WEDNESDAY 26 JUL 2017 3:29 PM


Regulatory frameworks govern business in many sectors, from communications to extractives. How will changes from government and the Brexit process impact the way companies in regulated sectors communicate? Hassan Butt investigates

In his seminal work, ‘The Economics of Welfare,’ renowned British economist, Arthur Cecil Pigou, began an in-depth study into the post-war welfare economics of Great Britain. First published in 1920 and considered the cornerstone of modern public economics, Pigou’s work came to be known widely as public interest theory – formatively proposing that regulation seeks the protection and benefit of the public at large.

More than half a century after public interest theory surfaced, George Stigler, Nobel laureate and a formative figure in the Chicago School of Economics, proposed another argument. Stigler said instead, regulation is “acquired by the industry and designed and operated primarily for its benefit,” thus leading to a form of government failure known as ‘regulatory capture.’

Today’s regulatory structure argues much more however, as Brexit continues to threaten the UK economy with uncertainty, regulation in the UK could follow a different line – one that goes against the grain of Pigou and Stigler.

The UK has over 70 functioning, government-controlled regulatory bodies, from energy and water to health and education. The last decade has seen regulatory rhetoric in the UK evade a traditional ‘nanny state’ polemic. Instances such as the Financial Conduct Authority’s regulatory ‘sandbox,’ which allows businesses to test innovative products, services and business models within the market at a lower cost, illustrate a positive capacity for regulation to become more flexible.

Yet examples of regulatory failures, including the financial crisis of 2008, BP’s Deepwater Horizon, News International’s involvement in the phone hacking scandal and more recently, the Grenfell Tower fire elucidate complacency, deception and poor corporate ethics that call into question not only the fragile 
nature of regulation within the UK, but why communications surrounding regulated sectors is becoming increasingly relevant.

For London-based B2B tech PR agency, Red Lorry Yellow Lorry (RLYL), working with clients in regulated industries is a regular occurrence. Guy Walsingham, managing director of RLYL, says, “Different organisations look at regulation in different ways. If you look at the FSA (Financial Services Authority), they have straightforward guidelines on what you can say and when you can say it. But we work with different clients, and different compliance departments. We must ensure that we are reflecting what they believe. Although we know what the regulations are, we don’t take decisions on those regulations – we have to be very open to how a client interprets regulation.”

Likewise, there is a large amount of regulatory crossover when it comes to public affairs. The legal sector shares much of its of regulation with larger governmental bodies in areas relating to risk, compliance, transparency and consumer protections. For law however, the spectrum widens. Legal aid lawyers and solicitors for example practice in a different way from their corporate or criminal law colleagues.

The regulatory framework of the Law Society and the Solicitors Regulation Authority (SRA), must be broad enough to include everything from legal professional privilege and clear client discretion to conveyancing and information relaying. Yet the legal sector also shares many alternatively regulated aspects, including the Solicitors Disciplinary Tribunal and the Legal Ombudsman that look after how legal action can, in effect, be dictated by the public.

For Stuart Thomson, head of public affairs at London-based law firm Bircham Dyson Bell (BDB), communications are extensive within a regulatory setting that is equally complex. He says, “The role of regulation will only increase, particularly with the current political climate. For us at BDB, we work with a range of different clients, some regulated in more ways than others. I have to abide by the regulations, as does the law firm. There has been some suggestion that public affairs under a law firm is different, but that’s simply not the case. The remit of the SRA is extensive, and with the move to a more statutory regulation system, including an amended lobbying element, they are ensuring that you are doing what you have to be doing. Although this may seem obvious, a lot of the crises and problems that organisations encounter is because they haven’t followed their processes.”

Similarly, the mining industry serves as an example of how layers of regulation can have a direct effect on the communications strategy within that sector. Coal mining is principally monitored by the Coal Authority and oil and gas by the Oil and Gas Authority. Yet gold and silver are property of the crown, and thus monitored by the Crown Estate. However, each branch of mining must fall in line with a host of regulatory procedures that are widely considered globally unified, these include environmental and socioeconomic regulations to health and safety.

An organisation dedicated to a safe, fair and sustainable mining industry, the International Council of Mining and Metals (ICMM) aims to “serve as a catalyst for change; enhancing mining’s contribution to society.” As a member body, the ICMM brings together 23 of the world’s mining and metals companies, as well as over 30 associations.

Jax Jacobsen, senior communications officer at ICMM, says, “Because there are so many international and domestic regulations, as well as the fact that many people aren’t aware of the mining industry and how it affects global economies, it can be difficult to cut through that as a communications professional. Yet for my role, things have changed a great deal since the 1990s. For example, things are a lot more open, and mining companies understand that it’s in their interest and the interest of the world to be sustainable, there’s no dispute about that anymore. They want to be leaders in that space.”

Understanding how regulators view communications however, is equally important. The Office of Communications (Ofcom) is the regulatory authority for the UK’s broadcasting, telecommunications and postal industries, and was founded in 2003. For communications within communications, Ofcom asserts that markets evolve and change rapidly. As a regulatory body, they must be adaptable and transparent. Accountability to the public must ensure that communications work for everybody – this doesn’t stop at consumers. With difficult decisions often at hand, and the global technological structure changing at a rapid pace, framing policy decisions in a way that’s relatable is incredibly important, as Ofcom often deal with highly complex issues that need translating.

As regulatory bodies differ and fluctuate with changing times, Thomson’s point that the role of regulation will increase offers interesting prospects for the regulatory environment in the UK, especially in the context of Brexit. Earlier this year, Jeremy Hunt, the health secretary, proposed plans to publish a consultation paper that could lead to the elimination of individual bodies monitoring health regulations, instead putting forth a unified ‘super-watchdog’ 
to keep track of the country’s approximately 1m health professionals.

The plans offer a reform to a regulatory structure that is widely considered unwieldy and complex, with the General Medical Council regulating 281,000 British doctors and, alternatively, the Nursing and Midwifery Council equally regulating 600,000 nurses and midwifes. The proposed overhaul, despite criticism, may offer a communications remedy for 
the scattered and segmented sector. Yet the health sector, by nature, often operates under a guise of synchronicity. Principally however, many problems face the proposed regulatory changes. First, training structures are diverse, and thus professional responsibilities widely differ between a doctor and a midwife. Second, the sector faces cuts that may threaten the way in which it operates. What may seem like a communications solution with regards to regulation in this case, could perhaps be damaging for certain sectors.

However, an overwhelming issue facing the UK’s domestic regulations, is its impending exit from the European Union. With many of the deeper folds of UK regulation tied up in EU derivates and heaps of red tape, the referendum decision thrusts regulatory issues into new light. Examples such as the Grenfell Tower fire, highlight that construction regulation must be reviewed. Yet the procedures in undertaking this involve not only tracing the regulatory history of UK-EU relations, but also how exactly new regulatory functions will be carved out of seemingly ‘old’ ones.

The Red Tape Initiative (RTI), established this year, is a government-backed, cross-party group set up with the principle aim of combatting the regulatory challenges Brexit proposes. Taking a sector-by-sector approach, RTI aims to launch several inquiries into a host of EU constraints, with the business-focus of boosting productivity. With a management board that includes Sir Oliver Letwin, Baroness Kate Rock of Stratton and Lord Jonathan Marland of Odstock, the initiative will target its initial focus on three key industrial areas: housebuilding, infrastructure construction and training and apprentices.

Nick Tyrone, director general of RTI and member of the management board, says that the organisation consults with various sectors to better understand regulatory concerns and to better understand the impact Brexit will have on regulation. He says, “Principally, the way that EU regulation has been interpreted in UK law is incredibly important to consider and one of the communications challenges of regulation we face, is the very idea of discussing regulation. It’s become a very politically contentious area, even in the way we’ve approached the subject, with a cross-party structure and having the TUC and green lobby at every meeting, it often raises red flags with a number of people.”

Yet for the RTI, tackling notions of ‘bad regulation’ throughout the Brexit process requires reasonable discussions to form the crux of the post-Brexit regulation process. Regulation is an integral part of society, and for business, understanding how markets are continuing to communicate within changing regulatory settings must be a discussion that is happening on a regular basis. Yet as regulation’s trajectory within the UK is expected to take several twists and turns, one thing remains clear; if communications are at risk of being hemmed in, so too might future regulation.