Learn lessons from COVID pandemic to stop regulatory confusion

The FSB - the UK’s largest business group - and academics are urging the Government to learn lessons from the implementation of COVID-19 health measures in order to create a commercial regulatory environment that will steer the economy away from recession. They recommend that governments and regulators across the UK should:

• Clearly communicate the distinction between actions that a business must take, and the steps that a business might choose to take, when changing or introducing regulatory requirements. 
• Make effective use of intermediary bodies when communicating changes to regulation.
• Publish illustrative examples of compliance to help small firms understand what good practice looks like
• Introduce grace periods after regulatory changes are introduced to avoid penalising those doing their utmost to comply.
• Minimise restrictions or red tape on schemes that are designed to help businesses, like furlough.

Dr Paul Richter, from Newcastle University Business School was the project’s Principal Investigator. He said: “The onset of the COVID pandemic presented the whole of society with a set of immense challenges. Governments were forced to act to protect public health while, simultaneously, minimising negative impacts on the UK economy. The regulatory response undoubtedly shook the UK’s small business community. Business leaders had to take decisions with far-reaching consequences for their employees’ livelihoods, public and employee health, and the viability and survival of their businesses.”

“Many businesses found it difficult to understand how to comply with the raft of new and changed regulations. And many felt that more clarity was needed in terms of whether regulations were legally required or recommended. This acted as an additional draw on small businesses’ already stretched resources.”

“However, the regulatory shock experienced by small businesses which, for many, meant shutting down operations initially, appears to have opened up the space for some to re-think how they did business and make positive changes for the future.”

Highlighting the resilience of the small business community, some found that, having adapted to the initial shock of engaging with a raft of new regulations, their new circumstances opened up novel opportunities to implement changes/innovations that they would maintain post-pandemic.

The overwhelming majority (82%) of businesses relied on more than one source to find out about regulatory changes during the pandemic. Nearly three-quarters relied on GOV.UK while half relied on business representative organisations such as FSB, which were reported to have tailored their language and regulatory information so that it was more useful to small businesses.

FSB National Chair Martin McTague said: “With economies now thankfully unlocked, this is the moment to step back and assess what broad regulatory lessons can be learned from the pandemic.

“While it is understandable that governments and regulators had to act at great speed as the circumstances of the pandemic evolved, some of the regulatory shortcomings were consistent with problems encountered in more normal times, including around clarity and communication.

“The gold plating trend that we saw over the lockdowns is not confined to health measures, this is a wider issue that drains firms of the resources they need to innovate, upskill and recruit as we work to secure our economic recovery.

“Constructive, clear regulation is a boon for small firms – ensuring they can excel in safe, productive environments. Complex red tape, by contrast, is a constant drag.

“The Government rightly set out its regulatory reforming zeal in the Queen’s Speech, and after Brexit, it now has full control on this agenda. We’re now urging it to learn from best practice and adopt the British Columbia model, where they successfully reduced regulatory requirements on business by over a third in three years. This was done through a new smarter approach to remove red tape, and implementation of new regulation only where it is strictly required and effectively communicated.