Last month saw leaders from a number of the UK's regulators meet with Rachel Reeves at Downing Street in order to discuss how regulation could be made more "proportionate and risk based", compliance "less onerous", and how to cut red tape.
The press release that followed the meeting stated that the so-called Action Plan would: "Save businesses across the country billions of pounds by cutting the number of regulators, streamlining their core legal duties and cracking down on complexity in the regulatory system."
Now, excuse my pessimism (or realism) but this all seems quite reminiscent of a certain bus slogan that was peddled around pre-Brexit... It is too soon to tell if anything discussed will go anywhere and whether there will actually be any meaningful reduction in regulation.
I am sure that I am not alone in my scepticism. Alongside my peers in the UK financial services sector, I have been heavily focused on these proposals for my clients who include multinational and global asset management groups, trading firms, brokers and smaller financial services businesses. The truth is that we have all asked ourselves whether this is all wishful thinking with no real substance, or indeed a sensible action plan to cut red tape – and nobody knows the answer yet.
If we look at the Action Plan itself, which aims to set out "the strategic vision and actions that will be taken to create a regulatory system that drives growth while continuing to protect millions of people" we can conclude that it lacks any meaningful substance that can be taken on by the financial services industry. The only real promising element for the sector is the range of pledges in Annex A that state the FCA and PRA will:
- provide a dedicated case officer to every firm within the FCA's regulatory sandbox;
- provide 50% more dedicated supervisors to early and high growth firms, to help them navigate the regulatory system and support their growth;
- extend pre-application support to all wholesale payments, and crypto firms;
- indicate more often that the FCA is 'minded to approve' start-ups to help them secure funding;
- simplify its mortgage and advice rules to support greater home ownership;
- welcome FCA work to review the contactless payment limits, including removing the £100 limit on individual payments;
- accelerate a review of capital requirements for specialized trading firms;
- reduce regulatory reporting requirements for firms.
Even these pledges seem to be soundbites and a nod to markets with only the last three relating to Labour's promise to cut the administrative cost of regulation on business.
Sensible proposals for post-Brexit reforms in the form of the Edinburgh Reforms were announced back in 2022 and presented many sensible and pragmatic updates to UK financial services sector rules. Billed as a once-in-a generation shake-up which included 31 measures to revamp and revitalise UK capital markets, only around 13 of these measures appear to have been completed. These included much needed changes to the UK's prospectus rules, reforms to the UK Securitisation Regulation, and amending the UK Short Selling Regulation, among others.
However, these are merely tweaks rather than robust reforms, and in some cases the FCA has merely commenced a review rather than actually changed any of its rules or cut red tape. We have a significant missed opportunity here – and if the Government, FCA and the PRA are indeed serious about cutting red tape, there's already a sensible roadmap in place – we just need to see it followed through.
Surprisingly (given as there was no pre-leaked "trailer"), on April 7, the Government and FCA published announcements about consultations that presented a real curveball – announcing a new, less onerous post-Brexit regime for UK-based asset managers with between £100m ($128.5m) to £5 billion ($6.43 billion) of assets under management, which the Government hopes will save them time and money and enhance the UK's position as dominant hub for private equity and hedge funds in Europe.
The FCA is consulting on the proposal until June 9, and says it will then consult on detailed rules in the first half of 2026, subject to feedback and to decisions by HM Treasury. If successful, the proposals could make it more straightforward for institutional asset managers to operate in the UK with fewer regulations and less cumbersome reporting.
It's still too soon to say if this is a real change or if it will all end up as a damp squib" but from my general scepticism, I feel there may yet be hope for meaningful regulatory changes to be made – though we will have to see if the Government and FCA can hold their nerve and follow though.
Originally published by Grip.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
