Why are businesses still unhappy if the EU is deregulating?

Businesses argue that the EU's deregulation efforts are either too limited in scope, too slow in implementation, or still too complex. While some rules have been softened, particularly in the digital sector, key areas like tax and labor laws, which have historically caused previous EU-wide business code attempts to fail, may not be fully addressed by the new regime. This leads to a perception that the changes are not fundamental enough to make Europe truly competitive globally.

Which digital rules have been 'weakened'?

The EU's digital rules, specifically elements of the General Data Protection Regulation (GDPR) and the Artificial Intelligence Act, have been adjusted. These changes were made with the stated aim of enhancing Europe's competitiveness, though the precise details of which provisions were weakened and to what extent have been a point of contention and debate.

What does this mean for Europe's tech industry?

For Europe's tech industry, the deregulation aims to foster innovation and reduce the administrative burden of scaling up. However, if the changes don't go far enough, it could mean that European tech companies continue to face higher compliance costs and slower market entry compared to their counterparts in regions with lighter regulatory touches. The weakening of digital rules could offer some relief but might also spark concerns among consumer privacy advocates.

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techJuly 11, 2026By Veridact EditorialUpdated Jul 11

Europe Tried to Deregulate. Businesses Are Still Unhappy. Here's Why.

Europe's efforts to streamline its business environment and boost competitiveness have hit a wall of corporate dissatisfaction. The European Union recently introduced a simplified '28th regime' business code and softened some digital regulations, including aspects of its AI Act and GDPR. Yet, despite these moves, business leaders contend the changes are too slow, too complex, and ultimately insufficient to address the continent's regulatory burden, raising questions about Europe's economic future.

Outlook

The European Union is caught in a difficult bind. On one side, it faces mounting pressure from its own business community, which argues that stringent regulations are stifling innovation and making Europe less competitive globally. On the other, it must balance these demands with its long-held commitment to consumer protection, data privacy, and a certain social contract. The introduction of the '28th regime' and the weakening of digital rules signal a clear shift in the EU's priorities, leaning towards economic growth. However, the muted response from businesses suggests that this shift, while significant, has not gone far enough to fundamentally alter the perception of Europe as a difficult place to operate. Expect continued lobbying from industry for more radical changes, coupled with internal EU debates on how much further to compromise on its regulatory principles.

Background

For years, European business leaders have voiced concerns that the continent's extensive regulatory framework places them at a disadvantage compared to rivals in the United States and Asia. These concerns have intensified amid increased global rivalry and a more assertive U.S. approach to business, which has seen calls from figures like former President Donald Trump to roll back red tape. European Commission President Ursula von der Leyen has publicly acknowledged the issue, stating that internal barriers within Europe hurt businesses more than external tariffs. Setting up a company or expanding across the EU's single market can still take 'weeks or even months,' a significant hurdle in a fast-moving global economy.

In response, the EU has taken steps to address these complaints. The most notable is the introduction of a simplified bloc-wide business code, dubbed the '28th regime,' announced yesterday, July 10, 2026. This initiative aims to make it easier for companies to operate across member states. Concurrently, there have been confirmed adjustments to key digital regulations, including the General Data Protection Regulation (GDPR) and the Artificial Intelligence Act, with specific provisions reportedly 'weakened for competitiveness.' However, this deregulation has not been without internal resistance; the European Parliament and member states rejected proposals deemed 'egregious,' such as removing a public database for AI systems exempt from high-risk classification, a move that would have offered a mere €100 in estimated cost savings per company.

Precedents

The current push for a unified, simplified business code is not the EU's first attempt. Previous efforts in 2011 and 2014 to create EU-wide company rules ultimately collapsed. Those failures were primarily due to unresolved disagreements among member states over critical issues like labor laws and taxation. This history suggests that achieving broad consensus on deep regulatory integration is inherently challenging within the EU's diverse political and economic landscape.

The '28th regime' appears to be an effort to learn from these past setbacks, potentially by limiting its scope to secure agreement. However, ignoring complex areas like taxes, as some experts like Apostolos Tomadakis of the Centre for European Policy Studies suggest, could become a major impediment to the actual adoption and effectiveness of the new rules. The pattern indicates that while the EU can make incremental changes, fundamental shifts often face deeply entrenched institutional and national interests, slowing down any perceived progress for businesses.

The ongoing tension between Europe's regulatory ambitions and its economic competitiveness has profound implications. If businesses remain dissatisfied, it could lead to a continued exodus of innovation and investment away from the continent, particularly in high-growth sectors like technology and artificial intelligence. This directly impacts job creation, tax revenues, and Europe's capacity to compete on the global stage.

The weakening of digital rules, while intended to boost competitiveness, also raises questions about the EU's long-term commitment to its 'Brussels effect' — its ability to set global standards for privacy and data protection. If the EU is perceived as ceding ground on these principles without fully satisfying business demands, it risks losing influence on both fronts. For European citizens, this balancing act could mean a trade-off between economic opportunity and the robust protections they have come to expect. The success or failure of these deregulation efforts will shape Europe's economic identity and its role in the global economy for years to come.

Scenarios

Analysis

One possible outcome is that the EU continues its incremental approach to deregulation, perhaps by further refining the '28th regime' or making additional, targeted adjustments to sectoral rules. This path would likely involve ongoing negotiations and compromises among member states, potentially leading to a slow but steady reduction in some administrative burdens. However, this pace may not be enough to satisfy increasingly vocal business leaders who are calling for more fundamental, 'Trump-style' overhauls.

Alternatively, the persistent dissatisfaction could prompt the EU to consider more radical reforms, potentially revisiting areas like labor and tax harmonization that have historically proven contentious. This would require a significant political will and a greater degree of consensus among member states than has been seen in previous attempts. Such a move could genuinely transform Europe's business environment, but it would also face considerable opposition from those concerned about social protections or national sovereignty.

A third scenario is that the EU's efforts, despite being insufficient for some, do just enough to stem the tide of dissatisfaction, preventing a full-scale 'regulatory flight' of businesses. In this outcome, Europe might find a new equilibrium, where it maintains a distinct regulatory approach while gradually improving its attractiveness for investment, albeit at a slower pace than businesses desire. The ultimate trajectory will depend on how effectively the EU can bridge the gap between its regulatory ideals and the pragmatic demands of a competitive global economy.

Timeline

2011

First Attempt at EU-wide Company Rules

An earlier initiative to create a unified business code across the EU failed due to disagreements among member states.

2014

Second Attempt at EU-wide Company Rules

Another proposal for EU-wide company rules collapsed, again due to unresolved concerns over labor and tax policies.

2026-07-10

EU Unveils '28th Regime'

The European Union introduced a new, simplified bloc-wide business code designed to make it easier for companies to operate across the single market.

2026-07-10

Digital Rules Weakened for Competitiveness

The EU confirmed that certain aspects of its digital regulations, including GDPR and the AI Act, have been adjusted or 'weakened' to enhance Europe's economic competitiveness.

2026-07-10

Business Reaction to Deregulation

Despite the EU's efforts, business leaders expressed continued dissatisfaction, stating that the deregulation changes are too slow and complex to meet their needs.

Frequently Asked Questions

The '28th regime' is a new, simplified business code introduced by the European Union. Its goal is to make it significantly easier and faster for companies to be set up and to conduct business across all 27 EU member states, effectively creating a more unified legal framework for businesses within the single market.

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