New foundations for accelerated economic growth and an increase of living standards were laid after the 1970s, with a stronger macroeconomic framework and discipline, as well as far-reaching structural reforms. As a result, the UK economy is much healthier today, and the transformation is clearly permanent. The economy has some particular strengths: a flexible labour market with unemployment among the lowest in the OECD, a world class financial services sector, and inward and outward investment flows that are among the highest in the world.

Regulatory reform in the UK, a process which started in 1979, and which continues to be forcefully pursued, was initially aimed at helping to improve the supply-side of the UK economy. Although standards of living continued to rise during the 1960s and 1970s, the UK’s economic performance slipped relative to that of other OECD countries. Attempts to accelerate economic growth foundered on balance of payments difficulties and a lack of competitiveness.

The UK’s unique regulatory culture reflects its political traditions. These have evolved over centuries without revolutionary change. Unlike most other countries there is no formal central focus in the form of a written Constitution. Instead, informal decision making based on co-operation and consensus coexists with respect to the rule of law. Pragmatism and evolution are defining characteristics. Political and regulatory structures are, in consequence, dynamic and complex. Reflecting this, regulations take many different forms, formal and informal: including parliamentary laws, Orders in Council, bylaws, circulars, guidance, directions, and codes of practice, issued by a variety of bodies.

Competition policy is integrated into the UK’s general policy framework for regulation in several complex ways. The role of competition policy in regulatory reform is recognised in historical practice and in recent statements of principle. In the UK, structural change predated stronger competition law by a decade or more, stretching the capacities of specialised regulators to deal with the market power that resulted from widespread privatisations. Mainstream competition policy instruments have now been modernised and integrated more closely with the roles played by specialist regulators.

The UK has a long tradition of open trade and an open investment climate. It was a founding member of the GATT, and is a strong supporter of the WTO and its obligations. It is active in EU and international trade liberalisation initiatives, and has rarely been at the centre of trade or investment disputes. Domestic and international policies are geared to enhancing both the attractiveness of the domestic market for foreign business and the international competitiveness of UK firms. Policy toward foreign direct investment (FDI) is very liberal, in the wake of significant restructuring of the manufacturing sector to counter loss of competitiveness.

The UK was and remains one of the pioneers in the reform in the electricity and gas sectors – it started earlier than most countries, has gone further than most in introducing competition, structural separation and winding back price regulation. At the broadest level, the outcome of reform was to shift away from government owned monopolies to a competitive structure. This involves a large number of private sector operators in the potentially competitive parts of the industry, independent regulation of private monopolies where competition is not feasible, and the government setting the legal framework. The present UK regulatory framework and the sectoral regulator (Ofgem) are among best practice in the OECD. The benefits from increased efficiency, that have been shared among consumers (in terms of lower prices and improved, more innovative services), shareholders and the government, have been substantial.

The UK has been an OECD leader in the liberalisation of its telecommunications sector. From the 1980s onwards, the market has been progressively opened up. The 1984 Telecommunications Act (TAct) was the first major change. The incumbent monopolist, British Telecommunications (BT), was privatised in 1984 and an independent regulator (OFTEL) set up at the same time to provide safeguards such as a universal service obligation on BT and a price control regime. Fixed line competition started in a modest way as a duopoly with Mercury Communications (Mercury). Analogue cellular mobile telephony competition started in 1985 with the award of licences to Cellnet (then 60% owned by BT) and Racal-Vodafone.