This week, we have again seen the Government push for a reduction in what they have termed excessive regulation. The Prime Minister wrote in City AM that successive governments have “layered regulation upon regulation on companies and investors, increasing complexity and cost”. Its accompanying policy paper cites studies suggesting regulation could be costing the UK economy as much as £70bn per year.
The PM’s argument is that the UK’s regulators have become increasingly risk-averse to avoid criticism, limiting flexibility and making it difficult to strike the right balance between mitigating risks and supporting innovation. As always, there is some truth in this.
Businesses will no doubt welcome the commitment to understanding the cost of regulation to businesses, as well as the pledge to cut those costs by 25% by the end of the parliament.
Given where we are, the government’s laser focus on growth is understandable and necessary. However, it mustn’t forget the vital role the UK’s regulatory system can play in supporting growth, as well as in protecting consumers.
The issue is about ensuring ‘good regulation’ that measures the right things, encourages a focus on customer outcomes and ensures proper consideration of the customer in the boardroom. Intent is material here – driving a service culture isn’t, and should never be, about tick boxing and league tables!
Good regulation is good for business
Well-designed regulation fosters growth and drives investment by upholding market confidence – through maintaining standards (for example, in building safety or data protection), providing certainty, and promoting a level playing field for all businesses within a sector. By promoting competition, regulators can also support innovation.
Regulation can also promote growth by mitigating societal and environmental risks. As the costs of climate change mount, it is increasingly clear that regulatory measures to protect the environment go hand in hand with delivering economic resilience.
What’s more, good regulation is also demanded by the nation’s consumers, with our research finding that 80% of consumers are strongly supportive of regulators having greater powers to enforce customer service standards.
With customer satisfaction for many UK businesses, as measured by our flagship UK Customer Satisfaction Index, remaining near historic lows, now would be an inopportune moment to weaken standards that drive confidence.
Getting the balance right
In seeking to boost UK growth and productivity, the Government needs to consider all the levers it can pull to support economic growth. However, the focus should be on working out the right measures and how organisations are measured in the intangible and tangible areas of customer service.
One effective way to encourage the growth we all want, with less risk of unintended consequences, is through outcomes-based regulation. This would set overarching goals of positive customer outcomes while allowing businesses and sectors the freedom to achieve these in the way that is most appropriate for their organisations.
Another key focus should be on influencing organisational culture. A service leadership culture can help businesses avoid the considerable cost of service failures, which our UK Customer Satisfaction Index tracks, and currently, it costs around £7.3bn every month. That’s one reason why it’s disappointing to see that for financial services firms, having a customer service-focused board member will no longer be mandated – although I hope that many will see the business sense in maintaining this.
The Government has a real opportunity to set our economy up for success. If we get the regulatory balance right, we can foster growth by raising the standards of the lowest performers within a sector without over-burdening those businesses already getting it right.
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