The UK’s product safety regime is not up to the job of preventing a tragedy such as the Grenfell Tower fire as shopping moves online and regulators take on new responsibilities following Brexit, MPs have warned.

A third of products are now bought on the web, yet a gap in the law means that digital giants such as Amazon and eBay are not responsible for the safety of items sold by third parties. The budgets of council-run Trading Standards services have also been cut to the bone, according to a report from the Public Accounts Committee (PAC).

Meg Hillier, the PAC chair, said flaws in the current set-up had been horrifically exposed by the Grenfell fire, which was caused by a fridge-freezer. There was also reason for serious concern about “everyday risks” such as toxic children’s toys and the rise of “smart” household gadgets that could “open a door to hackers”.

With “massive” new responsibilities following Brexit as well as oversight of building materials from 2022, Hillier said it added up to a worrying picture.

“We simply cannot be confident that the UK’s product safety regime will prevent the next tragedy or widespread harm or loss of life, or even know where it’s coming from,” she said. “UK consumer protection must be properly funded to get up to a speed and strength fit for the task.”

The nature of the safety risks people faced was “changing significantly and fast” as they bought more online. That websites like Amazon were not held accountable for sales by other brands was a “significant source of potential product safety harm”, the report said.

Responding to the findings Lesley Rudd, the chief executive of the charity Electrical Safety First, said the absence of vital laws governing online marketplaces posed “one of the biggest risks to product safety in the UK”.

“An unregulated marketplace for electrical goods in combination with enforcement body cuts and an increase in online shopping is contributing to the perfect storm, meaning dangerous products are more likely to end up in people’s homes,” said Rudd.

Until three years ago product safety rules were enforced by Trading Standards officers, but issues with household appliances as well as changes resulting from Brexit saw the creation of the Office for Product Safety and Standards (OPSS).

The OPSS, which is part of the Department for Business, Energy and Industrial Strategy (BEIS), regulates product safety at a national level and is also tasked with identifying risks and intervening on nationally significant product issues. The organisation, which has a budget of £14m, works alongside local Trading Standards offices which still undertake most enforcement activity.

While the OPSS had reacted well to issues such as faulty Whirlpool appliances and unsafe PPE, a lack of data slowed its response to dangers posed by the small high-powered magnets being swallowed by children that caused 40 paediatric admissions last year.

The PAC committee said the government had not set out how product safety would be regulated after Brexit. From 2023 the UK will no longer recognise the EU’s CE mark signifying compliance with standards and more checks will be required at the border.

Against the backdrop of a growing workload, MPs were concerned that regulators lacked the “capacity and skills to meet the challenges it faces”. It questioned the sustainability of Trading Standards services – in England their budgets have been cut by nearly 40% over the past decade. There was also a need for specialist science and engineering knowledge as technologies changed.

A spokesperson for BEIS said it was committed to ensuring only safe products could be legally placed on the market and that a database was being set up so councils could share critical product safety information. “While we recognise the concerns raised, we are addressing this by building an even more agile and advanced product safety framework,” they said.