Regulatory Outlook | Foreword | July 2021
Published on 20th Jul 2021
Welcome to the latest edition of Osborne Clarke's Regulatory Outlook
As the Covid-19 pandemic has continued to surge throughout the world, the impact on individuals – their lives and livelihoods – and on how business has been transacted throughout this period has been significant and is likely to be long-lasting.
For businesses in the UK adapting to their workforces working remotely (or in a more hybrid fashion) there continue to be many regulatory issues to grapple with. Having due regard for the health and safety of the workforce during the pandemic, and knowing what appropriate steps to take as regulations and guidance change continues to be challenging.
The pandemic has accelerated a move to digitalisation as businesses moved towards remote working. One result has been relentless pressure to ensure digital systems are secure and stable in a remote working environment. The right technical and organisational measures need to be in place so that cyber threats can be countered and compliance processes need to work as well remotely at employees' homes as they would on business premises. Ransomware continues to pose a significant risk to businesses.
The UK government and regulators have been extending various measures introduced to support consumers through the pandemic restrictions, with, for example, the Financial Conduct Authority (FCA) extending guidance to help consumers obtain refunds following a cancellation of services as a result of the pandemic.
More generally and away from the immediate impact of the pandemic, several consumer protection initiatives have been announced, likely to affect many sectors. The FCA is consulting on introducing a new consumer duty for retail financial markets. The Advertising Standards Authority and the Competition and Markets Authority (CMA) are working together to produce guidance on misleading environmental claims. The government intends to regulate the security of network-connectable consumer devices, and also to restrict the promotion of certain foods high in fat, sugar and salt, as well as certain drinks.
Globally, regulators are focusing on the implications of rapid technological change. The EU has unveiled its proposed regulatory regime for artificial intelligence. The EU is also intending to further regulate digital services and has published its Digital Services Act, addressing the new challenges of digital regulation since the e-Commerce Directive was introduced in 2000. The UK's equivalent measure, the Online Safety Bill, is intended to protect users of online content-sharing platforms from harmful material. Both measures are passing through legislative processes.
Competition regulators are also keen to involve themselves in digital markets. In the UK a new Digital Markets Unit has been set up within the CMA to oversee a new pro-competitive regulatory regime. In the EU, a draft Digital Markets Act has been published. This will be significant new legislation and businesses should consider engaging in relevant consultations.
National security is also high on the UK government's agenda, with the National Security and Investment Act introducing significant change to the corporate landscape, as the government can block, review and modify affected transactions on national security grounds and a mandatory notification regime is introduced. Similarly, a Telecoms Security Bill is intended to strengthen the legislative framework for telecoms security and resilience, with the government able to restrict vendors on national security grounds.
For businesses trading across the UK and the EU, the consequences of the UK leaving the Single Market and Customs Union at the end of 2020 are becoming clearer. Different compliance regimes are emerging (in, for example, emissions trading, and data) and future divergence from common standards will pose new complexities and increase the compliance costs of trading as businesses navigate these new rules. Examples of new requirements include the rules on exporting food and agricultural products between Great Britain, Northern Ireland and the EU, and new conformity marking requirements for products.
The limits on international travel caused by pandemic restrictions have masked the impact of the changes to the rules for business travel between the EU and the UK and as travel opens up many businesses will be dealing with that new business travel regime for the first time.
Regulators as well as businesses are focusing on environmental, social and governance (ESG) issues. The Environment Bill is continuing its progress through Parliament, and measures on packaging waste and recycling are proposed. Mandatory climate-related financial disclosures are being considered for companies and partnerships of a certain size. The forthcoming UN Climate Change Conference (COP26) taking place in November in Scotland will focus attention even more on green initiatives. In the pipeline in the UK a new labour supply chain body has been proposed by the government, to regulate employment intermediaries. Businesses are increasingly becoming aware of the commercial effect of failing to consider ESG factors, as well as of the compliance risk.
It has been a turbulent year, with many changes for businesses to adapt to. Our regulatory and global compliance teams can help you to understand the regulatory risks to your business now and those coming down the track; spot the gaps and areas for improvement; and implement long-lasting improvements to your compliance programmes and culture.
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We have also produced a series of Road Maps for different compliance areas, which provide you with a set of questions to discuss with your business to help you assess whether there are gaps in your compliance approach. You can find out more details here.