Cutting Red Tape

The Chancellor described the economy as ‘not working as it should … for too many people’. Her plans to take an axe to red tape and reform huge swathes of the regulatory system would boost growth and ‘make the UK a top destination for global capital’. The government has targeted a reduction in administrative costs to businesses of 25%, or almost £6bn, a year by the end of the parliamentary term in 2029.

Obstacle Course

The Department for Business and Trade’s 2024 “Business Perceptions Survey” found that almost half of businesses (47%) reporting in 2024 believe that regulation is an obstacle to their success, up a little from 45% in 2022.

Just two in five businesses in 2024 agreed that regulators helped them to comply with regulation and that they had confidence in the advice and guidance their regulators provided. These trends are even more pronounced when looking at innovative and high-growth businesses. A greater proportion of innovative and high-growth businesses report that complying with regulation presents a challenge to their business.

This is why, in March, the government published its Regulation Action Plan, which set out how ministers intend to overhaul the regulatory system so that it not only provides critical safeguards and protects consumers and competition, but also supports investment and innovation, increases productivity and drives economic growth. This included the target to reduce the administrative costs of regulation for businesses by 25%.

In an update published in October, the government published an estimated current burden of regulation of £22.4 billion against which the 25% reduction would be achieved, amounting therefore to some £5.6 billion of savings. About £1.5bn of annual savings have been identified so far, including from planning reforms (£0.3bn), digital verification services (£0.5bn), and lighter toucher corporate reporting requirements for SMEs (£0.2bn).

Bonfire of the Regulators

Other cost savings will come from cutting the number of regulators, and simplifying the duties of those that survive the cull.

• Environmental Regulation: An explosion of rules, protections and guidelines on the environment are often blamed for slowing infrastructure and housing projects. Ministers are planning to streamline the process, with a single point of contact rather than companies having to navigate multiple agencies. The government has consistently called out environmental protection regulation, such as complex guidance on bat habitats, as a source of delay for key national infrastructure projects, such as HS2. Ministers want to simplify the rules so that large projects (like new housing and transport) are less bogged down.  The government wants to speed up and streamline the delivery of 1.5 million new homes and critical infrastructure through its flagship Planning and Infrastructure Bill, expected to deliver £272m in administrative savings for businesses every year.
• Financial Services: There is a plan to reduce burdens and update regulatory regimes to encourage more ‘informed risk-taking’. New, simpler corporate rules will remove requirements for small businesses to submit lengthy reports to Companies House (Directors’ Report and Director’s Remuneration Report and Policy), the Treasury said. It is thought this will deliver £185m in administrative savings every year. The changes will apply to more than 100,000 firms such as family-run cafes. The plans will: exempt medium-sized private companies from producing a strategic report in the Annual Report; exempt wholly owned subsidiaries from producing a strategic report where they are covered by the reporting of a UK parent; and remove the requirement to produce a directors’ report, with some provisions to be removed entirely, and others relocated elsewhere in the Annual Report. Peter Kyle, the business secretary, said he was scrapping these reports ‘because some of it is just so unnecessary’. In her Spring Statement, the Chancellor said the regulatory plan includes measures to reduce ‘complexity, uncertainty and excessive risk aversion’. In July, the Government announced the most significant package of reforms to the Financial Ombudsman Service (FOS) since its inception to provide greater regulatory coherence with the Financial Conduct Authority, and to prevent the FOS acting as a quasi-regulator in a small but impactful number of cases.
• Growth considerations: It is hoped a move towards more ‘pro-growth regulation’, rather than just cutting everything, will support innovation, competition and investment. The Regulatory Innovation Office was launched in October 2024 to ensure that regulation enables innovation in science and technology, recognising that new technologies are the key to future growth. On October 21st, the government launched a plan to introduce a new regulatory initiative known as the AI Growth Lab, which would allow firms to pilot AI technologies in real-world conditions, but under tight supervision. The Business Secretary told the Today programme that the government’s approach to AI could include temporary exemptions from regulation for new AI software. He said: “In certain circumstances when new AI technology is being developed, we can remove it from all regulation for a period of time to give it the space to really grow, to develop, to be commercialised really rapidly.”
• Quango Reform: Part of the de-regulation drive is to reduce the number of public bodies, so called ‘quangos’ or arm’s-length bodies. Ministers believe that some duplication or overlapping regulation comes from having too many of these bodies. Perhaps the most prominent example is the plan to abolish NHS England.  There is also a commitment to overhaul water regulation: written statements mention abolishing Ofwat (the water regulator) and merging water regulation functions from multiple bodies into a single regulator. Ministers hope this single point of contact will bring an end to the current fragmented and complex web of water regulation that gets in the way of delivering for customers.

Risks and Challenges

Change is difficult to manage and it is usually impossible to keep all stakeholders happy with the new direction of travel.

Ministers are already under fire from various lobbying and special interest groups over concerns that a simplified and streamlined regulatory landscape could water down protections for the environment, or resurrect risks that deregulation is prioritising economic growth over the long-term stability of the financial system, or harming long fought for consumer protections.

It is a minefield that the Chancellor and Prime Minister will have to delicately tip-toe through over the coming months.

Business priorities for reform

The IoD has asked several questions on regulation in recent months to build our understanding of the extent to which regulation is blocking growth and in what areas. In our November 2025 Policy Voice survey quarterly question, regulation was the fourth most prominent factor having a negative impact on organisations, cited by 37% of respondents. When we have asked businesses for more detail on the regulations posing the greatest concerns, employment and workplace regulation (particularly the Employment Rights Bill) comes top. The government recently compromised on proposed changes to unfair dismissal rights, agreeing for them to come in at 6 months relative to day one as originally proposed (they currently come into effect after two years). However, this was in exchange for the removal of the cap on claims. We are continuing to work with government to ameliorate the risks that the reforms damage employment and disproportionately increase employment costs for business.