UK antitrust laws won’t compensate for lost competitiveness, Bank of England’s Weale says
18 July 2016. By Lewis Crofts.
The UK’s decision to leave the EU means the economy could struggle because British companies will no longer face the “stimulating effects of international competition,” Martin Weale, a Bank of England member said today.
Weale said he doubted whether the UK’s usually efficient antitrust-enforcement system would be adequate to counter the reduction in competitive pressure resulting from Brexit.
“I am not sure how far domestic competition law can substitute effectively . . . the stimulating effects of international competition,” he said.
Following the Brexit referendum, the UK is preparing to start formal negotiations to leave the European Union. This will mean stepping out of the EU’s unified system for tackling anticompetitive abuses and reviewing large mergers.
The UK will have to set up a parallel regime, adjudicating on anticompetitive conduct that harms British consumers and mergers that touch its territory.
Weale, a member of the Bank of England’s Monetary Policy Committee, said in a speech* this morning that the UK system might not make up for the loss of competition that comes from being outside the EU — something that could make UK companies less globally competitive.
“Outside the EU, British firms may face less pressure to be as efficient as possible,” Weale said.
While acknowledging the quality of the UK’s enforcement regime, Weale said it might struggle to keep the country’s industry competitive and to ensure consumers are protected.
“While I suspect that [UK] competition law is more effective than it was 45 years ago, I am not sure how far [it] will protect us from the possible consequences of reduced international competition after withdrawal from the European Union,” Weale said.
“Additionally, there is a risk that producer interests will become more dominant, and that the benefits [from effective competition law] which accrue to households, as consumers, will be reduced,” he said.
Weale said it was unclear what the UK’s future trading relationship with the remaining members of the EU would be, making the effects on business and the economy difficult to predict.
Weale will leave the Bank’s committee on Aug. 8.