IN 2016 we decried falling competition in America, where profits have surged as industries have become more concentrated. This week, drawing on our own research and a study by the Resolution Foundation, a think-tank, we report that a similar—if not yet as severe—problem has taken root across the Atlantic (see article). That is bad for ordinary Britons, who pay 25% more for goods and services than they did in 2008, even as wages have grown by just 19%. Moreover, as Britain grapples with what sort of place it should be after Brexit, the whiff of oligopoly risks turning people against capitalism.

If you split the British economy into 250-odd industry sectors, you will find that in nearly 60% of them the four biggest firms claim a larger share of revenues than they did a decade ago. Since the early 2000s the top 100 firms, excluding finance and oil, have seen their share of economy-wide takings creep up, from 18.5% to 23%. Profit margins have risen by nearly four-fifths since 1980, and are above the European average. So far, profits as a whole have not gobbled up a larger share of GDP, perhaps because small firms are doing worse and because the largest companies, such as Apple and Amazon, book profits offshore. But the long-run trend in profit margins is worrying.

Nobody can be sure why the economy is becoming more concentrated. It may be that globalisation and technological advances have enabled world-beating “superstar” firms to see off their lumbering domestic competitors. This could bring some benefits. Shakeouts, in which leading firms grow and laggards shrink, should boost overall productivity. And higher concentration does not always imperil competition. Just look at Britain’s big supermarkets, which have been fighting a decade-long price war and eking out only meagre profits. Consumers may benefit from the efficiencies large firms can bring.

But the British trend does not seem benign. There is greater concentration even in non-tradable industries such as housebuilding—in which nobody thinks the quality of output is high. Since the financial crisis, Britain’s increase in productivity has been dismal, keeping wage-growth low, too. There is evidence that leading firms, and not laggards, are behind the slowdown. In some industries they may feel they do not need to invest to keep ahead. The tech giants do innovate, but their ideas do not seem to spread through the economy.

Stand back

Regulators should ask themselves whether they have overlooked a growing problem. As in America, Britain’s competition tsars scrutinise mergers with a microscope. Though rigorous, their approach means that they can miss the big picture. Following a review in 2016, the government began publishing some indicators of the overall competitive health of markets. But the data are often old and patchy.

After Brexit, it will be vital for Britain to run a robust competition policy in the face of lobbying by some of the world’s largest companies. That is because the biggest mergers will be vetted in London rather than Brussels, including some which failed in Europe and return for a second try. By some measures, British regulators already look passive. In 2014 the German authorities concluded 29 competition cases, the French, 22. In Britain the figure was just five. Official estimates suggest that Britain’s Competition and Markets Authority needs to grow by nearly 40% to cope with the extra workload.

The danger is that Brexit hands power to vested interests. If Britain leaves the EU’s regulatory bodies in concentrated industries such as telecoms and airlines—where profits are high in America but not in Britain—firms might find it easier to raise prices or lower quality. There is a risk that a post-Brexit government eager to demonstrate the success of “Global Britain” will cosy up to big firms in an attempt to get them to invest.

To avoid that fate, Britain must fund its competition authorities adequately and ensure that they continue to champion consumers over producers. They should not shy away from industries—such as utilities—that provoke ire among the public. When monopolies and oligopolies thrive, the critics of free markets jump at the chance to blame liberal capitalism itself. The government not only needs to keep markets competitive. It must also convince a sceptical public that, far from strengthening elites, competition acts as a check on the accumulation of wealth and power.