UK government announces reforms to boost financial sector growth

The new Labour government in the UK has revealed plans to “drive growth and competitiveness in financial services” as the country looks to “unlock innovation, drive more investment and deliver sustainable economic growth”.

UK government sets out plans to “drive growth and competitiveness in financial services”

In her first Mansion House speech this week, Chancellor Rachel Reeves emphasised the government’s focus on facilitating “growth opportunities” in key sectors such as fintech, sustainable finance, insurance and reinsurance, asset management, wholesale services, and capital markets.

To unlock these opportunities, the finance minister has unveiled that the government is “reforming our approach to regulation to make it more dynamic and the sector more competitive”.

Reeves acknowledged that while regulatory changes following the 2008 global financial crisis were necessary, “These changes have resulted in a system which sought to eliminate risk-taking. That has gone too far.”

“The UK has been regulating for risk, but not regulating for growth,” Reeves said.

The Chancellor has now written to key UK regulators – including the Financial Conduct Authority (FCA), Payment Systems Regulator (PSR), Financial Policy Committee (FPC), and Prudential Regulation Committee (PRC) – urging them to prioritise economic growth in their mandates.

Furthermore, the Financial Ombudsman Service framework will be refreshed to provide clearer expectations for both consumers and financial institutions in its decision-making, while strengthening its role in ensuring consumer redress.

In her speech, Reeves also announced initiatives to tackle payment fraud, support green finance, and establish mega pension funds inspired by models in Australia and Canada.

Focusing on fintech, the minister also revealed plans to launch a pilot for a Digital Gilt Instrument using distributed ledger technology (DLT).

National Payments Vision

The government has also published its National Payments Vision, setting out its ambitions “to achieve a trusted, world-leading payments ecosystem delivered on next generation technology, where consumers and businesses have a choice of payment methods to meet their needs”.

The publication highlights plans to support increased coordination between regulators to support the growth of the payments sector and strengthen consumer protection, with the government also aiming to upgrade the UK’s underlying payments infrastructure.

The National Payments Vision also details the government’s ambitions to advance open banking and account-to-account (A2A) payments. The publication reads: “In line with its vision to increase choice in payment methods across the ecosystem, the government calls on the FCA and PSR to consider its commitment to developing open banking to drive delivery of seamless account-to-account payments. In this regard, the government has asked the FCA to be the UK’s regulator for open banking, while ensuring effective engagement with other relevant authorities, including cooperating with the PSR on matters related to designated payment systems.”

Commenting on the publication, TrueLayer’s CEO and co-founder Francesco Simoneschi states: “The National Payments Vision’s significant focus on open banking and account-to-account payments is a major step toward modernising the UK’s payment infrastructure.”

“Offering alternatives to outdated card systems will drive cost savings and growth for businesses, while enhancing convenience and security for consumers.”