A UK government task force is set to recommend sweeping regulatory reforms to the City of London and fast-growing sectors of the economy as ministers seek to free British businesses from EU red tape.

Prime minister Boris Johnson set up the group, led by former Conservative party leader Iain Duncan Smith, with a “mission to identify opportunities” after Brexit.

A report by Johnson’s task force on innovation, growth and regulatory reform will recommend that City pension funds be given more flexibility to invest in fast-growing smaller businesses — notably unicorn technology companies.

One person briefed on the report said it was also expected to propose changes to Mifid 2, the EU rules that govern financial services, which some executives have complained are too onerous and of limited benefit.

And the report will recommend regulatory changes to boost investment in 10 fast-growing sectors including life sciences, agritech, and future fuel sources.

The task force is led by Duncan Smith and includes former life sciences minister George Freeman and former environment secretary Theresa Villiers.

Duncan Smith declined to comment, but one government figure said the task force report, which was sent to Downing Street last month, had been “very well received”. It could be published as soon as next week.

Many Brexiters in the Tory party hoped that leaving the EU would provide an opportunity for UK employers to slash Brussels’ red tape affecting workers’ rights and the environment.

But in January, ministers abandoned a business department review of UK employment rules — including the 48-hour week enshrined in EU law — after a backlash from trade unions and the Labour party.

Instead, Downing Street commissioned the Duncan Smith task force to find less controversial ideas that take advantage of Britain’s freedom to diverge from EU rules after leaving the bloc. It has also been charged with establishing ways to boost potentially lucrative areas of future economic growth.

Duncan Smith has consulted with a range of industries over the past few months: business leaders urged a careful approach to deregulation rather than a “bonfire” of EU red tape.

The task force report will recommend pension reforms involving a relaxation of rules to make it easier for institutional investors to put money into smaller companies, according to people familiar with its contents.

It will say that US pension funds have a much higher proportion of their money in equities and private capital, while UK equivalents are much more restricted, said these people.

The report will also recommend changes to the Mifid 2 regulations that set tough and often prescriptive rules to improve financial services and markets after the 2008 banking crisis.

The Duncan Smith task force will stress the need for more nimble and focused regulation for fast growing sectors.

One person briefed on its report gave the example of nutraceuticals: food products with health benefits. Currently, such products can fall between the Food Standards Agency and the Medicines and Healthcare products Regulatory Agency, the food and medicines watchdogs.

The task force will also propose that the so-called precautionary principle in government regulation — a cautious approach that typically leads to long reviews — be replaced with a “proportionality principle”, where rules are limited to what is needed to achieve policy objectives.

The change would encourage much greater innovation by entrepreneurs, said people familiar with the report.

A government spokesperson said: “The prime minister asked the task force on innovation, growth and regulatory reform to scope out and propose options for how the UK can take advantage of our newfound regulatory freedoms and stimulate growth, innovation and competition across the economy, as we seize opportunities outside the EU. The task force’s report will be published shortly.”