On 21 February 2024, the Department for Business and Trade (DBT) announced a notable change in economic regulation. This regulatory development is notable when parallels are drawn with the UK's proposed regulatory position on AI (see our recent update here).

Regulators' Growth Duty

DBT's response to the late 2023 "Smarter Regulation: Regulating for Growth" consultation revealed an extension of the Growth Duty to key regulators like Ofcom, Ofgem, and Ofwat.

The Growth Duty, initiated in 2017 under the Deregulation Act 2015, requires specific national regulators to consider promoting economic growth alongside their regulatory duties. These regulators are responsible for overseeing markets that represent 13% of private investment in the UK. The Growth Duty requires the regulator exercising a specified regulatory function, to do so in a way which ensures that regulatory action is taken only when it is needed, and that any action taken is proportionate. 

Due to the extension of the Growth Duty, the DBT has also refreshed the statutory guidance accompanying the Growth Duty. A particular focus of the refresh was the clarification that ‘growth’ actually means ‘sustainable economic growth’. Further, this updated guidance identifies seven key drivers of growth that should be taken account of when deciding what to regulate. The listed drivers are innovation, infrastructure and investment, competition, skills, efficiency and productivity, trade and environmental sustainability.

Additionally, the guidance outlines good behaviours for regulators that they should attempt to follow when regulating, such as promoting innovation and transparency.

The DBT plans to release a framework for regulatory performance, detailing how it will report on the application of its updated standards. At the same time, the government intends to introduce a statutory instrument to extend the growth duty to Ofcom, Ofgem, and Ofwat, along with updated guidance. These changes are slated for parliamentary approval and are expected to take effect in April 2024.

UK AI regulation

The Growth Duty should be seen in context of how regulation is used to boost innovation and economic growth.  Government already is proposing to use regulation to do this, for example in  The Digital Markets, Competition and Consumers Bill and The Data Protection and Digital Information Bill.  Further, efforts of government to use regulation to boost economic growth can be seen in the UK's proposed ‘pro-innovation’ regulatory framework for AI.  

The UK government recently responded to the proposed AI regulatory framework in the UK. It recognises the significant opportunity AI poses:

The UK AI market is predicted to grow to over $1 trillion (USD) by 2035 unlocking everything from new skills and jobs to once unimaginable life saving treatments for cruel diseases like cancer and dementia.

However, the proposed UK AI regulatory framework also recognises the risks.   One of many policy leavers is a proposal for a series of cross-sectoral principles for regulators: Safety, security and robustness; Appropriate transparency and explainability; Fairness; Accountability and governance; Contestability and redress. No new legislation is immediately on the horizon. However, government is considering potential legislation in respect of large language models and whether a requirement for regulators to have regard to those principles should be on a non-statutory basis or, like the Growth Duty. 

The current lack of a non-statutory or statutory requirement to consider the cross-sector AI principles is not necessarily an issue.  Existing regulators may already consider that their regulatory remit and basis requires them to have sufficient regard to the cross-sector AI principles - in effect, the objectives of the cross-sector principles are achieved already. 

Whether this is the case for each regulator - and across key regulators - will become clearer in April 2024 onwards.  This is when key regulators have been asked to publish an outline of their strategic approach to AI, which may cover the issue.  

In any event, whatever the outcome of the regulators strategic approaches to AI and the government's view on whether cross-sectoral AI principles should be on a non-statutory or statutory basis, most regulators will need to consider the Growth Duty alongside the cross-sector AI principles (or any equivalent they consider already apply).

If you have any questions or would otherwise like to discuss any of the issues raised in this article, please contact Tom Whittaker, David Varney, Liz Smith, or another member of our Technology Team. For the latest updates on AI law, regulation, and governance, see our AI blog at: AI: Burges Salmon blog (burges-salmon.com).

This article was written by Nathan Gevao.