Companies flouting regulatory obligations are escaping prosecution because authorities cannot justify the costs, a new report claims.
A Cabinet Office review of the effectiveness of current sanctions against business regulation non-compliance said they are too heavily reliant on criminal prosecution.
Professor Richard Macrory, who wrote the report, said some firms are able to not comply with rules covering areas such as fly-tipping and health and safety because they know regulators will be unable to justify the expense of launching a case against them.
Even when they are caught, he claimed, current sanctions are often less than the financial benefits of non-compliance.
As a result, Macrory said alternatives to prosecuting businesses should be introduced such as fines and non-criminal penalties like being forced to detail their crimes in newspaper advertisements.
He said: "Rogue businesses who intentionally flout the law for economic gain should be treated as the criminals they are. They pollute the environment, undermine confidence in industry and risk peoples' lives.
"Rogue businesses who intentionally flout the law for economic gain should be treated as the criminals they are."
Professor Richard Macrory
"But we need a far more flexible system of regulatory sanctions in this country ' one that will provide better incentives for legitimate businesses to comply with regulations, and one that gives greater acknowledgement to the interests of victims.
"My vision for a system of regulatory sanctions will allow regulators to respond far more proportionately to the circumstances and facts of a particular breach."
Commenting on the report, Miles Templeman, director general of the Institute of Directors, said: "We are pleased to see the emphasis on a more constructive regime that concentrates on changing future behaviour rather than simply penalising businesses for punishment's sake.
"We would still like to see a clearer recognition that a tougher regime for persistent rogue traders should be balanced by a lighter-touch approach for good businesses that find themselves non-compliant through oversight or accident. Responsible businesses will respond well to a constructive approach, but they need carrots as well as sticks."
The government will respond to the report in the autumn.