The Government has launched its Financial Services Growth and Competitiveness strategy, the sector-specific paper to support the broader Industrial Strategy and drive economic development across the UK. Aligning with the Chancellor’s annual Mansion House speech, the Government has also launched the Leeds Reforms to simplify the regulatory landscape and catapult the strategy into action.
Broadly speaking, the collective changes cover three fronts. The first is to reduce regulatory red tape to cut the cost of regulation and reduce risk aversion. The second is to make the UK a more attractive – and crucially, accessible – place for overseas firms to do business. The third is to boost innovation and create jobs, with a sectorial focus on fintech and a geographic focus on growing regional financial services clusters.
These activities play to the strengths of the UK economy, in line with the broader Industrial Strategy (which highlights financial services as one of the eight sectors that are integral to growth). However, the Financial Services Growth and Competitiveness Strategy notes that the sector’s output “has not kept pace with the rest of the economy in the last 15 years”, with a real-world drop of 7% in 2024 vs 2010, and financial services exports dropping from 21% in 2010 to 15% in 2023. The strategic approach aims to tackle this directly and create an environment to foster competition, encourage retail investment and maintain the UK’s position as a global leader of financial services.
The Leeds Reforms aim to reduce the regulatory burden across the financial services sector, remove duplicative rules and increase the pace of change. The key highlights are listed below.
Building on work announced in the Edinburgh Reforms in 2022, the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), and HM Treasury (HMT) reviewed the effectiveness, proportionality and scope of the SM&CR. This included the FCA/PRA’s joint discussion paper (DP23/3), which explored how to maintain accountability while streamlining the regime.
In the Leeds Reforms, the regulators have published new proposals, detailed across the FCA’s CP25/21, PRA’s CP18/25 and HMT’s SM&CR consultation paper. With an expected 50% reduction in regulatory burden, the work will be rolled out across two phases, with phase one changes aiming to:
Phase two changes (subject to legislation), include:
The consultations close on 7 October 2025.
The FCA published CP25/22 on modernising the redress system, to boost consumer confidence through greater consistency, predictability and transparency. The government is also reviewing the role of the Financial Ombudsman Service, to reaffirm its role as an impartial dispute resolution service, rather than a quasi-regulator.
Collectively, these measures support early issue resolution, with clearer reporting and escalation guidance for firms. Key changes include:
These changes are particularly timely, given the FCA’s ongoing work into motor finance and any potential subsequent redress scheme. Strengthening the redress system could improve consumer outcomes and turnaround times, enable the industry to leverage data driven approaches to remediation with more certainty and at speed, and provide a greater mechanism to feed lessons learned back to the wider industry.
These consultations close on 8 October 2025.
Updating the ring-fencing regime has been on the cards since the Edinburgh Reforms, with work to date including the PRA’s review and consultation on application to third-country subsidiaries and branches. Shifting the focus to unlocking banking capital, HMT is set to review the rules and publish a report by early 2026, covering the following key topics:
These changes could create operational efficiencies, reduce the regulatory burden and support innovation through increased flexibility to provide a wider services offering.
Following earlier consultations on corporate bonds, prospectus reform and public offer platforms, the FCA has published two final policy statements PS25/19 and PS25/10 to reduce the cost of capital for businesses and implement the Public Offers and Admissions to Trading Regulations 2024 (POATRs).
Collectively these changes:
The new regime comes into effect on 19 January 2026 and sits alongside broader capital market reforms. These include the new Private Intermittent Securities and Capital Exchange System (PISCES), and upcoming work from the FCA on the consolidated tape for bonds, planned changes to transaction reporting and a review of securitisation rules later this year.
It’s also important to note HMT’s newly released policy paper to support the Financial Services Growth and Competitiveness Strategy, covering the Wholesale Financial Markets Digital Strategy and leveraging emerging technology to drive efficiencies across the sector.
To make it easier for new firms to enter the financial services market, and adapt their offerings, the Leeds Reforms also sets shorter targets to complete authorisation processes, namely:
These changes ultimately aim to reduce uncertainty as a key component of the Financial Services Growth and Competitiveness Strategy, and drive innovation by helping firms be more responsive to market needs and innovation.
Recognising the importance of Consumer Duty, the Government has also asked the FCA to review the framework’s application to asset managers and wholesale firms. While these firms don’t deal directly with the retail market, they are a wider part of the distribution chain and the Government is keen to ensure application is proportionate, and in line with the associated risk to consumers. The report is due by the end of September.
The fintech sector is currently an area of strength for the UK, with the Financial Services Growth and Competitiveness Strategy noting that it “attracted $3.6 billion in investment in 2024 – second only to the US”. However, the Government is keen to consolidate the UK’s position as a leading fintech centre and continue to maximise the benefits from emerging technology.
Existing initiatives to support safe fintech growth includes the FCA’s Innovation Hub, the digital securities sandbox, January’s AI Sprint and the FCA’s plans for a live AI testing service. In addition to the above, the Government is working with the regulators to remove barriers to success and promote growth through:
However, achieving the above will depend on the right investment in people and skills. The Government will achieve this through changes to the visa rules and a Global Talent Taskforce, to attract overseas talent. It has also commissioned a report from the Financial Services Skills Commission (FSSC) to understand and address skills gaps around disruptive technologies, build on findings from the recent Technology Adoption Review and provide more flexible learning opportunities.
In keeping with the wider Industry Strategy, the Financial Services Growth and Competitiveness Strategy takes a regional approach to growth. As such, it looks beyond the key hubs of London, Glasgow and Edinburgh, all in the top 40 most competitive global financial centres, and focuses on key development opportunities across West Yorkshire, Greater Manchester, Cheshire, Norwich and East Norfolk, the West Midlands, Cardiff, and the South of England.
Playing to the existing financial sector strengths of these clusters, with support from the Office for Investment: Financial Services and dedicated skills development from the TechFirst programme, the Government aims to enable these hubs to compete on an international level.
With financial services contributing £208.2 billion to the UK economy, totaling 8.8% of total economic output and providing 3.1% of all UK jobs in 2023, the Government recognises the critical role the sector will play in realising UK growth ambitions. This relies on both unlocking the value of new technologies and embracing a simpler regulatory environment to promote financial services as a key international export.
However, the Financial Services Growth and Competitiveness Strategy also aims at attracting international business to the UK and ensuring the market remains accessible and competitive. The Office for Investment: Financial Services, due to open in October, will support that goal with a new concierge service to guide overseas investors through the regulatory journey and reduce barriers to entry. In addition to other measures, it’s also worth noting HMT’s newly published Overseas Recognition Regimes (ORRs) guidance, to support cross border services and reduce friction when delivering financial services internationally.
While the Leeds Reforms focus on regulatory simplification to streamline operations and reduce the administrative burden, they sit within the broader context of the UK’s Financial Services Growth and Competitiveness Strategy. They are an integral element of it – but by no means the only one. Leveraging emerging technologies, investing in key regional clusters and addressing key skills gaps will be crucial to maintaining and strengthen the UK’s position as a leading global financial centre. Additionally, it will provide a nurturing and attractive environment for overseas investment, with guidance on entering the market and shorter authorisation times for more certainty throughout.
However, success will largely depend on striking the right balance between ensuring financial stability and establishing a risk appetite that is embraced by all stakeholders in order to promote sustainable growth over the longer term. If the sector can achieve that then it will be well placed to support broader growth ambitions across the UK, while ensuring the financial sector continues to lead the way at a domestic and global level.
For further information contact Alex Ellerton.
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