Amid persistent economic challenges, it is vital for regulation to play a key role in tackling them. That was the main message of ICAEW’s roundtable talk, Regulation as an instrument of growth, which took place at Chartered Accountants’ Hall on 26 September.

Part of the Institute’s ongoing Better Regulation initiative, the event brought together speakers and delegates from government departments, parliamentary bodies, business, the third sector and regulators themselves to look at how rulesets and the environment around them could be improved to support the UK growth agenda.

Creating solutions

Early in the event, delegates heard that the UK is at an economic inflection point. While it is trying to grow, everyday business decisions risk being slowed by complexity, cost and uncertainty. ICAEW members, who advise around three million UK companies, often note that business owners want a regulatory landscape that spurs investment. If the UK is serious about growth, regulation must be part of the answer.

Regulation aimed at stimulating growth may require a shift in mindset for policymakers and regulators to set the right balance between protection against risk and enabling innovation. Regulators must work in innovative ways, with rules designed to sustain productivity and innovation. While it is essential to equip regulators to act proportionally, consistently and transparently, they must also engage with businesses – particularly SMEs – to understand their challenges and create solutions together.

At a macro level, UK regulation seems caught in a cycle where market failure in a key sector triggers a ‘something must be done’ response in Whitehall. This not only leads to new rules, but sometimes to new regulatory institutions. Over the past two to three decades, these changes have left businesses with a patchwork of duplicative and contradictory regulations. As a result, business owners spend too much time on compliance when they could focus more on growth.

Pendulum swing

A senior figure at a London-listed corporate explained that the period of under-regulation in the run-up to 2008’s global financial crash made subsequent reforms of capital and liquidity rules essential. Those changes strengthened markets against later crises, such as Covid and energy shocks stemming from geopolitical tensions. Now, though, the pendulum is swinging back the other way, amid calls to streamline regulation and increase risk appetites.

In the senior figure’s view, regulation is neither good nor bad; its value lies in design and execution. To balance the pendulum, stakeholders must adhere to three key principles.

• Smart regulation: Ensure that rulesets target live, tangible risks, proportionate to potential harms and adaptable to changing conditions. Smart regulation is neither lighter nor heavier, but fitter.
• Evidence-based regulation: When amending or developing rulesets, policymakers and watchdogs must be humble about what they don’t know and rigorous about what they do know. They must use data more effectively as a basis for regulations and be willing to revisit those rulesets whenever evidence changes.
• Context sensitivity: Innovation and risk differ greatly between industries. For example, risks from crypto and artificial intelligence can scale globally in months, while climate risks builds more gradually but with wider impacts. Sectoral regulations must be carefully tailored to avoid one-size-fits-all overlaps.

Put those principles together, the senior figure said, and stakeholders will have regulation that builds trust and fosters long-term growth. “Not the stability of the graveyard, but the stability that innovators and investors rely on to make long-term bets.”

Exerting discipline

A speaker from a prominent business association pointed out that, contrary to popular belief, SME owners find regulations quite useful. As well as helping SMEs to build trust among their customers and bring new products to market, they level the playing field between large and small players working in the same industries. However, while some watchdogs are good at phrasing their regulations for an SME audience, others are presenting business owners with an unhelpful jargon barrier.

Noting these inconsistencies, some delegates discussed whether the UK government should create a new supervisory body to oversee watchdogs, similar to New Zealand’s Ministry of Regulation. A UK equivalent could set best practices for developing and managing rules and ensure regulators work effectively with the communities they serve. Others considered whether the UK could use recognised industry standards and high-level, principles-based agreements in different sectors to support regulations, making rules more business-focused and reducing reliance on statutory instruments.

A speaker from a parliamentary body highlighted the success of the Financial Conduct Authority’s (FCA’s) Regulatory Sandbox initiative as an example of how regulators can work in smarter, more business-friendly ways. According to the FCA, the Sandbox allows firms to test new financial products and refine them for regulatory approval before going to market. By April 2025 , it had welcomed concepts from 195 companies since its launch in 2016.

Some delegates raised the question of whether the government could use an AI tool to comb through the UK’s entire corpus of regulations to spot inefficiencies, such as overlaps, duplications and contradictions.

Perhaps, inevitably, talk of combating inefficiencies summoned the spectre of US politics and whether the UK could pick up any tips on how to pare down regulatory bloat from President Donald Trump’s Department of Government Efficiency (DOGE). Reflecting on the story of the DOGE experiment so far, one delegate with close insights on the workings of government responded: “What you learn from the aspiration that there could be a quick fix for these issues is that there isn’t.”