Dubbed “the Edinburgh Reforms”, the measures aim to “seize the benefits of Brexit” by delivering what many are touting to be the biggest shake-up in the financial sector for 30 years. The reforms mark the next stage in what Rishi Sunak termed the UK’s “Big Bang 2.0” which seeks to unlock investment opportunities, turbocharge growth and deliver a “smarter” and “home grown” framework for the UK.
The Chancellor highlighted the UK government’s ambition to cultivate a financial services sector that is “open, sustainable and technologically advanced”, and these are key themes that are threaded throughout the regulatory proposals. But will they really transform the competitiveness of the UK’s financial services sector? Is now the right time to be ripping up the regulatory rulebook? And what have business leaders and industry bodies made of the announcement?
A “major step” forwards or “a race to the bottom”?
So what has been reaction to Hunt’s announcement looked like so far? Industry figures have largely welcomed the reforms and recognised the need for the UK to enhance its status as a competitive financial services hub and foster innovation to make it a welcoming prospect for overseas investors. However, others have raised concerns that the UK was at risk of forgetting the lessons of the global financial crisis by doing away with regulation which underpins the stability of the sector.
Bank of England Governor Andrew Bailey has poured cold water on the plans, arguing the government is wrong in its belief that “we don’t need the regulations that we had post the financial crisis”. And whilst the shadow City Minister Tulip Siddiq called the proposed reforms “a race to the bottom” which would “introduce more risk and potentially more financial instability”, CEO of industry body Innovate Finance claimed the measures would “maintain UK competitiveness [and] enhance the UK as a positive investment environment”. Likewise, UK Finance chief executive David Postings labelled the package as “comprehensive” and “a major step in ensuring the sector remains strong and internationally competitive”.
It’s clear that the reforms can be described as an ambitious recalibration of the UK’s financial services regulatory regime, prioritising competitiveness and growth. By casting aside a number of unfavoured EU directives, the UK government is hoping to finally unlock a new chapter for the sector.
But despite being trailed in the media in recent weeks, it would be fair to say that these measures are more than most firms were expecting to get for Christmas. Businesses will therefore need to make sure they are on the front foot, by getting ahead of any changes they might be subject to and making sure they communicate clearly and in good time with all stakeholders about what this will mean for them individually – including customers, employees and investors. And with several of the announcements announced as proposed consultations, it remains to be seen what form they will take over the coming months once parliamentarians, regulators and the industry have had their say.
We’ve broken down the proposed changes and industry reaction to Hunt’s announcement here.
By Ellie McGarahan
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