The Government has been urged by a House of Lords committee to begin early talks with the European Commission on securing a new data adequacy agreement to ensure the economy is not hit by extra costs and red tape.

The Lords European Affairs Committee has written to Technology Secretary Peter Kyle to encourage him to begin talks on renewing the data agreement, which is due to expire in June 2025.

The UK and European Commission made a data adequacy agreement in 2021, where the EU recognised the UK’s data protection regulations as being equal to the EU’s own laws on the issue, therefore allowing data to flow seamlessly between the two.

The Lords committee has written to the Technology Secretary after concluding a seven-month inquiry, where it said experts warned that losing data adequacy status would not only increase friction for businesses and other organisations, but also produce significant extra costs and higher prices for consumers.

Lord Ricketts, chairman of the European Affairs Committee, said: “The UK faces a potential cliff-edge in June 2025 unless agreement is reached with the EU on the continued free flow of data.

“The safe and effective exchange of data underpins our trade and economic links with the EU and co-operation between our law enforcement bodies.

“The loss of data adequacy would create new barriers and run completely counter to the Government’s ambitions to grow the economy and reset relations with the EU.

“We recommend that reaching timely agreement on data adequacy should be integral to the reset, and the Government’s top data protection priority.”

The committee said witnesses during its inquiry suggested that failing to secure continued adequacy status could impose additional compliance costs on UK businesses of around £1 billion.

Lord Ricketts added that the process could also give the Government the chance to look at the UK’s own data laws.

“The UK’s current GDPR regime is far from perfect. But the consequences of not reaching agreement with the EU are extremely harmful,” he said.

“There is clearly scope to reform and improve GDPR as part of the Government’s new Digital Information and Smart Data Bill.

“But this must not jeopardise the UK’s adequacy status.”

A spokesman for the Department for Science, Innovation and Technology (DSIT) said: “Since taking office, the Science Secretary has met EU Commissioner (Didier) Reynders twice to discuss the upcoming EU personal data adequacy review of the UK, and how to ensure secure continuity of personal data flows from the EU to the UK.

“Our officials will join technical discussions with EU counterparts where required to support the review process.”