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Rachel Reeves will on Monday pledge to change the law to restrict merger investigations by the UK competition watchdog, as part of her bid to boost corporate confidence and economic growth by easing business regulation.

The chancellor will say she plans to update the two main tests that determine whether the Competition and Markets Authority should probe a merger, according to government officials with knowledge of her plans. 

The move — which aims to make probes faster, more predictable and more proportionate — comes as Reeves prepares to haul regulators into Downing Street on Monday and unveil a “radical action plan” to cut red tape and help grow the economy.

One test, known as “share of supply”, allows the CMA to investigate deals that would result in a company controlling 25 per cent of the supply of goods and services in a market.

The second “material influence” test can give the antitrust regulator power over purchases of certain interests in a business, such as significant shareholdings, even if they fall short of total control.

Officials said Reeves wanted to “tighten” and “limit” the circumstances in which deals come under CMA scrutiny. The agency has been in the government’s crosshairs in recent months following complaints by business that it is too interventionist and stifling Britain’s attractiveness to investors.

The regulator — whose former chair was ousted by ministers in January — has already said it will shorten some merger consultations.

“The chancellor is promising to legislate to make it happen,” said one official. “This includes tightening and limiting which mergers the CMA can review under the share of supply and material influence tests.”

CMA chief executive Sarah Cardell last month said UK law gave it an “unusually broad jurisdiction” by international standards. She added that the agency would update how it interpreted and applied the “material influence” and “share of supply” tests, noting the changes could provide greater certainty over “whether we will review a particular deal or not”. 

In January the government installed former Amazon UK boss Doug Gurr as interim chair, giving him a mandate to help attract the “absolute maximum possible business investment”.

Soon afterwards the CMA provisionally cleared US-listed American Express Global Business Travel’s $570mn purchase of rival CWT, in an unusual reversal of an earlier decision.

The two tests will be examined as part of a broader review by the CMA into its approach to merger remedies, which was launched last week with a call for evidence open until May.

The CMA said in a statement that it “continues to work closely with government to ensure the UK merger control regime is effective and proportionate”.

Watchdogs including the Financial Conduct Authority and the Prudential Regulation Authority have been summoned to Downing Street on Monday to discuss the chancellor’s plans. 

Ahead of the meeting Reeves said the measures — including a commitment to reduce the administrative cost of regulation by 25 per cent — would “free businesses from the shackles of regulation”. 

Under the action plan, the FCA will issue more notices of likely authorisation approvals to help start-ups secure funding and the Regulator for Community Interest Companies will be folded into Companies House to reduce overlapping disclosure requirements.

A review into the Financial Ombudsman Service, which is under way now, will seek to curb its freedom to interpret rules when adjudicating on unresolved consumer complaints about the sector in order to stop it acting as “a quasi-regulator”, the Treasury said.

Meanwhile the Civil Aviation Authority, the aviation regulator, will authorise at least two more large drone-flying trials in the coming months. 

Reeves also aims to streamline the objectives given to financial regulators by reducing the 25-plus additional targets for which they must have “have regard” — an area watchdogs have asked the Treasury to address.

She said cabinet ministers would be asked to suggest more of the roughly 130 regulators that could be abolished by this summer, after the Payment Systems Regulator was axed last week.