Outcomes of the UK Internal Market Act Review

The UK Government announced a Review of parts of the UK Internal Market Act 2020 on Friday 23 January 2025. Part of the Review was a consultation which stakeholders were invited to respond to. On 15 July 2025 the UK Government published its response to the Review and Douglas Alexander, then Minister for State for Trade Policy and Economic Security, also lodged a written statement at the House of Commons to announce the publication. This long-read blog provides some background information and considers the outcomes of the Review.

What is the Internal Market Act 2020 and what was being reviewed?

The UK Internal Market Act 2020 (UKIMA) governs the trading relationship between the different nations of the UK for goods and services. The Act establishes two market access principles – mutual recognition and non-discrimination. The market access principles are intended to facilitate trade, the provision of services and recognition of professional qualifications across the UK.

A statutory review of three aspects of UKIMA was required by the Act itself by December 2025. The review duties in UKIMA are:

• the duty to review any use that has been made of the Part 1 amendment powers (powers to change what is excluded from the market access principles for goods) under section 13
• the duty to review any use that has been made of the Part 2 amendment powers (powers to change what is excluded from the market access principles for services) under section 22
• the duty to review arrangements for carrying out Part 4 functions (this relates, in particular, to the effectiveness of using Office for the Internal Market (OIM) task groups to carry out the Competition and Markets Authority’s functions under Part 4 of giving independent advice on and monitoring of the internal market) under section 44.

The UK Government set out its approach in a Ministerial statement on 12 December 2024 made by Douglas Alexander, then Minister for Trade Policy and Economic Security. The Minister stated that the Review would also include:

… inviting views on the process for considering exclusions from the Act, and the role and functions carried out by the Office for the Internal Market.

The Review of UKIMA being wider than that required by law appeared to be part of the UK Government’s ‘reset of relations’ with the devolved governments Making a statement on 12 December 2024, Mr Alexander, stated:

…we recognise that the operation of the UK Internal Market Act can be improved, including more certainty and clarity when considering proposals which remove areas of regulation from the scope of the market access principles. We believe that the UK Internal Market Act should complement Common Frameworks and support collaborative policy-making. To improve the management of the UK internal market, the Government will deliver an initial package of measures to demonstrate a more pragmatic approach.

Although the Review was wider than required under UKIMA, the UK Government stated that the Review would not consider whether to repeal UKIMA or any part of it, something which the Scottish Government was critical of. The Scottish Parliament agreed (passed by 73 votes to 47) a motion calling for the Act to be repealed on 19 February 2025. The motion stated:

That the Parliament notes the publication of the UK Government’s consultation and review of the United Kingdom Internal Market Act 2020, which sets out that it will “not consider whether to repeal the UK Internal Market Act or any part of it”; recalls that both the Scottish Parliament and Welsh Senedd refused to give the Act legislative consent; notes the position of the Welsh Government, which opposes the Act, believing it to be “an unwarranted attack on devolution”; reaffirms its decision regarding the Act on 3 October 2023, and calls for it to be repealed.

In addition, the Review did not consider the UK Government’s power to provide financial assistance throughout the UK or subsidy control.

Work by the Constitution, Europe, External Affairs and Culture Committee

The Constitution, Europe, External Affairs and Culture (CEEAC) Committee launched a short inquiry linked to the UKIMA Review in February 2025. The inquiry’s purpose was to inform the CEEAC Committee’s submission to the Review which concluded that:

…the starting point for this reset should be a recognition that devolution looks very different outside of the EU compared to when the UK was a Member State. The key difference is how the regulatory environment within the UK is managed compared to how it was managed within the EU. Critically this is a shared space which requires much more intergovernmental working than previously when the UK was in the EU.

While a number of mechanisms and ways of working, including UKIMA, have been developed to manage the shared space, there remains a lack of consensus about how the regulatory environment should be managed. There is also a lack of clarity and certainty around mechanisms, such as the exclusions process, which are key to how the regulatory environment is now managed. Our view is that the review of UKIMA should address this lack of clarity, consensus and certainty. The recommendations in this submission are intended to support that process.

A SPICe paper provided to the CEEAC Committee for its inquiry on the Review included detailed background on what was required to be reviewed by law, how the UK Government approach to the Review widened its scope, and how the issues raised in the Review linked to the CEEAC Committee’s previous work around transparency and accountability of intergovernmental decision making.

The Review outcomes

The UK Government’s response to the Review was published on 15 July 2025 and was accompanied by a Ministerial Statement laid in the UK Parliament.

The outcomes of the Review do not propose changes to UKIMA itself; the market access principles of mutual recognition and non-discrimination still apply and no changes to the Act are proposed.

The Review outcomes are a series of commitments to try to address some of the concerns raised by those who responded to the consultation held as part of the review.  The changes are, therefore, a commitment to better intergovernmental working which include:

• An agreement to consider environmental protection and public health, alongside economic impacts, in UKIMA exclusions.
• A commitment to implement any UKIMA exclusions that have been agreed by all governments within a Common Framework.
• A Minimum Economic Impact (MEI) process for considering exclusions with an economic impact of less than £10 million a year, and a commitment by the UK Government to implement them where all governments agree the exclusion has minimum economic impact.
• A “reserve” exclusions process for instances where it has not been possible for all four governments to reach agreement on an exclusion through either the Common Framework or MEI process.
• Work to improve the transparency of Common Frameworks by the governments working to agree processes for how to engage with businesses and other stakeholders on matters being discussed in frameworks.
• A commitment that the UK Government will work with the devolved governments to agree a process for all four governments to jointly refer UK internal market matters for advice to the Office for the Internal Market.

The following sections of this blog consider each of these commitments in more detail.

Consideration of environmental protection and public health in UKIMA exclusions

The market access principles of UKIMA allow for very little divergence between regulatory requirements for goods and services in different parts of the UK. The principles apply unless there is an exclusion. There are some exclusions set out in the Act with exclusions for goods listed in Schedule 1 and exclusions for services listed in Schedule 2. In addition, existing regulations (i.e., those in force on 30th December 2020) are broadly excluded from the market access principles for goods and those which have not been substantively changed are broadly excluded from the market access principles for services. New exclusions can also be created by UK Ministers. In the main, matters such as environmental protection and public health are not excluded from the market access principles of UKIMA.  

Although environmental protection and public health were not specifically included in the existing exclusions process, this does not mean that evidence on these impacts could not be considered. That said, because of the lack of transparency around how Common Frameworks and the exclusions process operates it’s been largely unclear how decisions on exclusions have been reached to date.

Paragraph 37 of the UK Government’s response to the Review specifically states that evidence relating to environmental protections and public health will now be considered alongside economic impact when exclusions from the market access principles are being discussed:

Environmental and public health matters are key devolved policy areas that may have an interaction with the UKIM Act. We believe that, by taking those into account in the consideration of a UKIM Act exclusion, we will ensure the right balance between encouraging innovation and solutions that meet local needs; and preserving the integrity of the UK internal market. We encourage devolved governments also to consider environmental protection and public health factors in any exclusion proposal.

It’s important to note, however, that the processes for considering exclusions are intergovernmental and not legally binding. The addition of environmental protection and public health as areas where evidence should be considered does not in itself change the application of the market access principles in these policy areas. It may, however, mean that exclusions in those areas are more likely to be agreed where there is a compelling environmental or public health interest.

Exclusions to the market access principles

Under sections 10 and 18 of UKIMA, UK Ministers may make regulations which change what is excluded from the application of the Act’s market access principles. The consent of the devolved Ministers must be sought for any regulations made under these sections, but their consent is not required. UKIMA specifies that if consent is not given within one month of it being sought, the regulations can be made without it. This means that UK Ministers can change the exclusions to the market access principles even where the devolved administrations disagree.  

Although only UK Ministers have the power to make changes, the UK and devolved governments have previously agreed a process for the consideration of exclusions in areas covered by Common Frameworks. That process was light on the detail of how exactly it operates in practice and there was no mechanism built into it to allow the Scottish Parliament or other stakeholders to have a voice in it.

To date a single exclusions process has existed and has been used to agree an exclusion in relation to single use plastics, but a proposed exclusion relating to the Deposit Return Scheme for Scotland was rejected leading to significant tension between the UK and Scottish Governments. The process was also used in relation to rodent glue traps, even though the policy did not fall within a Common Framework area.

The UK Government response to the Review suggests three distinct exclusion processes, with discussion and agreement through Common Frameworks being favoured.

Implementation of exclusions agreed by all governments in Common Framework areas

The first ‘exclusions process’ facilitates discussion of proposed exclusions through Common Frameworks (intergovernmental groups of officials). In its response to the Review the UK Government states that:

the UK Government confirms it will discuss proposed UKIM exclusions in Common Framework meetings, and will implement all exclusions that have been agreed by all governments through a Common Framework. UK Government intends to use Common Framework meetings to ensure interoperable policy solutions across the UK, as far as that is reasonably possible, but also to seek to reach agreement with all governments where an exclusion is suitable and necessary.

The process proposed by the Review is based on the existing exclusions process and doesn’t add significantly to the detail of how it should operate. The table below provides a comparison of the existing process for considering exclusions and the process proposed by the Review.  The text used in column 1 is taken from the Process for considering UK Internal Market Act exclusions in Common Framework areas (published December 2021). The text from column 2 is taken from the process set out in the UK Government’s response to the Review (published 15 July 2025).

There is, as illustrated in the table above, an explicit commitment from the UK Government to implement “all exclusions that have been agreed by all governments through a Common Framework”. The Scottish Government has indicated in relation to the exclusion on the deposit return scheme that the previous UK Government had not followed the exclusions process,  which required discussions through Common Frameworks rather than formal ministerial requests.

Nevertheless, the Common Frameworks exclusions process now explicitly favours common approaches rather than regulatory divergence. This is demonstrated by the inclusion in the process of a new step which states “Once all avenues to explore similar policy approaches have been pursued within the Common Framework” an exclusion can be sought.

A similar phrase is already included in the individual dispute resolution mechanisms of some Common Framework agreements, for example that of the Animal Health and Welfare Common Framework which states:

The disagreement/dispute avoidance and resolution processes should only be engaged once all routine avenues to try and resolve the disagreement have been exhausted.

This perhaps underlines the intention that the exclusions process through frameworks is to be founded on consensus. Nevertheless, the requirement for consensus in Common Frameworks could mean that the exclusions process is drawn out, and it would appear to be open to parties deliberately frustrating the process to delay a decision on an exclusion. 

Paragraph 26 of the UK Government’s response also states that:

The UK Government believes that, within Common Framework discussions, all governments should be seeking opportunities to align their approaches where appropriate and, as a minimum, look to achieve interoperability of policy across the different parts of the UK.

There appears, therefore, to be a tension then with paragraphs 52 and 53 of the UK Government’s response to the Review which are said to relate to “Getting the right balance between the potential for local regulatory innovations in sectors and UK-wide alignment”. This section of the UK Government’s response suggests that it wants to “enable innovation”, noting that it and stakeholders were supportive of “devolved governments’ ability to launch local innovative initiatives” and indicating that “Common Frameworks are the right place to discuss the potential for policy innovation.”

Minimum Economic Impact process

The Review sought views on whether all proposed exclusions should be handled in the same way regardless of their estimated economic impact. The Review considered this in light of the Scottish Government’s proposed exclusion in relation to rodent glue traps, which was rejected in March 2024 by the previous UK Government but agreed to by the present UK Government which stated that it “recognises this proposal has a minimal economic impact on trade within the UK”.

The UK Government’s response to the Review notes that respondents generally supported the “UK Government running a lighter touch exclusions process where there is clear evidence to show minimal economic impacts on the UK internal market.” As such a Minimal Economic Impact (MEI) exclusion process is to be introduced where the economic impact of the proposed exclusion is no greater than £10 million each year in Equivalent Annual Net Direct Costs to Business. The process is more streamlined, requiring that:

• the proposing government demonstrates that the economic impact does not exceed the £10 million annual threshold
• other governments have no objections based on MEI having been demonstrated
• the UK Government implements legislation and commits to doing so as soon as reasonably practicable.

Reserve exclusions process

A reserve exclusions process is to be introduced for proposed exclusions which fall neither within a Common Framework area nor within the MEI exclusions process. The reserve exclusions process will also be used should agreement not be reached on an exclusion proposed through either the Common Frameworks or the MEI process.

The reserve process means that the administration seeking an exclusion can write to the relevant UK Minister, detailing the proposal and indicating they wish to use the reserve exclusion process to propose the exclusion.

The reserve process appears to be based solely on a review of the proposal by the UK Minister responsible for the relevant policy area. It is noted that decisions under the reserve process, as with the exclusions process through Common Frameworks, will consider evidence in relation to direct and indirect economic impact, environmental protection and public health. The response to the Review states:

Exclusion proposals under this process will be acknowledged in writing by the relevant UK Government minister within one month, and should receive a published, ministerial response from UK Government within six months of the proposal being made. If a decision has not been reached in this timeframe – for example, if the evidence provided is insufficient to make a decision – the response should explain why this has not been possible and commit to a new timeframe. This should be published to extend transparency to businesses and Common Frameworks.

Areas where further work is needed

The UK Government’s response indicated two areas where more intergovernmental work is required to address issues raised in the Review. The first is to ensure better “transparency and communication”with stakeholders on the Common Frameworks programme overall and on individual frameworks.

The second is to agree a process by which joint referrals to the Office for the Internal Market can be made “where potential UKIM impacts are identified in Common Framework discussions”.

Scottish and Welsh Government reaction

The Scottish Government published a position paper on UKIMA in April 2025. That paper set out the Scottish Government’s response to the Review and:

• recognised stakeholders’ concerns over the visibility and transparency of Common Frameworks stating that “the imposition of the Act, without consent, has greatly impeded both the technical operation of Common Frameworks and the principle of respect for devolution on which they are founded”.
• Called for repeal of UKIMA “with an equitable, co-designed system built around the Common Frameworks approach” and “full restoration of the powers of the Scottish Parliament”.
• Indicated that “The unilaterally determined terms of the statutory review are unlikely, in the Scottish Government’s view, to deliver the change necessary.”

Following the outcomes of the Review, Cabinet Secretary for Constitution, External Affairs and Culture, Angus Robertson MSP, was quoted as saying that the UK Government’s response to the Review “falls well short” of the Scottish Government’s stated position of repeal of UKIMA “and indeed short of the legislative change required to mitigate the most damaging aspects of the operation of the IMA.”

Mr Robertson noted that although the Scottish Government welcomed the UK Government addressing “some of the most egregious issues with the function of the IMA exclusions process”, Scottish Ministers “remain concerned that there is no clear vehicle to give meaningful effect to these changes, which work against our shared interests to promote growth, protect jobs and ensure seamless trade across the UK nations”.

The Scottish Government hasn’t, however, published a full response to the Review to date. In it’s response to the CEEAC Committee’s call for views on its inquiry into transparency of intergovernmental activity and its implications for parliamentary scrutiny the Scottish Government noted:

In relation to the statutory review of the Internal Market Act, not only did it explicitly
rule out, in advance, the Scottish Government’s preferred option of repeal and
replace, but it was also conducted without permitting the close collaboration of the
devolved governments. There was no opportunity to discuss, far less jointly agree,
the scope of the review and there was no acknowledgement that the Act was
imposed by the previous UK Government without the consent of any devolved
legislature. Moreover, the devolved governments were treated throughout the
process as stakeholders, not partners; the review recommendations made little or no
reference to the positions and priorities of the devolved governments and
legislatures; and there was no acknowledgement of the IMA’s constitutional effect,
far less proposals on how this might be addressed.

The Welsh Government’s written statement on the Review outcomes was published on 17 July 2025. The Welsh Government broadly welcomed the outcomes of the Review, stating:

We need an approach to governing the UK internal market which works with the grain of devolution and respects our democratic mandate…The commitments made by the UK Government following the review are a good start towards this goal.

The Welsh Government was particularly welcoming of the commitment to implement exclusions agreed in Common Frameworks given that “The Common Frameworks operate on a clear set of principles which fully respect devolution and include dispute resolution mechanisms.”

The statement also noted that work remains to be done to ensure that the reserve exclusions process (discussed in more detail below) is “objective and transparent in the same way as the Common Frameworks processes.”

The Welsh Government did not move from its position that UKIMA should be repealed, stating:

However, it is our long-standing and consistent view that the Act should be repealed and replaced with a system, underpinned by legislation, designed around the Common Frameworks and which maintains the safeguards necessary to support the Windsor Framework…

We will continue to make the case for statutory changes to the Act to prevent its misuse and improve its functioning alongside the devolution settlements.  The non-statutory commitments made by the UK Government are welcome, but they do not prevent the misuse of the Act by future UK Governments to enforce English policy preferences in affected devolved policy.

Key take aways

• Common Frameworks are confirmed as the vehicle through which much of the day-to-day discussion about policy direction in areas affected by UKIMA will be done. Nevertheless, UKIMA remains as the legislative underpinning of the UK’s internal market and its market access principles remain unchanged. As such, the UK Government continues to be the final decision maker in whether an exclusion is given effect as only UK Ministers can make changes to UKIMA.
• The new three-tier exclusions process may help to streamline some exclusion requests, particularly those with MEI.
• There remains a lack of clarity on how the exclusions process routed through Common Frameworks operates in terms of the evidence which should be presented when making an exclusion request.
• Whilst the UK Government has given a clear commitment to implement exclusions agreed through Common Frameworks and recognises the possible benefits of “local need”, there appears to be a greater focus on UK wide approaches and aligned regulations in the text of the exclusions process routed through Common Frameworks.
• Although transparency concerns raised through the review have been noted, there is nothing agreed on how to improve that for legislatures and stakeholders. More work between the governments on how to improve this is promised. The pace of that work, if the Common Frameworks programme is the benchmark, is likely to be slow. That may continue to frustrate stakeholders who seek to be involved in policy discussions as well as legislatures responsible for scrutinising government decision making.
• All of the proposed changes are made through political commitments. This means that future UK Governments may take a different approach to the management of the UK internal market through the operation of UKIMA and the way in which discussion about exclusions to its market access principles take place.

Sarah McKay, Senior Researcher