Startup Manifesto: Promote innovation in regulated sectors by creating a cross-sector regulatory sandbox

Policy 16: Promote innovation in regulated sectors by creating a cross-sector regulatory sandbox

In collaboration with The Coalition for a Digital Economy (Coadec), we have produced a manifesto to make Britain the best place in the world to start and grow a business. It features 21 policies across three key policy areas: access to talent, access to investment, and regulation. We’re sharing the policies on our blog. To read the full manifesto, click here.

Regulatory sandboxes allow new firms to operate outside some existing regulations, many of which are constructed with large incumbents in mind. The success of the UK’s fintech sandbox shows how effective they can be. 

An “n+1 sandbox” could replicate this function across other sectors, issuing five-year provisional licenses to innovative companies with business models that conflict with existing regulations, which could then operate outside those regulations. The companies would be required to take out liability insurance, or in some cases the regulator itself may offer it (at a price) if the private sector would not insure an innovative business.

This approach exists in healthcare already, where treatments may be used in certain circumstances even before they have won full regulatory approval, as well as in fintech to some extent. 

This would have two objectives. The first would be to make it easier for innovative companies to come to market, and test out their propositions without having to worry about regulations which may unintentionally have prevented them from operating. The second would be to highlight regulations that are causing problems and holding back innovation, allowing other regulators to see the costs of their actions that would otherwise be invisible.