instruments Directive II) imposed highly detailed reporting and disclosure rules on financial firms, including small brokers, often with thousands of pages of compliance obligations. The compliance burden hit smaller firms hardest, raising costs without proportionate benefits for market stability or consumer protection.
There are UK Opportunities post-Brexit. The UK is reviewing MiFID II requirements. It should simplify reporting, especially for smaller firms, while keeping key investor protections.
In workplace and product standards the EU rules often prescribe how something must be done rather than just what the outcome should be. For example, workplace health and safety rules may mandate exact procedures instead of allowing firms to demonstrate that outcomes, such as safe working conditions, are achieved in their own way. This approach fosters box-ticking rather than innovative approaches to safety or efficiency.
More principles-based standards could let businesses choose their own methods to achieve desired outcomes, monitored through cost-benefit tested enforcement.
The EU’s Renewable Energy Directive included specific technology targets (e.g. biofuels quotas) rather than letting countries decide the cheapest or most effective way to cut emissions. This sometimes locked in less efficient solutions and drove up energy costs. With independence, the UK can focus on outcomes and choose the most cost-effective mix of technologies, including nuclear and fracking.
These examples illustrate the broader argument that EU rules tend to be precautionary, detailed, and harmonized, while a UK alternative could be risk-based, results-oriented, and tailored, provided that political will exists to actually make the switch. We should do it.
Madsen Pirie