Harnessing competition to drive investment
Source: gov.uk (2025-09-10)

Speech by Sarah Cardell, the CMA's Chief Executive, delivered at the BVCA Summit 2025.

Good afternoon and thank you Michael for the kind invitation to speak at today’s conference.

A year or 2 ago, you might have been surprised to see the Chief Executive of the Competition and Markets Authority speak to a room of investors. Mildly concerned even… But please rest assured – this speech is very much offered in the spirit of collective endeavour.

Over the last year, the CMA has been thinking deeply about how we can contribute to the government’s priority mission to drive economic growth. Increasing private investment is vital – not just to meet economic targets, but because it is foundational to long-term national resilience and prosperity.

Like many other British institutions, the CMA has an important role to play in spurring growth. I am delighted to share with you some of the ways in which the CMA is going about this – including some reflections on the relationship between competition and investment and the role of competition in supporting scale ups. But first, a few words on how we have changed the way we are working in response to that priority focus on economic growth.

How the CMA has transformed the way we work over the last 12 months

When I reflected last Autumn on how the CMA could step up and support the growth mission (https://www.gov.uk/government/speeches/driving-growth-how-the-cma-is-rising-to-the-challenge), it was clear to me that I needed to engage widely and openly with the business and investor communities to understand your direct experience of dealing with the CMA. I heard 2 things very clearly. First, that the rule of law, including the robustness and independence of UK institutions like the CMA, was a strong pull factor. Second, notwithstanding this, the way in which the CMA goes about its work, and the experience firms have engaging with us, matters a great deal. Even perceptions of how we might think, or act, can create a ripple effect which impacts the UK’s attractiveness as a destination for capital.

4 key aspects shone through from those conversations as most impactful to business and investor confidence:
- pace
- proportionality
- predictability
- process – by which I really mean engagement with stakeholders and interested parties
This was the genesis of our 4Ps programme – the most significant transformation to the way we work since the CMA opened its doors over a decade ago.

We have been rolling out the 4Ps across every area of our work since January, communicating openly about the changes as we go. As we all know, catchy acronyms are sometimes a red flag for style over substance. But you should be in no doubt about the extent of tangible change this programme is delivering. Let me give you just a couple of examples in areas most relevant to this audience.

Pace

We know that delay chills investment and can mean promising startups run out of road. So, we’re committed to arriving at good decisions as quickly as possible.

In our merger reviews, for example, we have new KPIs to reduce our pre-notification period from around 70 to 40 working days; and our review of straightforward phase 1 cases from 35 to 25 days. The vast majority of deals actually raise no competition concerns, so it makes sense that this process should be as quick as possible.

Beyond mergers, we’re streamlining our approach across the board – overhauling processes, focusing in as early as possible on key issues, and resisting the temptation to gold-plate.

Proportionality

We know excessive, overly burdensome interventions can create undue costs and risks that stifle investment and innovation.

So, we will act proportionately and minimise costs wherever we can. Before launching new markets work for example, we will carefully consider the potential costs for businesses, as well as the benefits it might yield. Orders we impose will automatically expire after a fixed period unless there’s a strong reason to retain them, and we will be more proactive about removing outdated remedies.

Proportionality also means prioritising issues that most directly affect UK consumers and businesses. For example, we’ve said we are more likely to prioritise for investigation mergers with a UK-specific impact or requiring UK-specific remedies, recognising that for other global deals action by other authorities could resolve UK concerns.

Predictability

We know uncertainty can stall decision-making and weaken business and investor confidence.

When it comes to merger review, for example, we’re consulting on new jurisdictional guidance to give businesses a better sense of which deals we might investigate. And we’ve published roadmaps for our investigations under the new digital markets competition regime, setting out the phased actions we might take following formal designation decisions.

Process

By which we mean the way we engage with stakeholders, inside and outside of our formal work.

We are offering more direct contact with key decision-makers and more targeted outreach to critical communities – with investment and startups 2 notable examples.

A new Growth and Investment Council (https://www.gov.uk/government/collections/cma-growth-and-investment-council-meeting-minutes) to ground our work in the commercial realities of business in the UK. New stakeholder surveys to capture valuable feedback and perceptions.

The CMA is more committed than ever to the fundamentals of our role – to promote competition and protect consumers, within an independent regime. But I am determined we do so in a way which maximises our contribution to growth and investment. And early feedback suggests that the scale of the transformation underway is starting to be felt positively by those who engage with us.

Competition and investment

Now, I’d like to move away from the nuts and bolts – critical as they are – and turn to a more nuanced question: the relationship between competition and investment.

The discussion is sometimes framed in binary terms: either that stronger competition always spurs investment; or conversely, that promoting competition will inevitably deter investment by the largest players. The reality, of course, is more complex. And it’s an area where evidence and thoughtful balance really matter if we are to fully leverage investment, and the power of competition, to the UK’s advantage.

That’s why, as part of the CMA’s Growth Programme, our Microeconomics Unit (https://www.gov.uk/government/collections/microeconomics-unit-research) will be publishing tomorrow a new literature review exploring more deeply the relationship between competition and investment.

So, what does the evidence suggest?

At an overarching level, competition influences investment through 2 main channels: by easing constraints (notably by improving access to finance) and by shaping incentives (for example, spurring innovation). But much depends on where a firm is in its lifecycle, with constraints mattering most early in the lifecycle and incentives becoming more important as firms mature.

For startups, the biggest barrier is access to finance. Competition in financial markets matters because it expands the supply of funds, easing those constraints. And the evidence suggests this is not a case of diminishing returns: the additional ventures that get funded are often just as productive as those already backed. Start-ups can also have a dynamic effect on the wider market – by entering and innovating, they increase pressure on incumbents to invest in their own innovation.

As firms grow, access to capital remains critical but the dynamics shift. Venture capital is the lifeblood of scale-ups, and competition among venture capital (VC) firms matters. Unclear or overly burdensome regulation can deter investors, reducing competition in the VC market. In that diminished pool, bargaining power can shift from founders to funders, limiting the size and number of viable scale-ups. This may contribute to the fact that the UK’s relative strength in early-stage funding does not always translate into later-stage growth on the scale we see in the US, along with challenges like risk appetite and talent.

For more mature businesses, the focus moves from capital markets to competition in input and product markets. Market power can distort investment flows, but whether it reduces overall investment appears to depend on its source. If market power reflects genuine efficiencies – such as economies of scale – it may coincide with higher aggregate investment. But if it stems from anti-competitive conduct, the effect is more likely to be negative. Market power can also lead to misallocation, locking resources into less productive firms and reducing dynamism across the economy.

For firms striving to become global ‘superstars’, 2 factors stand out: international exposure and innovation. Trade can boost investment, but the effect is nuanced. Exporting firms tend to invest more, yet the impact of import competition is mixed – it can spur innovation in some cases but potentially squeeze margins and deter investment in others.

Foreign direct investment also matters, but again it’s a nuanced picture. Greenfield investment tends to raise domestic investment and productivity. For cross-border acquisitions, emerging research suggests an increase in innovation investment – but perhaps predominantly in the acquirer’s home country, rather than the target’s.

On innovation more broadly, the evidence suggests that more competition tends to raise innovation when firms have market power – but the picture varies by sector and type of innovation. Smaller challengers often spark disruptive breakthroughs. Larger firms dominate R&D spending but tend to focus on incremental rather than drastic improvements.

And finally, although I don’t have time to cover it in detail today, the review also explores the implications for investment and competition of different forms of financing and exit, including private equity, mergers and public listing.

It is clear from our review that understanding the complexity of the relationship between competition and investment has important implications for policymakers – especially around industrial strategy, which leverages investment to shape markets. To further develop this understanding, the CMA is now convening various discussions across the public and private sectors ahead of publishing further thinking next year.

Scale-ups

Let me turn to my final theme – the role of competition policy in supporting UK scale-ups – which is the subject of a separate discussion paper we are also publishing tomorrow.

As this audience knows better than most, UK scale-ups – particularly fast-growing, ‘superstar firms’ with the potential to become global leaders – are critical to our economic future.

When firms scale successfully in the UK, the result is greater innovation, more high-value jobs, and the opportunity to retain and realise the value created by UK entrepreneurs and founders.

And when those firms grow in strategically important sectors, they bolster the UK’s ability to respond to global shocks and supply chain disruptions – strengthening our resilience in an uncertain world.

Equally, UK startups which go on to become globally consequential firms strengthen our influence and autonomy – particularly in sectors where economic strength intersects with national security and foreign policy.

But we know that scaling is hard. And while the UK has a strong start-up ecosystem, we don’t always see that early promise translate into later-stage growth. So, the question we’re asking now is: how can competition help?

We’ve focused on 3 key areas, with particular emphasis on the priority sectors under the Industrial Strategy – the so-called IS-8.

First, tackling sector-specific barriers. We’re looking at how competition policy can help remove obstacles that make it harder for firms to scale.

Public procurement, for example – worth £385 billion to the public purse annually – can be a powerful tool to shape markets and support scaling. But we often hear that processes can be frustratingly slow, risk-averse, and tilted towards incumbents. So, we’re asking: where are procurement practices holding back scale-ups? And how can competition policy help unlock more dynamic, contestable markets – especially in critical sectors like infrastructure and defence?

Regulation is another critical lever. Smart regulation can create certainty and stimulate innovation. But poorly designed rules can entrench incumbency and deter new entrants.

So, we’re keen to hear where regulatory burdens may be disproportionately affecting smaller firms? And what reforms could help level the playing field, supporting scaling in high-growth sectors?

Second, beyond sector-specific issues, we’re also exploring cross-economy ‘enablers’ which act as catalysts for scaling across multiple markets. Unsurprisingly, the 2 we hear about most frequently are access to data and interoperability. Powerful enablers, but often controlled to some degree by incumbents, creating bottlenecks for smaller players.

The diffusion rate of knowledge and innovation across the economy can also help or hinder. Sluggish technology adoption can put the brakes on scaling. But where businesses are quick adopters, innovative scale-ups can experience exponential growth. It’s notable, therefore, that the UK ranks highly for innovation globally but lags behind on the diffusion of new ideas and technologies. Our Microeconomics Unit is exploring what role competition might play here.

In the meantime, we’re asking:
- how access to public and private data can be improved to support innovation and growth?
- what might the right balance be between open access and protecting proprietary investment?
- what other key horizontal barriers currently restrict scaling?
Now, tackling sector-specific barriers and unlocking these sorts of enablers are grounded in a well-established principle: that competition policy supports and protects the market conditions needed for dynamism and scaling. But there are instances – particularly in industrial strategy – where the relationship between competition policy and the ambition to build scale in strategic industries becomes more nuanced. This is our third area of focus.

Collaboration between firms is one such area. The CMA will always take robust action against anti-competitive conduct that harms businesses and consumers. But we also recognise that collaboration can support scaling and unlock wider economic benefits that may not be achievable alone – from productivity gains to breakthrough innovation.

Many collaborations won’t raise concerns, especially in less concentrated markets. But uncertainty around what’s permissible can deter firms from working together – especially scale-ups, which often lack the legal and compliance infrastructure larger firms deploy to manage regulatory risk. That’s why we’ve taken steps to provide greater clarity in areas such as net zero and higher education. And it’s why we are now asking in what other areas – particularly within the IS-8 – could clearer signalling from the CMA unlock beneficial partnerships. That might include shared infrastructure, joint procurement, even mentor-protégée models that help smaller firms gain know-how from more experienced players.

The last area I will touch on is mergers. Again, the picture is nuanced. Consolidation between competitors (which is where most competition concerns arise) can, in theory, help firms achieve the scale to compete globally. And that scale might unlock benefits for the UK: growth and investment, enhanced strategic resilience, stronger global influence.

None of these outcomes are guaranteed, of course. A merger may create a stronger firm, but the value of this may or may not be realised in the UK. Larger firms may be better equipped to manage shocks and serve domestic needs. But consolidation can also create systemic risks and reduce incentives for efficiency and innovation. Scale can be a prerequisite for global superstar firms. But if consolidation dampens domestic competition, it may slow the very dynamism that drives their innovation and productivity, as well as potentially resulting in higher prices and less choice for customers back home.

The specific circumstances are likely to matter in each scenario – and the trade-offs for policymakers to consider may be significant.

So, we’re asking:
- how acquisitions and mergers impact on whether innovative firms continue their scale-up journey in the UK, rather than moving abroad?
- where we encourage UK scale-ups to improve our domestic resilience in critical areas, what market structures will yield the best outcomes?
- what role might domestic consolidation play in supporting UK scale-ups to hold strategic positions in global markets, and how should this be considered within the UK merger regime?
These are not easy questions and some of the answers likely fall outside the CMA’s remit. But they are important, and I hope the investment community will play an active part in helping us explore them over the coming months.

Conclusion

I want to finish by thanking Michael and the BVCA for your ongoing partnership – not least as members of the CMA’s Growth and Investment Council, which helps to keep us connected to the real experiences of businesses across the UK economy.

What I hope you will take away from today is that the CMA’s role – and the value of competition policy more broadly – is about more than preventing harm. It’s about opening up opportunities for the UK to grow, to compete, to become more innovative, resilient, stable and prosperous.

That’s why we’re transforming how we work – reducing burdens and strengthening business confidence.

It’s why we’re sharply focused on those IS-8 sectors, which are of such enormous strategic importance to the UK.

It’s why we’re exploring the evidence about the relationship between competition, investment and growth with an open mind, asking the tough questions.

And it’s why we’re forging deeper and more constructive dialogue with the communities that play a critical role in securing the future we all wish to see for the UK. Like all of you in this room.

This is not about changing our fundamental purpose. It’s about delivering it in a way that helps unlock the UK’s full economic potential.