The UK’s new online safety bill threatens to weigh down small businesses with new costs, according to the new chief executive of a group of online watchdogs which are gaining increased powers to compel tech companies to protect users on the internet.

Gill Whitehead, the first head of the Digital Regulation Cooperation Forum (DRCF), a new group created to streamline internet regulation, will have an important role in coordinating how the ambitious and controversial bill is implemented.

The bill, which passed its second reading in parliament last week, contains measures designed to tackle a wide range of online harms from bullying to child abuse. It also means that executives at groups such as Facebook-owner Meta and Google’s parent Alphabet face jail sentences for failing to adhere to the new regime.

In her first interview since taking the post in November last year, Whitehead warned that emerging start-ups may also struggle with complying with the upcoming law, stifling their ability to take on established tech groups.

“The online safety bill could have an inherent tension with competition because there’s a cost to complying with the bill that might be prohibitive for smaller firms,” she said.

“Unless we work through those things ahead of time, then we leave those tensions on the table and that slows things down for business. By working together, we can help accelerate.”

The online safety bill is an attempt to force Big Tech companies to police their networks and turn the UK into a global leader in internet regulation. But the law could lead to higher costs for content moderation, as well as hefty fines for breaching the rules.

It comes as Brussels has warned that Twitter under Elon Musk’s ownership must follow new EU rules on moderating illegal and harmful content online, after the billionaire entrepreneur’s $44bn offer for the company was accepted. Whitehead, a former Google executive, said she was “genuinely interested” to see what Musk would do with the platform.

“If the rudder changes hands at a tech company, that won’t change the fundamental things regulators think about in terms of protecting users from harm, defending freedom of expression and fostering innovation,” she added.

Whitehead’s DRCF group has been created to co-ordinate the four existing regulators: the Competition and Markets Authority, Financial Conduct Authority, Information Commissioner’s Office and Ofcom.

Under the UK’s new regulatory regime, Ofcom will be able to audit algorithms that control users’ experience online. Ofcom said it would require £44mn next year, as well as 300 extra staff, to fulfil its duties set out in the online safety bill, something Whitehead said presented a “hiring challenge” because of talent shortages across the tech sector.

On Thursday, the DRCF published a paper setting out possibilities for regulating algorithms with accredited third-party auditors, similar to financial institutions. Whitehead advocates for transparency over algorithms’ outcomes — for example, why a consumer might not be approved for a mortgage or might receive certain variable pricing online.

“There are no clear standards [for algorithms], so there’s no industry consensus of what good looks like,” she said.

On emerging technologies such as the metaverse, Whitehead said the DRCF was watching closely to understand how to regulate the creation of avatar-filled virtual worlds.

“It’s the mantra of tech is to be fast and break things,” she said. “Our role is to have a really good understanding of implications and effects of new technologies and then to ensure we are acting in a smart, effective and proportionate way. Because if you act too soon, the danger is you prevent important innovation from happening.”