At Form, we invest in tech startups building the future of regulated markets. That could be in traditional regulated markets like fintech or health, or frontier ones where novel technologies demand new regulatory frameworks. Whether you’re a payments company or cultivating food in a lab, navigating regulation is a critical part of building your business.
But last year we started to spot a trend. Companies that otherwise had very little in common were all hitting upon a similar challenge: regulators that were either underfunded, inflexible or lacking in risk appetite were holding them back from moving quickly. Crucially, this wasn’t about one specific rule or disagreement with a regulator. Instead, almost universally, it was clear that a slow decline in regulatory capacity meant authorities were unable to move as quickly as progress demanded.
Over-stretched regulators now stand between an ever-growing number of UK startups and their users. Post-Brexit, they are already creaking under the weight of enormous extra responsibility, with limited extra resource. Then add the challenge of the accelerating technology frontier, and regulators are struggling to keep up. For many startups this is becoming their biggest barrier to growth.
Fintech companies are waiting 12+ months for authorisation. Drones still can’t deliver life-saving medicines, because regulators are struggling to get comfortable with flight ‘beyond visual line of sight’. Sustainable, cruelty-free, cultivated foods are available in Singapore and the US, yet stuck in regulatory limbo in the UK. The list goes on.
But progress in AI, bio, food, health, finance, transport and many other sectors is core to the UK’s economic growth and to improvements in people’s lives. While entrepreneurs in the ‘markets that matter’ are holding up their end of the bargain, regulators are increasingly unable to move as quickly as the public interest demands.
To get back on track, in February we launched our Fix The Regulators campaign, getting into the detail of what’s gone wrong and setting out a manifesto for upgrading regulators. We highlighted 3 elements we need to correct to get this right: resource, rules, and risk appetite.
Some regulators have the right ambition and legal framework to support frontier technology companies, but simply lack the resource to design and then operate the required pathways. The Food Standards Agency is a case in point, needing perhaps £5-10m more to put the UK back in the lead as a place to develop alternative proteins. To put this in context, the government spends £15 billion on R&D annually.
Other regulators are constrained by rules, even if they have the risk appetite and resource to make progress. Drone companies are doing everything they can to prove and scale their technology, but can’t grow without slow-going reform that’s stuck between parliament and the regulator. The clinical trials regulator is tapping its feet waiting for government to respond to its request for changes to the law.
Finally, there are regulators which don’t lack for resource or rule flexibility, but simply lack the risk appetite to prioritise innovation. A decade ago, politicians, regulators and entrepreneurs combined behind the ambition to make the UK the “fintech capital of the world”. But now, this spirit of innovation has retreated to the extent where ministers are routinely resorting to criticising the regulator for being overly risk-averse.
The next government has a chance to arrest this regulatory decline, by creating and empowering a cross-government unit to focus on regulating innovation. The UK should aim for new products to be licensed more quickly than anywhere in the world, with agile permissions that pivot in line with the technology. We can massively reduce friction for founders, without lowering standards for customers.
The fact that this is not a headline political issue is partly a challenge: fixing our regulatory plumbing is not a doorstep issue, so won’t dominate attention. But it is also a massive advantage: this work can be done with far less of the political contention that has prevented other economic levers like planning reform. Whoever wins the election, the next government will need to grip this issue to give UK tech — and the wider UK economy — a chance at growth.
