The UK Government’s Response to the Review of the United Kingdom Internal Market Act 2020 – UK Constitutional Law Association

On 15^th July 2025, the UK Government (UKG) published its response to its review and public consultation on Parts 1 and 2 of the United Kingdom Internal Market Act 2020 (UKIMA). The Response confirms the UKG’s commitment to (re)position the Common Frameworks (sector-specific intergovernmental agreements coordinating policy in devolved areas previously governed by EU law) ahead of the UKIMA to manage future policy divergence in devolved areas affecting intra-UK trade. It also details six reforms that the UKG will bring forward in coming months. After setting out some brief background to the Review, the first part of this post explores the UKG’s reform proposals, with a focus on changes to the existing UKIMA exclusion process. Thereafter, this post reflects on the UKG’s broader aspiration to manage intra-UK trade under devolution primarily by consensus through the Common Frameworks, rather than by imposition under the UKIMA.

The main takeaway is clear: the UKIMA remains a highly potent instrument but one that now operates largely in the background beneath an evolving network of intergovernmental arrangements with the Common Frameworks at the centre. For those inclined to analogies, the UKIMA now resembles a nuclear deterrent in statutory form – a weapon that certain stakeholders still campaign vigorously to abolish and those currently holding the launch codes hope never to use.

The challenge now is to strengthen the intergovernmental space that structures the UK internal market. The UKG’s reform proposals take meaningful steps in that direction but more remains to be done. As this post concludes, the UKG’s commitment to positioning the UKIMA in the background highlights the need for further reforms to make what is now back in the foreground – the Common Frameworks – function effectively. The stability of the UK internal market now depends on improving the Common Frameworks jointly with the devolved governments and in a manner that improves transparency and stakeholder engagement but also respects the integrity of devolved legislative processes.

Background to the Review

The UKG announcement back in December 2024 that it intended to review the operation of the UKIMA came as a surprise. The Labour manifesto said nothing about the Act. The King’s Speech was also silent on the UKIMA. Further, the UKG was not formally required to complete a statutory review of Parts 1 and 2 of the Act until December 2025. Added to this, the UKG’s opening moves in relation to the regulation of domestic trade did little to suggest that addressing the UKIMA was being prioritised as part of its commitment to reset relations with the devolved governments. Consider, for example, the Product Regulation and Metrology Bill, proposing new powers for the UKG to regulate, among other things, product standards, including to achieve EU alignment. As introduced, that bill made no reference to the UKIMA despite clearly intersecting with its core provisions.

Whilst its launch may have surprised, the UKG review appeared to offer several olive branches to the devolved governments (alongside parallel opportunities for business and other stakeholders to feedback on the UKIMA’s initial operation).

First, in terms of scope, the Review was framed more broadly than was formally required by statute – in particular, the UKG invited views on potential improvements to the exclusion process, by which devolved legislation on specified issues may be shielded from the application of the UKIMA market access principles (mutual recognition and non-discrimination). The UKG rightly acknowledged this as a real concern for both the devolved governments and other stakeholders (only one exclusion has been successfully negotiated thus far covering single use plastics). Secondly, and relatedly, the Review’s terms of reference offered a specific concession to the Scottish Government. The UKG announced that it would grant an exclusion covering Scottish legislation prohibiting the sale of glue traps in Scotland – reversing the previous UKG’s rejection of that request. Thirdly, and most significantly, the UKG used the Review to announce its ambition to recalibrate the relationship between the UKIMA and the Common Frameworks. In a gesture to the devolved governments’ longstanding positions, the UKG outlined its intention to manage future regulatory difference in devolved areas with the governments in Belfast, Cardiff and Edinburgh through existing Common Frameworks rather than relying on the application of the UKIMA market access principles.  

At the same time, the Review’s design also aggravated existing tensions. The UKIMA Review was not co-designed with the devolved governments, nor did it provide them with any special privileges. The UKG unilaterally ruled certain matters of concern to the devolved governments out of scope – including, most notably, the possibility of the Act’s repeal, but also revisiting Part 6 of the Act (establishing direct spending powers for the UKG in devolved areas; for criticism here, see e.g. the Welsh Government’s statement on the UKG’s Response). It also construed its statutory obligation to ‘consult’ with the devolved governments narrowly to mean simply inviting the devolved governments to respond alongside other stakeholders. The Scottish Government’s Position Paper reported that the UKG shared the consultation document only 24 hours prior to its publication.

Even the UKG’s specific concession on glue traps is not the olive branch that it may seem at first sight. That the UKG could simply gift that exclusion to the Scottish Government in the Review’s terms of reference serves as a powerful reminder that, using its UKIMA powers, the UKG presently enjoys an effective veto over devolved legislation that conflicts with the market access principles.

The UKG Response: Six Reform Proposals

The UKG Response outlines six measures that the UKG will take forward to improve the functioning of the UK internal market. Four of these relate specifically to the exclusion process. The remaining two commit the UKG to working with the devolved governments to agree new processes to engage stakeholders with the Common Frameworks and to facilitate joint referrals to the Office for the Internal Market (OIM) for independent technical advice, respectively. The Response proposes no changes to the OIM’s current statutory responsibilities in relation to market monitoring and reporting. In relation to the OIM, the focus is on integrating existing powers into the Common Frameworks. This post will limit itself to discussing proposed changes to the exclusion process.

On exclusions, the UKG has agreed to broaden the range of factors balancing the economic effects of legislative proposals to which the UKIMA market access principles apply. This responds directly to widely shared concerns that the exclusion process provides insufficient space to balance non-economic objectives with direct and indirect economic effects. Specifically, the UKG now recognises the need for space to consider two important policy concerns: environmental protection and public health. The UKG is correct to note the importance of both in relation to devolved policymaking. What is less clear, however, is why scope to balance the impact and benefits of non-economic interests with the protection of intra-UK trade ought to be so limited as matter of principle. The Scottish Government, for example, had called for the recognition of a broader range of public interest objectives as well as the introduction of thicker normative principles (proportionality and subsidiarity). Nevertheless, the UKG’s decision on environmental protection and public health represents an important step towards rebalancing an internal market framework that, in comparative perspective, was always strikingly deregulatory by design.

The UKG has also committed to reform the procedure for requesting exclusions from the UKIMA market access principles. The existing process is set out in an intergovernmental agreement concluded in December 2021. For the devolved governments that have engaged with it (only the Scottish Government thus far), its operation has proved highly frustrating. There is a lack of transparency around how the current process operates, with no agreed workflow governing key issues, including the format and timing of decisions. At worst, the process has functioned more as a stage for performative intergovernmental conflict than as a robust process to manage regulatory difference within an integrated market.

Under UKG proposals (Annex B), the exclusion process will be recast as three distinct procedures. The first of these (the MEI exclusion) is a new addition that is designed to shield regulations of minimal economic impact – in effect, a de minimis test. Going forward, the devolved governments (and, regulating for England, the UKG) will be able to request exclusions for in-scope regulations where their total economic impact is evidenced as being less than £10m per year (calculated using ‘Equivalent Annual Net Direct Costs to Business’ data).

The second procedure essentially replicates the existing exclusion mechanism but is now more explicitly tied to the Common Frameworks. It places consensus at its core, with the UKG committing politically to implement (using its UKIMA powers) all future exclusions that are agreed by all governments through the relevant Common Framework. Notably, however, exclusion requests are now framed as exceptional – they should be requested by individual governments only ‘once all avenues to explore similar policy approaches’ have been pursued and UK-wide interoperability ruled out.

The requirement to seek consensus across governments to approve an exclusion where it has been not possible to reach prior consensus on potential policy coordination and/or interoperability explains the introduction of the third process: the Reserve Exclusion Process (REP). This mechanism is available in instances where there is no relevant Common Framework (i.e. as a catch-all), but also where it has not been possible to reach agreement using either or both of the other exclusion processes. Under the REP, the proposing government may write, with supporting evidence, to the relevant UKG minister (copying in all relevant devolved ministers) to request an exclusion, with UKG ministerial acknowledgment due within 1 month and a decision (which must be published) to follow within 6 months. Strictly speaking, the REP (and the other two exclusion processes) applies (apply) to the UKG regulating for England. With respect to the REP, in practice, this would mean UK ministers effectively marking their own homework, assuming they were to engage the process formally in the first place.

Overall, the revised exclusion processes represent an improvement on existing arrangements. A de minimis test is sensible, although the £10m threshold is extremely low, calling into question the MEI’s practical impact beyond protecting only the most minor regulatory measures (e.g. glue traps). Equally, the UKG committing formally to enact all agreed exclusions ties the exercise of its UKIMA powers to the implementation of exclusion decisions reached by consensus by all four governments. That strengthens the integrity of intergovernmental processes within a framework where one actor (the UKG) occupies a dual role as both regulator for England and UK-wide regulator.

The UKG proposals have not, however, fully exorcised the UKG’s gatekeeping role with respect to UK market management. In relation to the MEI, the UKG undertakes to monitor ‘total cumulative divergence’ and alert the devolved governments where this exceeds £50m in any given sector. More potently, the UKG retains ultimate authority to adjudicate on the REP, which models the essential features of the existing exclusion process, albeit with some improvements, including the introduction of timings governing UKG decision making. That gatekeeping power may prove decisive for the devolved governments where consensus cannot be reached through the second (ordinary) exclusion process.

A final point to note is the absence of any timings governing exclusion requests under the ordinary process. The Response states that the UKG will provide ‘full clarity’ on how the revised exclusion processes will operate, including timescales. Yet the ordinary exclusion process outlined in Annex B is silent on timings for decision making – only the MEI and REP provide specific details. It is unclear why the UKG is yet to firm up timings across the board.

(Re)prioritising the Common Frameworks

At the macro-level, the UKG’s Response outlines its commitment to managing future regulatory difference between the four nations and territories of the UK primarily through the Common Frameworks. This should not surprise given that this commitment was foregrounded in the Review’s terms of reference. The devolved governments will welcome this shift in approach, having long maintained a preference for addressing regulatory difference through intergovernmental cooperation and withheld legislative consent for the UKIM Bill.

The (re)prioritisation of the Common Frameworks dilutes the practical impact of the UKIMA. In relation to intra-UK trade, that Act is effectively reduced to a framework enabling the UKG to implement agreements on exclusions to the market access principles reached between the UK and devolved governments through intergovernmental processes that take shape outside that Act. The possibility remains, of course, of private actors activating the market access principles, though the UKIMA’s prospective focus on future regulatory difference reduces this likelihood in practice.

The UKG clearly now views the Common Frameworks as instruments to facilitate and deliver policy coordination (with interoperability framed as a baseline), not just as tools to manage requests for exclusions from the UKIMA market access principles. This builds on existing trends in relation to the Act’s formative operation. As studies have shown, the market access principles exercise a ‘chilling effect’ on unilateral policymaking in devolved areas. The Scottish Government’s decision to pause its introduction of a deposit return scheme (DRS) in Scotland and the Welsh Government’s approach to implementing its ban on single-use plastics (SUPs) evidence this clearly. In both instances, the UKG’s refusal to grant exclusions from the market access principles resulted in the devolved governments – explicitly in the case of Scotland and the DRS; implicitly in the case of Wales and SUPs – reshaping (and lowering) their policy ambitions in areas of devolved competence.

Rather than acting unilaterally and seeking exclusions for devolved policies, the devolved governments appear increasingly open to engaging with the UKG bilaterally (or with the UK and other devolved governments multilaterally) with a view to adopting joint UK-wide approaches in devolved policy areas. The UKG Response cites the UK and devolved governments’ joint work on tobacco and vapes (which started under the previous UKG) as an example of effective intergovernmental collaboration to deliver shared policy objectives in manner that avoids the introduction of new barriers to intra-UK trade.

The (re)prioritisation of the Common Frameworks to further collaborative policymaking (and manage extraordinary requests for exclusions) turns the spotlight from the UKIMA to those Frameworks. A House of Lords Report (2022) concluded that the Common Frameworks represented a ‘missed opportunity’ to address the challenges of policy coordination under UK devolution post-Brexit. That opportunity is now being seized, and the UKG’s Response addresses several key concerns set out in that Report.

For example, as outlined, the UKG has now helpfully clarified its position on the relationship between the Common Frameworks and the UKIMA market access principles: the Frameworks take priority, with the UKG committing to implement key decisions arrived at by consensus with devolved governments through them. In addition, the UKG has agreed to work with the devolved governments to address longstanding concerns around transparency, as well as to improve engagement with business and other stakeholders. Better integrating business into the Frameworks emerges as a primary concern in a public consultation that expressly linked reforming the UK internal market to delivering the UKG’s economic growth agenda.

These are positive signals, and it is expected that work towards improving the Common Frameworks will continue with fresh impetus. However, significant concerns remain unaddressed. This is perhaps inevitable given the consultation’s focus: the UKIMA was at its centre, not the Frameworks. Nevertheless, the UKG’s decision to reorder the relationship between the two market-management mechanisms exposes the need for further reforms to the Common Frameworks – if these instruments are to function effectively in the foreground. Equally, it also calls for reflection on the constitutional implications of prioritising the Frameworks with respect to the devolved parliaments. These are both weighty topics, and space precludes detailed analysis. This post sketches only two key issues.

First, in relation to the Common Frameworks themselves, there is a need for more clarity on substance. In their present form, the Common Frameworks remain principally concerned with procedural matters, i.e. setting out agreed ways of working between governments. However, if the Frameworks are now to displace the UKIMA as the main method of managing future regulatory difference within the UK internal market, what principles apply (should apply) to determine the scope for permissible policy divergence? Stakeholders need clarity on that. Individual Frameworks currently provide little detail on the substantive parameters for policy coordination beyond those agreed in the JMC Communique. The UKG has clarified the relationship between the UKIMA and the Frameworks, but it has not expressed its view on the principles that will actually structure joint decision making on policy in devolved areas. Is there a role for the UKIMA market access principles within the revised Frameworks, or is it policymaking simply by political consensus, with interoperability as the baseline?

Secondly, in terms of broader implications, it is important to keep sight of the wider constitutional impact of prioritising the Common Frameworks. Recourse to the Frameworks to manage future policy difference prioritises executive over legislative politics and risks weakening devolved legislative processes. The Frameworks shift decisions over the scope, depth and timing of legislation in devolved areas into an intergovernmental space where the focus is on securing consensus between the UK and devolved governments. Where agreement is to be reached by intergovernmental negotiation, the devolved parliaments may find their scope to shape policy outcomes significantly narrowed. Reprioritising the Common Frameworks therefore requires renewed consideration of the devolved parliaments’ respective procedures for authorising and scrutinising executing decision making. As the Scottish Parliament’s CEEAC Committee concluded in relation to developments in Holyrood, it is imperative that robust processes exist to ensure the devolved governments remains fully accountable to their respective legislatures when acting within the Frameworks.

The UKG’s proposals to afford business and other stakeholders formal input into the Common Frameworks will likely strengthen rather than dilute any impression that the Frameworks operate as policy forums in devolved areas affecting intra-UK trade. Intergovernmental processes are notorious as instruments of executive empowerment – there is nothing new here – and the UK and devolved governments may have little incentive to tackle this issue. But it remains an important consideration in ongoing reform discussions. It is not only the UKIMA market access principles that put pressure on the integrity of devolved legislative processes. For the devolved legislatures, the rise of the Common Frameworks also poses a threat in that regard. The UKG’s proposals displace rather than alleviate existing tensions.

Concluding Remarks

The UKG’s consultation centred on the UKIMA, but its terms of reference and recommendations ultimately direct attention away from the Act towards the Common Frameworks. The task now is for the UK and devolved governments to collaborate effectively to finalise those Frameworks in a manner that is sensitive to a full range of concerns, including the integrity of devolved legislative processes. Rebuilding lasting intergovernmental trust remains essential: ultimately, the UKG’s change in approach and proposed reforms rest on political commitments alone and leave the nuclear codes to UKIMA powers squarely in its hands (and those of future UK governments).

On 17^th July, the Welsh Government announced that it broadly welcomed the UKG’s reform proposals, but would continue to make the case for statutory change to the UKIMA. At the time of writing, the Scottish and Northern Ireland governments are yet to issue statements responding to the UKG’s proposals.  

Thomas Horsley, Professor of Law, University of Liverpool

My thanks, with the usual proviso, to Paul Scott and Mike Gordon for their helpful comments on an earlier draft of this post.

(Suggested citation: T. Horsley, ‘Reforming the UK Internal Market: The UK Government’s Response to the Review of the United Kingdom Internal Market Act 2020’, U.K. Const. L. Blog (21 July 2025) (available at https://ukconstitutionallaw.org/))