Regulation, legislation and competitiveness - The Bribery Act

From the first of July, businesses will have another piece of legislation to deal with when the Bribery Act comes into law. This was proposed and passed in 2010 just before the election last May, and in the last year the government have been determining the precise way in which it should be put into practice. There are good reasons for it, to establish the country’s position as a global leader in the fight against business corruption – the UK currently holds a strong position in the World Bank’s rankings of economies for their ease of doing business.

A high ranking on the ease of doing business index means the regulatory environment is more conducive to the starting and operation of a local firm, and in June 2010 the UK was fourth on this register (behind Singapore, Hong Kong and New Zealand). London was ranked top amongst the Top 50 Cities for Doing Business, and the regulatory environment is a key aspect of this. Part of the aim here is to attract more businesses to invest in the UK so boosting the capital account on the Balance of Payments. For A level economists, this could give an example of government intervention designed to help to build the reputation and competitiveness of the country in order to attract FDI.

This radio interview with Michael Littlechild, the Director of Good Corporation, a company that helps companies comply with the Act, sets out what is and isn’t to be allowed. He told BBC Radio 5 live Wake Up To Money that the OECD says the UK is ‘way behind most EU countries’ when it comes to bribery regulations, and that the new legislation is therefore much needed to maintain the UK’s reputation and help UK businesses to protect their image in world markets.

The main provisions of the act are to prevent business employees from engaging in bribery of a third party or receiving bribes which are intended to “induce a person to perform improperly a relevant function or activity, or to reward a person for the improper performance of such a function or activity”. It also prohibits bribery of foreign public officials: “A person (“P”) who bribes a foreign public official (“F”) is guilty of an offence if P’s intention is to influence F in F’s capacity as a foreign public official.”

These provisions are wide-ranging – they apply to a UK business’s operations anywhere in the world, and cover individuals operating on a company’s behalf even if they are not directly employed by the company. The new offence of “failure to prevent bribery” will make all enterprises including SMEs responsible for ensuring the compliance of any agent or contractor connected with their businesses – irrespective of where they are in the world. The penalties include not only large fines but also imprisonment. There will be concerns about an increase in Red Tape, but Business Secretary Vince Cable said the government was “minimising regulatory burdens” on businesses. “Bribery has no place in British business, at home or abroad. This robust law reflects the UK’s leading role in the fight against bribery,” he said.