The government is waging an all-out war against red tape. But opinion in the financial district of London (known as the (‘City’) is divided about whether it will actually work.
Since coming into power last July, Labour government has placed financial regulators in its firing line, accusing them of putting barriers to economic growth. It fired the Competition and Markets Authority’s chair in January, axed the Payment Systems Regulator and plans to rein in the Financial Ombudsman Service’s remit.
Chancellor Rachel Reeves told trade body the British Private Equity & Venture Capital Association’s conference in September, “I’m really proud of some of the things we’ve done on regulation. We’ve committed to reducing the regulatory burden that businesses face by 25 per cent and every cabinet minister recognises their responsibility there. It’s going to be a lot easier in the UK. It’s already got easier”.
Reeves said though there was “more to do” and she wanted to “take out more regulators”, there had been a “massive step change” at the CMA since the government changed its leadership.
“I previously had businesses all the time, particularly in tech, raising concerns around the CMA”, she said. “That has changed a lot”.
Reeves also talked up improvements at the Financial Conduct Authority (FCA) which “is becoming more growth orientated” under Nikhil Rathi’s leadership.
The FCA brought in external consultants in 2022 to help clear its backlogs in dealing with firms’ applications. The regulator’s data shows there has since been a gradual improvement in processing time. For example, only two-thirds of regulators under the 5th Anti-Money Laundering Directive were done on time in the first quarter of 2024/25 but a 100 per cent are now. Such improvements have not gone unnoticed by financial services veterans.
“The signs are changing now that competitiveness is part of the regulatory statutory objectives for the regulators”, former Newton boss Baroness Helena Morrisey told the Master Investor podcast last month. “But it needs to speed up and show how and why you expect businesses to be internationally competitive.
“We have moved a very long way and this pendulum has swung, obviously as it should have done, from the light touch regulation that there was prior to the global financial crisis. But we’ve now got to the point where people are afraid of their own shadows”.
However, many people predict that rolling back the rulebook won’t have a significant impact. The PSR, for example, accounts for only three per cent of the FCA’s budget. No job cuts have been announced as its responsibilities transition back to the organisation with which it already shared buildings and staff.
The Financial Reporting Council launched an Innovation and Improvement Hub on September 15 that it said would “drive regulatory innovation and market growth”. It had already set up an audit sandbox and scalebox, but while it has invited firms to join the scalebox, none has officially accepted. The scheme also won’t launch fully until 2026.
Furthermore, Technology minister Peter Kyle, in a speech last month, urged UK regulators to adopt AI in a bid to cut approval times for businesses, as Britain seeks to keep pace in the global race for tech leadership.
Kyle pledged 2.7 million in government funding to help regulators trial AI systems across sectors including drones, aviation, nuclear power and clean energy. He argues the move could accelerate investment, reduce red tape and make the UK more attractive to fast-growing firms.
Funding will be allocated to five regulators, including Ofgem, the Civil Aviation Authority (CAA) and the Office for Nuclear Regulation. Projects include using AI to analyse accident reports more quickly, build a “one-stop shop” for regulatory guidance and test new approaches to nuclear waste management.
Andy Jalil
The writer is our foreign correspondent based in the UK
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