Select Page

UK: The regulatory superpower next door


By Joël Reland, UK in a Changing Europe

In contrast to the fevered speculation over the timing of the UK election, little attention is being paid to one we already know the date of – this June’s EU elections. Yet the next European Commission, whose composition hinges on the outcome of the poll, is likely to have a major bearing on the UK’s politics and economy.

For evidence of this, you need only look at the current legislative hyperactivity in Brussels.

While Rishi Sunak’s legislative agenda has all but dried up, the European institutions are rushing to finalise a number of landmark pieces of legislation before June. Many of these have major implications not only for the UK, but for the global economy.

The rash of new legislation reveals some key themes. One is the need to ensure businesses uphold fundamental rights even outside Europe. This is done via import bans on products made with forced labour or linked to deforestation, and new obligations on businesses to conduct due diligence on potential human rights and environmental violations in supply chains.

Tech firms are also in the firing line. The likes of Uber and Deliveroo will be forced to treat some workers as employees – and thus provide them with a minimum wage, paid leave and sick pay – under the Platform Workers Directive. And Apple has already had to reboot its iOS interface for EU users (for example by permitting competitor app stores) in order to comply with the Digital Markets Act.

Finally, there is a big push to upgrade environmental and sustainability standards, with new rules on the reusability of packaging, and obligations for businesses to repair, rather than replace, products. Cosmetics and pharma companies, meanwhile, will be obliged to pay for wastewater treatment necessitated by their products.

This is a serious package of legislation, even if the EU has ‘watered down’ several of the proposals to get them passed in time. The number of businesses subject to supply chain due diligence obligations was cut by 70% at the last minute; likewise, the definition of employee applied to platform workers was heavily fudged. And, against a backdrop of high-profile farmer protests, member states are still refusing to sign-off a new law on restoring degraded ecosystems.

Yet to focus on what has been lost is to miss the bigger picture. Compromise and horse-trading are inevitable parts of the EU policymaking process, and the legislation that has emerged is still going to have a major impact on business operations around the world, creating major new compliance obligations for access to the single market.

Unsurprising, then, that the new rules on packaging were reportedly among the most lobbied in EU history, so significant are there effects on supply chains. Apple, meanwhile, has taken the extraordinary step of producing an iOS system for EU users only, despite previously trying to legally challenge the relevant legislation.

States, too, have felt the force. The governments of Malaysia and Indonesia sought to challenge the EU’s deforestation rules, given the direct impact it has on their own agricultural sectors, but have now settled for some limited derogations. Other countries – including the US – unsuccessfully opposed the introduction of a Carbon Border Adjustment Mechanism (CBAM) which applies the EU’s carbon tariffs to imports.

This highlights a key theme running through much of this new EU legislation – its growing extraterritorial effect. Regulation is being used to impose the EU’s values onto the rest of the world. Compliance with EU product standards (always a precondition for market access) increasingly means compliance with EU standards on environmental, human and social rights too.

The EU has long been a regulatory heavyweight, but has historically used its influence to reduce barriers to trade through harmonised standards with other jurisdictions. Now, by contrast, it is happily erecting major new regulatory barriers around its own market, in the name of upholding certain fundamental values.

The pandemic and global energy crisis appear to have checked the EU’s historic optimism about a global liberal market order, highlighting the risks of excessive reliance on Chinese and Russian imports. Consequently, it has tried to become more self-sufficient as it decarbonises and boosts its energy security – meaning a growing reliance on trade barriers (and subsidies), and a desire to uphold distinct EU principles.

What, then, of the UK? Despite the UK technically being free of Brussels ‘red tape’, the EU remains its chief export market. That means British businesses have little choice but to follow new EU regulations – on packaging, due diligence, and much else – to maintain market access. And so, EU regulations become de facto UK ones.

The government is in a similar bind. Failing to replicate EU measures which heighten surveillance on forced labour or deforestation carries the risk of becoming a dumping ground for the goods the EU rejects. Revealingly, similar deforestation and digital markets legislation are in the works. Meanwhile, the UK has opted to effectively replicate the EU’s CBAM, to avoid an influx of carbon-heavy goods into the UK.

Such is the reality of living next door to a regulatory behemoth. If UK businesses want to understand their regulatory horizon, they’d be advised to pay as much attention to the identity of the next Commission in Brussels, as to the next government in Westminster.


Joël Reland is a Research Associate at UK in a Changing Europe. His academic background is in international politics and the history of political thought, and his research focuses on in UK-EU relations, UK-EU regulatory divergence and European politics.