Red tape or smart regulation? Why rules still matter – for business and society

It has long been routine in business circles to decry regulation in general as “red tape” and to argue that it slows growth and obstructs innovation.

This issue has been thrust into the spotlight again when Prime Minister Keir Starmer took to social media at the end of last month to claim that excessive red tape was costing firms money, saying: “We are investing in Britain’s future by cutting the red tape that holds businesses back.” The post echoed UK Labour’s wider message of building a ‘pro-business, pro-growth’ government.

On the same day, Chancellor Rachel Reeves told the first UK Regional Investment Summit in Birmingham that the government would launch a blitz on unnecessary business bureaucracy, claiming a 25 percent cut in the administrative costs of regulation could save firms £6 billion a year by the end of this Parliament.

This was music to the ears of many business-people. Ask them and they will point to compliance costs, overlapping regulators, planning delays and a plethora of guides and forms that seem disconnected from their day job. Cut the unnecessary, remove duplication, speed up decision-making: who would argue with that?

There is, however, a deeper question that often gets lost in the rhetoric: when is “red tape” serving a useful purpose? When does trimming this apparent burden scupper the achievement of a valid goal? What happens, for example, when we relax rules that protect consumers, public health, employees or the environment?

Take the water industry. In Wales and England, the issue of river pollution has become front page news. Thousands of businesses and residents are now taking legal action, seeking substantial damages from Welsh Water and chicken producers Avara Foots Ltd and Freemans of Newent Ltd over their alleged role in the pollution of the rivers Wye, Lugg and Usk.

The law firm acting for the claimants, Leigh Day, argues that legal action has become “the last avenue for justice” because “government and regulators have failed to prevent the degradation of our rivers”. In other words, stronger regulation might well have prevented the sewage and chemical discharges that have contaminated the environment and damaged tourism, recreation and local livelihoods.

The companies involved deny they are to blame, with a Welsh Water spokesperson saying: “Unfortunately, the water pollution caused by other sectors during this period has increased significantly, reducing the overall impact of the water quality improvements we have achieved.”

Whatever the outcome of that case, it highlights the ‘red tape’ conundrum. The danger is that, without rules, and their effective enforcement, standards often slip and the playing field becomes skewed: those who cut corners impose costs on other businesses and the wider community.

Here lies the tension. On one hand, business-friendly reform is often justified and welcome. On the other, regulation has generally been introduced in the first place for good reason – acting as a guard rail that protects employees, customers or other businesses. Regulation that is tiresome red tape for some businesses, can be vital for the survival of others.

And even businesses that are restrained by regulation may ultimately benefit from it. For instance, health and safety rules might be costly for a firm in the short-term, but the reputational and financial damage of a serious incident can be far worse. Employment rights might feel like constraints, but they also promote productivity, retention and a stable workforce.

The debate on the ongoing passage of the Employment Rights Bill through Parliament illustrates the latter. The Bill aims to strengthen worker protections and curb controversial practices such as ‘fire and rehire’. However, the Institute of Employment Rights (IER) has warned that, in its current form, the legislation still leaves significant loopholes that could allow ruthless employers to dismiss and rehire staff on worse terms. As the Bill progresses through the House of Lords, its success will depend on whether it can genuinely simplify compliance for responsible employers while closing the gaps that leave workers exposed.

In short, while red tape is a convenient soundbite, the questions for businesses in Wales should go deeper. Are we asking for less regulation because it genuinely helps our firms compete, grow and employ? Or are we asking for less regulation because we resent having to meet the standards that underpin a fair and sustainable economy?

Regulation usually exists for a good reason – not for its own sake but because, without it, the environment, employees, consumers and communities suffer and businesses with high standards are undermined by those that cut corners. Unnecessary burden must go. But let us not mistake removing ‘red tape’ for removing responsibility.

A version of this column appeared in the Western Mail on 3 November 2025 and was written by our HR & operations director, Sarah Whittle.