UK competition regulator to probe investment barriers

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Britain’s competition watchdog has launched a study into barriers to investment in the UK, as it revealed that the “mark-up” charged for goods and services has climbed in the past 25 years.

The Competition and Markets Authority will report its initial findings around the end of the year on areas including how competition affects the attractiveness of the UK as an investment destination.

The UK’s approach to competition was singled out by Sir Keir Starmer as one of the things potentially holding back investors earlier this month.

The CMA’s initiative — which was in train before the prime minister’s comments — comes as the watchdog warned that mark-ups had generally risen in the UK in recent decades.

It said the difference in price between the amount a product or service costs to make against what it sells for, has risen by around 10 per cent in the past 25 years.

This was lower than the US and several other peer nations according to its two-yearly “state of competition” report published on Thursday.

It also found that “business dynamism” had fallen, with new entrants less successful at taking on incumbent businesses than in the past.

The number of jobs being created or destroyed by businesses — an indicator of competitive health in the labour market — has fallen “considerably” since 2004, it found.

The regulator’s research comes at a time when it is under greater scrutiny. The prime minister told the government’s investment summit this month that regulators needed to “prioritise growth, investment and innovation”. 

The growth programme was already in the works at the CMA, but has been accelerated in light of the government’s focus, the agency said.

CMA chief executive Sarah Cardell said the research would “inform the government’s growth mission and industrial strategy”.

It is not yet clear whether the CMA’s findings will lead to any direct changes to the agency’s approach.

She added: “At a time of tremendous opportunity for the UK, effective competition has a key role to play in driving economic growth, investment and innovation.”

Ministers are also consulting about what to ask the regulator, which is independent, to focus on in the future.

In November 2023, the previous Conservative government instructed the regulator to prioritise “creating a pro-competition, pro-growth, pro-investment environment”.

Last year’s “strategic steer” came after the CMA faced fierce criticism over its decision to initially block Microsoft’s $75bn acquisition of Activision Blizzard in April 2023. The decision, which it later reversed, prompted Activision to claim the UK was “clearly closed for business”.