UK Regulators Lose Billions on Bad Contracts and Lack of Enforcement Leaves Public ‘Unprotected from Rogue Companies’

The failure of UK regulators to take action on fraud is costing the Government “billions” on contracts where suppliers “may be overcharging or providing poor quality goods and services”, a new report has found.

Research by Good Jobs First and Violation Tracker – a website that tracks regulatory rulings – found that there was a “perilous gap” in enforcement of the law between the US and the UK, and that British companies have “learned to exploit a mismanaged system”.

In certain areas, the US was fining firms at scales that were often tens or hundreds of times higher than the UK, even after adjusting for the population difference, the research found.

The report focused on four main areas: price-fixing and anticompetitive practice, government outsourcing offences, labour market enforcement, and breaches of environmental laws. 

In every area analysed, US regulators outperformed the UK. US agencies recovered more than $39 billion since 2010 from firms for outscoring offences or contracting fraud. 

The UK’s failure in this area, the report noted, was costing the Government “billions in spending”. The researchers cited a 2017 estimate suggesting that the amount lost just to Local Government procurement fraud between 2013 and 2016 was as high as £4.4 billion.

The report also noted how 57% of entries logged on the Violation Tracker UK website had no monetary penalty, and a further 24% listed figures below £5,000.

The researchers said that one of the main causes of the disparity was the UK’s reliance on self-regulation – something that has been commonplace since the Hampton Review, a Government report commissioned by then Chancellor Gordon Brown into how to reduce regulatory burdens on firms – and worsened by reduced funding and short staffing at UK regulators.

The findings come amid a litany of growing scandals surrounding the failures of UK regulators to hold recidivist companies to account. 

One of the most prominent controversies surrounds the ongoing release of untreated sewage into UK waterways by England’s privatised water firms and the failure of Ofwat and the Environment Agency (EA) – the main regulators of the water industry – to address it.

In March, it was revealed that raw sewage was discharged into waterways for 3.6 million hours in 2023 by England’s privatised water firms – more than double the 2022 figure.

Despite that, the EA, facing slashed budgets and with limited powers, has launched very few investigations and fewer prosecutions.

In the Lake District’s iconic Lake Windermere, the regulators signed off on reports by water companies wrongly downgrading the severity of raw sewage releases without even attending the site.

A new Government watchdog ruled in September that regulators’ failure to deal with the scale of sewage dumping may break the law.

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Two weeks ago, Ofwat faced calls to be dissolved after it was revealed that the regulator had spent £26.7 million on advice from management consultants, who then advertised their inside knowledge of the regulator to water industry clients.  

The Violation Tracker research found that the EA and other environmental regulators handed out £361 million in fines, compared to $100 billion registered in the US.

Even after adjusting for population and currency differences, the US figure was 4,581% higher than the UK. 

“Our research shows the UK is lagging behind the US on enforcement in every area examined,” said Dr Maia Kirby, the report’s lead author and UK coordinator for Good Jobs First. 

“Lack of enforcement of the rules leaves the general public, workers and the environment unprotected from rogue companies, driving down our living standards.”

Another co-author of the report, Siobhan Standaert, told Byline Times that self-regulation of the law was not working and stressed that “issuing warnings instead of fines does not appear to be improving outcomes”.