Sharon White: the implications of Brexit for UK regulation and industry

Like many UK industries, the communications sector is thoroughly embedded in the European Union (EU). White noted that around 40% of workers in this sector are EU citizens, and that it is the EU which provides most of the legal and regulatory framework for this sector. However, while leaving the EU will require change, White focused on the opportunities that Brexit presents to improve, amend or scrap EU laws and regulations that don’t suit the UK’s needs. She identified three lessons which apply to the communications sector but, in our view, also apply across UK industry:

Mirroring EU laws may sometimes be in the UK’s interests

White explained that it will be in the UK’s interests to maintain many aspects of EU law after Brexit. The country of origin principle, for example, allows broadcasters to transmit across the entire EU as long as they comply with the rules of the country where they originate. Roughly 400 TV services are based in the UK despite not broadcasting to UK viewers. These services provide employment and skills important to the UK economy. However, this would mean the EU agreeing to continue to apply country of origin to a country outside the EU – something that now will have to be agreed with the EU27.

Retaining beneficial EU legislation will depend on EU members, not just the UK

The UK Government will not be able to single-handedly decide which EU legislation it would like to keep. Recognising the importance of sectors such as communications and making it a priority is an important first step, but only gets you so far. Important legislation such as the country of origin principle will not endure simply by the UK Government deciding to enshrine it in UK law; instead it will depend on the other 27 member states agreeing to the UK broadcasting across Europe, and vice versa. Constructive and continuous discussions with European neighbours will be crucial in realising the potential benefits of Brexit.

There are significant opportunities to reform and improve EU law

White emphasised that Brexit also provides the UK with a choice to replicate or replace existing EU laws – and so presents a huge opportunity to shape the UK communications market for the better. State aid offers one example. EU state aid rules prevent the UK Government from offering financial support to boost rural broadband services – removing these rules will allow the UK to invest in much-needed telecoms infrastructure. Another potential benefit to leaving the EU would be to scrap the requirement to review communications regulation every three years, allowing the UK to set its own review cycles. White argued that this would provide much needed stability for business and encourage investment.

Outside of the EU, the UK will also be free to incorporate a public interest dimension into merger and acquisition decisions, to protect the market from a potential lack of competition. However, while improving the current state of play and regulatory environment is important, the UK needs to make sure its citizens don’t miss out on benefits from EU legislation such as capped mobile roaming charges across the EU.

The powers of regulators would need to be reviewed

The UK’s structure of economic regulators was created after our entry into the EU, with UK regulators operating alongside their EU counterparts. Post-Brexit, as the UK would take over responsibility for domestic legislation, Ofcom would also take on powers previously exercised by EU authorities and thus need new capacity to fulfil its new role. It will be crucial that regulators like Ofcom remain independent from government to avoid politicising key decisions, for example on pricing. From an investor’s point of view, this would raise ‘regulatory risk’, discouraging them from investing or leading them to demand higher returns if they were to do so.

The European market is of great importance to the UK communications sector, and to many other UK industries. To maintain these close links, carrying over some EU law or regulation will be in the UK’s interests. However, White’s speech shows that UK business and the Government should be alive to the opportunities presented by Brexit to improve or to scrap rules and regulations that do not meet the UK’s needs, and may be acting as barriers to growth and investment.

Read the full transcript of Sharon White’s speech