Top 100 EU regulations cost the UK economy £27.4 billion a year

europebynight3EU leaders will meet in Brussels this week to discuss ways to improve growth and competitiveness across Europe. Ahead of this meeting, Open Europe has published a list of the 100 most costly EU regulations to the UK economy. Using data from the UK Government’s impact assessments of these rules, Open Europe estimates that the top 100 EU laws cost the UK economy £27.4 billion a year. This is more than what the UK Treasury expects to raise in revenue from Council Tax this year (£27 billion).

Open Europe’s ‘Top 100’ list identifies at least 24 EU regulations where the UK Government’s own impact assessment finds that the estimated costs outweigh the estimated benefits – meaning that they impose a net cost on the UK economy.

Though the impact assessments also claim that the 100 EU regulations deliver a combined net benefit, in fact, in some cases, these benefits are vastly over-stated. In the case of the EU’s flagship climate change package, for example, Open Europe estimates that 95% of the envisaged benefits have failed to materialise. Encouragingly, over a third of the regulations Open Europe has identified featured in the recent ‘Business Task Force’ report – endorsed by the UK government – outlining ways to cut the burden of red tape.

Open Europe Analyst Vincenzo Scarpetta said: 

“According to the UK Government’s own figures, we know that nearly a quarter of the EU’s most costly regulations impose a net cost on the UK economy. At a time when businesses across Europe are desperately struggling for growth, it is hard to understand how policymakers can knowingly impose costs on the economy that outweigh the stated benefits of regulation.”

“EU regulation can come with benefits – and though many of these rules would be far easier to scrap or amend if the UK were to leave the EU, many of them are also locked into domestic law, so would likely remain in place. However, far too many EU laws impose unnecessary costs on businesses and the rest of the economy. We need to deal with the costliest EU rules and put new mechanisms in place to ensure that when the EU regulates, it does not produce laws better decided at the national level or which impose unnecessary costs on business.”

“EU leaders will meet this week to discuss ways to increase Europe’s growth and competitiveness and Open Europe’s list of the EU’s costliest regulations provides a helpful guide of where to start.”

To see the full ‘Top 100’ list, and read the accompanying briefing, click here:

Key points

  • In 2013 prices, the total cost to the UK economy of the 100 EU regulations is £27.4 billion a year. This includes the cost of EU laws that have already been passed, but have yet to come into force – such as the new capital rules for banks (the CRD IV package).
  • Our estimated cost figure is higher than what the UK Government is expecting to raise from Council Tax in 2013-2014 (£27 billion).
  • According to the impact assessments, the top 100 EU regulations provide a total benefit of £57.1bn a year. £45.1bn of this benefit stems from just three items (EU climate targets – £20.4bn; rules on the capital held by banks – £15.3bn; and rules on payments across the EU – £9.4bn). However, these benefits are almost certainly vastly over-stated. For example, the stated benefit of the EU’s climate targets was dependent on a global deal to reduce carbon emissions that was never struck. In fact, Open Europe estimates that up to 95% of the benefits envisaged in the impact assessment have failed to materialise.
  • Taking the regulations individually, the UK Government’s own impact assessments show that for 24 of the top 100 EU laws the estimated costs outweigh the estimated benefits. Therefore, these regulations clearly result in a net cost to the UK economy – which comes to a combined total of over £3 billion a year. These regulations include the Temporary Agency Workers Directive and the Energy Performance of Buildings Directive.
  • A further 33 of the costliest EU regulations present a ‘net cost’ simply because the benefits either haven’t been quantified or the benefits are intangible and therefore ‘non-quantifiable’ (such as a better work-life balance in the case of EU working time rules or stronger investor protection in the case of EU rules on hedge funds). For example, the Working Time Directive represents an estimated cost to the UK economy of £4.1bn a year and the benefits are unknown.
  • EU regulation can come with benefits, particularly if it helps facilitate trade across the single market. It would also be wrong to assume that, if the UK were to leave the EU, the costs described above would disappear overnight. The reality is that the UK would be likely to keep a good number of these laws in part or in full, such as rules on anti-discrimination, some health and safety rules, food safety standards, and so forth. At the same time, the UK would no longer benefit from many of the EU rules that give British business access to European markets – such as ‘passporting rules’ for financial firms. Hence, the best option for now is for the UK to seek to change these rules from within the EU.
  • The UK Government’s ‘Business Task Force’ has recently published its recommendations on how to cut EU red tape. The report is a very good start, and deserves the support of like-minded EU member states. Indeed, it is essential that the Task Force’s ideas are followed by concrete action to reduce the existing and future burden of EU law on European and British businesses.
  • Furthermore, Open Europe believes that serious thought must also be given to creating a mechanism for national parliaments to review and repeal EU laws that impose a net cost on the economy or do not, in practice, deliver the benefits promised.

The top five costliest EU regulations

1)    The CRD IV package (new capital rules for banks) – Recurring cost: £4.5bn a year

2)    The Working Time Directive – Recurring cost: £4.1bn a year

3)    The EU Climate and Energy Package – Recurring cost: £3.4bn a year

4)    The Temporary Agency Workers Directive – Recurring cost: £2bn a year

5)    The Energy Performance of Buildings Directive – Recurring cost: £1.5bn a year


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