Better Regulation: supporting economic growth and investment

4. Initial findings

Summary

Across our engagement, businesses have been positive about Scotland’s regulatory system, recognising it as stable, robust, and aligned with international best practice. This report highlights examples of good regulatory practice.

However, stakeholders reported complex, inconsistent processes and disjoint across regulatory arenas. In response, we outline the work in progress across the Scottish Government to address these issues, including our Public Service Reform strategy, our work to establish a Scottish Regulators Forum, and our approach to Heat in Buildings legislation, the latter of which exemplifies our considered approach of the broader UK regulatory context.

Concerns were also raised about the cumulative impact and cost of regulation. Through mechanisms such as the Regulatory Review Group, we detail how we scrutinise the business impact of new regulation and consider cost, benefits and risks.

Businesses reported they want regulation to be faster, more responsive, flexible, and transparent. This report showcases examples of such responsive approaches on habitat regulations for offshore wind and energy consenting, and sets out plans to review the Scottish Regulators’ Strategic Code of Practice.

Stakeholders highlighted challenges with digital interfaces. We set out below how we aim to drive improvement in this regard across Scotland’s public services.

However, limited specific examples of regulations and regulatory practices for repeal or reform were identified through this process. Some businesses raised concerns over Energy Performance Certification and this report details how the Scottish Government is addressing these. In the housing sector, the current road bonds system was identified as impacting project viability, investment pipelines and delivery timescales. As detailed below, we are considering improvements to the system while maintaining its integrity, especially the protections it provides to local authorities.

Discrete regulatory issues

Reforming Regulatory Barriers in Housing Delivery

Scotland is currently facing a Housing Emergency. Delivering more homes at pace is essential to meet the needs of communities and support economic growth.

We recognise that regulation plays a vital role in safeguarding standards and the public good. However, where regulatory requirements create disproportionate costs, delays, or uncertainty, they can restrict investment and slow delivery. This is particularly acute in housing, where the need for accelerated delivery is urgent.

The recent Housing Emergency Action Plan^[4] outlined several actions to accelerate the delivery of more homes. We recognise that small and medium-sized housebuilders (SMEs) play a vital role in Scotland’s housing system, often delivering homes on smaller, rural, and brownfield sites that larger developers may not prioritise. At the same time, we are aware that because of their scale, requirements from regulatory processes can have a significant impact, affecting project viability and financial capacity^[5].

Case Study: Road Bonds

Through stakeholder engagement and analysis of existing regulatory processes, road bonds have been identified as a key area for improvement.

Road bonds are financial guarantees required from developers by local authorities under the Roads (Scotland) Act 1984 and are required to ensure that roads associated with new residential developments comply with adoptable standards. The purpose of this security is to ensure that, should a developer fail to complete the road to the required adoptable standard, the authority has sufficient funds to complete the work. While they perform an important function to protect public infrastructure, and our central priority is to ensure this will be maintained, SME housebuilders have highlighted road bonds as a regulatory barrier to housing delivery, locking up significant capital, and constraining opportunities for development and investment.

Key challenges identified in the current road bond system include:

• Limited market capacity: The bond market is small, offering limited options to SME developers and new entrants, often resulting in higher costs.
• Upfront financial pressures: Bonds can tie up substantial capital for extended periods, which can make projects financially unviable in some cases, particularly for smaller housebuilders.
• Inconsistent application: Road bond processes vary significantly across local authorities, with differences in calculation methodologies, rates, accepted bond providers, and release procedures. These differences can make it particularly challenging for smaller housebuilders operating across multiple local authorities.
• Delays in road adoption: Bonds are often retained beyond the intended timeframe, due to delays in bonds being released and roads being adopted. This locks up capital and extends liability for maintenance and insurance to housebuilders, creating further financial strain.

These factors can contribute to slower housing delivery at a time when acceleration is essential. Reforming the road bond system is therefore a priority to unlock future investment and support Scotland’s Housing Emergency response.

Action Plan

The Scottish Government is working with partners to reduce these barriers while maintaining the protections that road bonds provide to local authorities and homeowners. Insights gathered from stakeholders, including SME house builders, industry bodies, transport professionals, and local authorities, are informing this work.

We have reviewed the application of the current road bond system to ensure alignment with the Better Regulation principles and will continue to collaborate across government to explore changes. This includes identifying where there are opportunities for targeted reform that supports delivery without compromising on public interests.

Our goal is to ensure that regulatory processes related to road bonds remain supportive of housing delivery, especially in the context of Scotland’s Housing Emergency, while at the same time retaining the protections road bonds provide to local authorities and the public in terms of infrastructure delivery.

To achieve this, we will:

• Support the Scottish Collaboration of Transportation Specialists (SCOTS) group in updating road bond guidance: We are engaging with SCOTS group and other relevant stakeholders to update the national road bond guidance by Autumn 2026. This update will strengthen the guidance to promote greater clarity and consistency across local authorities.
• Working with local authorities to better understand and improve implementation: We are working with local authorities to improve the quality and consistency of data gathering on aspects such as bond values and timeframes for adoption to inform practical improvements. This will be ongoing to provide a baseline and measure improvement. Data collection will begin from February 2026.
• Building consensus around a longer-term alternative to the current road bond system: We are assessing alternative models that could operate alongside road bonds that will maintain public protections while unlocking capital for development. This work will be evidence-led and designed to support housing delivery without compromising on road standards. Over the next six months we will work with stakeholders to understand the feasibility of a new guarantee fund that could operate alongside road bonds.

Summary

This work is not about deregulation; it is about ensuring that regulation enables delivery and investment in housing during a time of national emergency. In the next six months, we will continue to explore and test alternative approaches to road bonds that provide the necessary assurance and avoid barriers to development.

By reforming regulatory barriers in housing, we aim to unlock investment, accelerate delivery, and help meet Scotland’s housing needs, to better support communities and drive economic growth.

Reforming Energy Performance Certificates:

Energy Performance Certificates (EPCs) originate from the EU Energy Performance of Buildings Directive. The Scottish Government has an aim to remain aligned with EU law where it is desirable and feasible to do so.

Following significant consultation and extensive engagement with businesses, and consideration via the independent Regulatory Review Group (RRG)^[6], revised Energy Performance of Buildings Regulations were laid in the Scottish Parliament in November 2025 and have since been approved, coming into force in October 2026. Our reforms respond to longstanding stakeholder concern, delivering improvements by, among other things:

• Adopting a new EPC rating system for domestic buildings:
  • Heat Retention Rating (fabric energy efficiency)
  • Heating System Rating (type, emissions, efficiency, running costs)
  • Energy Cost Rating (retaining the existing SAP-based EE Rating)
• Adopting a new EPC rating system for non-domestic buildings – including creation of a new rating which directly responds to business’ demands for alignment across the UK.
• Adopting a redesigned EPC certificate.
• Reducing the validity period of EPCs from 10 to five years to ensure consumers have better and more up-to-date information.
• Developing a new dynamic EPC user interface to sit alongside the published EPC.
• Introducing strengthened operational governance arrangements for EPC assessors and Approved Organisations to enhance quality assurance for consumers (including onsite audit).
• Establishing a new technical infrastructure to underpin EPCs: replacing the Standard Assessment Procedure (SAP) with the new UK Home Energy Model (HEM) calculation methodology, and building a new EPC Register.
• Continuing to work with the UK Government and devolved administrations where we share elements of the EPC regulatory system across the UK internal market.
• Increasing EPC lodgement fees to fund the technical infrastructure of HEM and Register and to fund new onsite audit and inspection of EPCs.
• Not changing the trigger points for an EPC (advert for sale or let; completion of new buildings).

• Ensuring a transitional period of up to one year for buildings advertised for sale or let, and for short term lets; and allowing a transition period of up to five years for large non-domestic buildings frequently accessed by the public.

We will continue to work with industry as we move into implementation of the revised regulations.

Regulatory stability

Stakeholders outlined the value of a stable regulatory landscape. Certainty of requirements, processes and systems, builds confidence and de-risks investment, creating the conditions for business growth.

Feedback highlighted that Scotland's regulatory landscape is credible, predictable, and robust – attracting competitive capital and globally-mobile flows of investment. We have a strong foundation to protect, and upon which to build.

We recognise that regulators, in our priority sectors and beyond, have undertaken work to embed our Better Regulation principles and enhance the user experience for businesses. The below case studies from SEPA and Food Standards Scotland illustrate the good practice already underway.

Food Standards Scotland: SAFER

Food Standards Scotland (FSS) has launched SAFER as a strategic programme of reform to modernise and improve the delivery of food law in Scotland. Food law is of vital importance not just to the Scottish public, but also to Scotland’s reputation and to the large number of relevant businesses operating in and trading with Scotland.

SAFER is governed by a multidisciplinary programme board which consists of strategic leaders from across the food industry, local and central government, and other key public bodies.

The four objectives of SAFER are to:

1. Review and reform the food law delivery model for Scotland, benchmarked against leading international approaches to ensure ambition and best practice.

2. Develop options to sustainably fund delivery of officials controls and consider a transparent and proportionate cost recovery system.

3. Explore innovative regulatory strategies for reform, focused on risk, assurance, increased efficiency, and measurable public health outcomes.

4. Utilise new technologies to support food safety professionals, incentivise business compliance, and enhance consumer protection.

FSS operates in line with the Scottish Government’s approach to Public Service Reform and Better Regulation, and is covered by the Scottish Regulators’ Strategic Code of Practice and statutory growth duty. The SAFER programme vision is a modernised approach for the delivery of food law that will create a sustainable system that is more efficient and effective, reduces burdens on food businesses, and uses new technologies and good intelligence to focus on risk and improve compliance. A more efficient delivery system can benefit both consumers and businesses by streamlining engagement with regulators and focusing enforcement only on those businesses with lower compliance.

An aligned approach to regulation

Businesses rarely interact with a single aspect of Scotland’s regulatory system in isolation; instead, they navigate multiple regulators, levels of government, and processes simultaneously. This complexity can be frustrating, and lead to inconsistency and friction, thereby slowing delivery or disincentivising investment.

We are committed to developing a more integrated, outcome-focussed, regulatory approach that improves consistency and reduces complexity. This means better aligning regulators around shared priorities, promoting best practice, and developing platforms to consider both the user experience and our desired regulatory outcomes.

To support this, we have established a Scottish Regulators Forum. Beginning in December 2025, this forum brings together key Scottish regulators to strengthen collaboration, improve engagement with government, and identify opportunities for joint working and streamlining. The forum will also provide mechanisms for regulators to feedback on their experiences of regulation, allowing regulators to share insights, issues, and ideas.

This sits in the context of our Public Service Reform Strategy (further detail below), which sets out the Scottish Government’s vision for public services: where everyone has access to services that are efficient, good quality and effective. Services should be preventative, holistic, and person-centred with a “no wrong door” approach, streamlining the way people engage with our system of public services.

Scottish Environment Protection Agency: New Integrated System for Environmental Authorisations

The Scottish Environment Protection Agency (SEPA) and the Scottish Government have implemented a new integrated system for environmental authorisations. Under the Environmental Authorisations (Scotland) Regulations (EASR), SEPA’s four main regulatory regimes covering water, waste, industrial activities and radioactive substances have been brought together into a single common framework.

EASR greatly simplifies the regulatory landscape, replacing multiple pieces of individual legislation with a single regime with common types of authorisations and simpler, consistent processes, tools and timescales.

This integrated authorisation framework allows operational efficiencies for SEPA and for businesses through a streamlining of regulation and a programme of digitisation that enables some authorisations granted in minutes online.

EASR enables proportionate regulation by simplifying the processes required for lower risk activities and allowing SEPA to target more of its resources on those activities with greater potential for hazard, or harm, for communities and the environment.

Through the clarity provided by the common framework, EASR also promotes greater transparency and accountability that supports high performance and compliance. Furthermore, EASR also introduces an enhanced “fit and proper person” test to prevent disreputable operators from competing with businesses that take their environmental obligations seriously.

Stakeholders expressed the challenge of working across multiple regulatory jurisdictions, agencies and requirements – from the EU to local authority level. We recognise that Scottish regulation is part of a wider regulatory arena and work to minimise burden arising from cumulative impact wherever possible, both on businesses and on public sector agencies.

The independent Regulatory Review Group (RRG) is working to support Scottish ministers with strategic phasing of regulatory requirements, both to ensure appropriate timing for businesses and enforcement capacity and resourcing across the public sector. Similarly, as set out by Scottish Ministers in the Scottish Public Finance Manual, “where SG business areas consider that a new policy initiative or legislative change might place an additional financial burden on local authorities they should contact Local Government Finance Unit at the earliest possible stage and the additional expenditure should be fully funded by the relevant SG policy area”^[7].

Scotland’s commitment to remain close to the EU means Scotland will continue to align with the EU where it is possible and meaningful to do so, and in a manner that contributes towards protecting and advancing regulatory standards across a range of areas. By protecting and continuing to advance the high standards that Scotland shares with the EU, we will safeguard the prosperity and wellbeing of people and businesses in Scotland, maintaining Scotland’s inclusive, outward-facing reputation

We engage regularly with the UK and devolved governments, working to share good practice and to promote and protect the interests of Scottish Businesses. Our approach to ‘Heat in Buildings’, legislation exemplifies where the Scottish Government is taking a considered approach, cognisant of policy development across administrations.

Heat in Buildings

On 18 November, the Scottish Government published a draft of the Buildings (Heating and Energy Performance) and Heat Networks (Scotland) Bill. Ministers intend to introduce this Bill in the next Parliamentary session, subject to the outcome of the 2026 Scottish Parliament election.

By publishing a draft Bill, the Scottish Government is providing clarity on our policy direction, and giving Parliament, households and industry a clear road map of our path ahead.

It was Ministers’ intention to introduce a Bill in this Parliamentary session. The Scottish Government has worked at pace to produce a Bill, ready for introduction, building on the proposals announced to Parliament in April.

However, Ministers felt that Parliament would be better placed to debate the Bill once the UK Government’s Warm Homes Plan had been published. The Plan is now available, though it does not yet outline a long-term approach to rebalancing electricity and gas prices, which is considered essential to support the long-term affordability of clean heat. We will continue to work with the UK Government to address this and related issues.

Pausing formal introduction until the next session – subject to the outcome of the election – will allow Parliament sufficient time to scrutinise the Bill with clarity on the UK Government’s plans.

Meanwhile, publication of the draft Bill gives a clear direction of travel to Parliament and stakeholders. The Scottish Government is acting with purpose, transparency and ambition—taking the steps we can now, and preparing the ground for a robust, future-proofed approach that serves Scotland’s long-term interests.

Our draft Climate Change Plan reiterates our unwavering commitment to decarbonising heat in buildings and achieving net zero by 2045.

Cumulative impacts and costs

Businesses across our priority sectors highlighted the cumulative impact of regulatory requirements. Compliance costs and administrative pressures divert resources from growth and, in some cases, make further investment unviable. The cumulative impact of regulatory burden on SME employers is evidenced as a major obstacle^[8].

The Scottish Government is committed to improving how new regulations are developed and implemented to ensure that regulation is proportionate and targeted, aligned to our Better Regulation principles. We are driving this forward through two primary mechanisms:

• The independent Regulatory Review Group (RRG) advises Scottish ministers on all aspects of Better Regulation from a business and regulatory perspective. Bringing together industry and government, it advises actions to improve the regulatory environment for business, provides practical implementation advice, and offers independent and informed input on the Scottish Government and its regulatory agencies’ Better Regulation performance.
• Since its re-establishment under the New Deal for Business, the RRG has focused on supporting the development of regulation that is proportionate, workable, and informed by early engagement with those most affected (Annex C). By examining regulations in development, the RRG helps Ministers and officials anticipate risks, unintended consequences, and delivery challenges before they materialise. Through this collaborative, evidence-based approach, the RRG will continue to help maintain a regulatory environment that offers certainty to investors, supports sustainable growth, and delivers effective outcomes for businesses, consumers, and communities.
• Business and Regulatory Impact Assessments (BRIAs) that help to assess the likely costs, benefits, and risks of any proposed primary or secondary legislation, voluntary regulation, codes of practice, or guidance that may impact the public, private or third sector. Alongside impact assessments, engagement, and consultation, BRIAs aid in assessing impact and consequences of new proposals. The BRIA is considered best practice, and the effectiveness and uptake is under continual review.

Responsive, flexible, and transparent regulation

Scotland’s economy operates in a dynamic global context.

Regulation therefore must be agile and adaptive, delivering safeguards while aligning with wider ambitions for Scotland’s economy.

Though stability is important, businesses told us that regulatory systems should be flexible, risk-based, and proportionate – tailored to context, while remaining fair and consistent.

Stakeholder feedback expressed particular concern that timescales for regulatory processes and decisions are often lengthy.

In response, and without limiting opportunities for businesses and other stakeholders to engage with them, we want to ensure faster processes, limiting businesses’ financial exposure while processes are navigated and determinations made.

We also want to support flexible and pragmatic approaches: risk-based approaches that help deliver at pace, regulate proportionately, and support innovation in technologies and business models.

Across our engagement it was evident that this approach must be backed by transparency, effective governance, and robust institutions. Flexibility must not sacrifice scrutiny, standards, or safeguards.

To do this, The Scottish Government will work with regulators to review and update the Scottish Regulators’ Strategic Code of Practice.

We will conduct the review alongside regulators, supporting consistency across institutions, and ensuring that across the public sector there is a clear commitment to upholding the highest standards while delivering a flexible regulatory environment.

Our ambitions have a strong foundation. The case studies which follow underline that this drive for greater flexibility, pragmatism, user-centred and transparent approaches is already delivering positive results.

Driving regulatory flexibility for Offshore Wind

Enabled by the provisions of the Energy Act 2023, the Scottish Government is proposing to amend the Habitats Regulations for offshore wind, to provide a more flexible and pragmatic approach to environmental compensation for offshore wind, unlocking barriers to offshore wind development and its associated economic and environmental benefits, and offering new opportunities for investment in Scotland’s marine environment.

Consultation on Scotland’s Strategic Compensation Policy for Offshore Wind opened on 22 July 2025 for a six-week period and closed on 1 September. In line with our collaborative approach, the UK Government consulted on their concurrent policy at the same time, which would apply in the Scottish offshore region^[9].

The draft Scottish Statutory Instrument (which would apply in the Scottish inshore region) was laid before the Scottish Parliament on 9 January 2026.

Faster decision making for priority energy infrastructure

The Scottish Ministers have an ambition to determine priority applications for transmission infrastructure within 52 weeks.

Guidance was published in February 2025 setting out the procedure and direction on all steps of the process^[10].

The 52 week ambition facilitates the delivery of net zero and ensures energy security.

Improving interfaces

Outdated, complex and cumbersome digital systems were raised by stakeholders as a challenging aspect of navigating the regulatory environment. As the recently published Digital Strategy for Scotland^[11] set out, we want to see a Scotland where digital innovation “transforms Scotland’s public services, making them smarter, faster and fairer”. We will deliver on this through developing public sector leadership, skills and capability for digital, data and innovation; the use of data and technology, including AI, ethically to protect privacy, build trust and reduce cyber risk; and, delivering collaborative digital programmes and common digital solutions that improve the efficiency of public services, transform the under experience and deliver better outcomes for the people of Scotland.

Scottish Environment Protection Agency: Redesigning and Building its Online Offering

As part of the implementation of a new integrated system for environmental authorisations, SEPA has invested heavily in redesigning and building its online offering. This is to help operators and interested parties to understand and navigate the new system and launch a new digital application service for environmental authorisations.

The changes required extensive consideration and redesign of user journeys to ensure that customers are quickly directed to the right guidance on relevant authorisations, all connected pages and materials are fully updated to reflect the changes, and migration from SEPA’s legacy to Beta site.

The new digital application service was added to SEPA’s website at the start of November 2025. This now allows users to apply for a new authorisation or to vary, transfer or surrender an existing authorisation.

Authorisations for private sewage treatment systems and for transporting waste activities can also be secured online through the digital system.

Alternative options remain available to ensure that customers can choose a more traditional form if that suits them best, however the new online service significantly reduces processing time and improves the customer experience. Further digital applications for more types of environmental authorisations are scheduled for April 2026.