The UK’s competition regulator, the Competition and Markets Authority, has reinforced its pro-growth shift with two recently published reports: a policy discussion paper exploring the role of competition policy in UK scale-ups, and a review of the relationship between investment and competition over the lifecycle of a business.
Coupled with these reports is a speech by CMA Chief Executive Sarah Cardell, titled “Harnessing competition to drive investment.”
In her speech, Cardell begins by asking what role domestic consolidation might play in supporting UK scale-ups to hold strategic positions in global markets, going on to ask “how acquisitions and mergers impact on whether innovative firms continue their scale-up journey in the UK, rather than moving abroad.”
These starting points are revealing and they are atypical, in as much as competition agencies generally regard their core mission as protecting consumers and keeping markets open and contestable by tackling anti-competitive harms These statements are a reminder of how the CMA is playing into the government’s pro-growth agenda.
They are also emblematic of a broader UK political agenda that equates deregulation with economic growth, and where big business-friendly policies are favoured over a more responsive competition regulator robustly enforcing competition policy in a craven effort to attract investment.
The business lifecycle review frames the CMA’s role as supporting the government’s growth mission, “including unlocking innovation, stimulating investment, and increasing business confidence.”
The emphasis is on how competition can incentivise investment. And while building an evidence base for how this materialises in practice is welcome, it also sends a signal that transactions that might have previously been blocked are now more likely to be approved.
Startups are depicted as constrained by financing access, but the solution provided is framed in terms of stimulating investment rather than fostering truly competitive markets:
“Which potential startups become reality…often has less to do with how productive they could be, and more with how financially constrained their founders are.”
The investment initiatives of more mature firms are instead discussed in terms of profitability, with, again, limited attention to how dominant incumbents can suppress market entry for potential newcomers.
What will be the effect of the CMA’s efforts to demonstrate that it is not anti-business and is pro-growth, when it comes to taking tough decisions that challenge increasing concentration and are politically unpopular?
The CMA is at risk of straying from its core mission or being perceived to do so. And that leaves it at risk of being a passive observer, swept along by external developments and temporary demands. If it doesn’t hold true to its agenda and reacts to changing circumstances, it will not achieve lasting success or achieve its core mission – and as reminder the CMA states “improving outcomes for consumers is at the heart of everything we do”.
The CMA’s pendulum swings with broader UK policy biases. Across the UK government, the narrative of deregulation and less intervention from regulators automatically spurring growth has become a mantra. The Chancellor of the Exchequer Rachel Reeves, speaking recently about the CMA, said leadership change at the watchdog at the start of this year has been welcomed by industry.
“Previously businesses, all the time — especially in tech — had been raising concerns about the CMA. That has changed a lot," Reeves said. In January this year the CMA’s former chair Marcus Bokkerink was removed and replaced by former Amazon executive Doug Gurr.
Reeves also recently praised Nikhil Rathi — Chief Executive of the UK’s financial markets watchdog the Financial Conduct Authority — for aligning with the government’s approach.
“When I wrote to regulators and asked: ‘What can you do to drive growth?’...Nikhil responded positively to that,” said Reeves, speaking after Rathi was approved for a second term heading the FCA earlier last year. “That’s why we reappointed him to carry on heading up the FCA,” the Chancellor added.
In other words, fewer complaints by Big Tech are celebrated as progress, and regulators are favoured for prioritising and aligning with pro-growth objectives over challenging entrenched market power.
These political signals paint a concerning picture which UK observers have known for a long time: the government is evaluating its regulatory environment more than ever on its ability to support the government’s ambitions on chasing private investment, rather than strong enforcement of competition rules for a well-functioning economy for the benefit of consumers, citizens and business.
This is the latest call to action for anti-monopoly groups and civil society writ large: the government must refocus on protecting open, competitive, and fair markets. Without it, the UK risks entrenching concentrated market power and sidelining the public interest in favour of growth at any or all costs.
Weekly highlights:
The UK and United States this week agreed a deal to boost national ties in key tech sectors, including artificial intelligence, quantum computing and nuclear energy. Some of the biggest US firms have pledged millions in UK investments, including Microsoft, which has pledged over £30 billion. As part of the deal announcement, the UK said the pact will be utilised to help develop AI models for healthcare, as well as to support economic growth in both countries.
Elsewhere on the Microsoft front, the European Commission said late last week that it had accepted Microsoft’s proposed changes to Teams, its online work messaging system, resolving a long running investigation into whether the platform violated Europe’s competition laws. Specifically, the Commission accused the Big Tech giant of “possibly abusive” practices, after alleging that Microsoft was tying Teams to other software tools including Word and Excel. “We appreciate the dialogue with the Commission that led to this agreement, and we turn now to implementing these new obligations promptly and fully,” said Microsoft.
Soundbite of the week: AI is burning the planet
As part of the UK’s broad embrace of Big Tech and artificial intelligence, a Google data centre set to go live in Essex is expected to emit over half a million tonnes of carbon dioxide per year, equivalent to roughly 500 flights from Heathrow to Malaga per week.
“Google’s planned facility in Essex will produce carbon emissions several times higher than those of an international airport…but this is just one of many ‘hyperscale’ data centres that US big tech wants to impose on the UK in pursuit of their own profits and regardless of the cost to our environment,” said campaign group Foxglove.
Data mining: Private capital is coming for your food
Foodtech venture capital funding totalled $2 billion over 120 transactions in the last quarter, marking an over 50% quarter on quarter increase in total capital deployed according to analytics platform PitchBook.
Funding pouring into the food sector may sound like a positive, but when the financing of food systems is left in the hands of concentrated pools of private wealth, the agenda skews towards rapid growth and cost cutting, as we have seen in other critical infrastructure sectors before.
The Counterbalance is published every Thursday. Please send any thoughts and feedback to scott@balancedeconomy.org.