In July 2025, the UK Government set out its 10-year plan to "rewire the financial system", to support growth and international competitiveness: the Financial Services Growth and Competitiveness Strategy (Strategy). Financial services is one of eight high growth sectors (known as "IS-8") identified by the Government in its UK Modern Industrial Strategy. Each sector will have its own 10-year strategy.
Together with the Chancellor's Mansion House 2025 speech and various other announcements by the regulators (i.e. the Bank of England (BoE), Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA)), the Strategy and the so-called "Leeds Reforms" that it introduces are designed to deliver the Government's vision for a proportionate, predictable and internationally competitive UK financial services regulatory landscape.
For more information on the UK Modern Industrial Strategy, see our Infrastructure blog.
More than just lighter regulation
The Chancellor's Ministerial Forward to the Strategy sets out the stall for a major overhaul. The aim is to "now regulate not just for risk, but for growth...rolling back regulations that had gone too far in seeking to eliminate risk...". There are plenty of measures to rein back the rising tide of regulation, especially since the financial crisis. Many of the targets for action are 'made in Britain' - such as the Senior Managers and Certification Regime (SM&CR) and bank ring-fencing. Others derive from assimilated EU law or international standards - such as capital requirements.
The Chancellor also highlights the need for the UK financial services sector to "innovate and adapt" so it can "remain competitive in a changing world". The Strategy features many positive forward-looking measures relating to the financial eco-system, designed to facilitate innovation and growth. These include modernising payments and e-money regulation to support emerging forms of digital money; a new 'concierge' unit to help non-UK businesses set up in the UK; and a new form of light-touch advice regime (targeted support) to facilitate more consumer investment. Many of these initiatives are not new, but the Government is pushing them forward with renewed vigour as part of its growth agenda, to which financial services is central.
The Government is also dropping reforms which are not seen as pro-growth or competitiveness - such as the proposed UK Green Taxonomy, which it has concluded would not be the most effective tool to deliver the green transition and should not be part of the UK's sustainable finance framework.
Areas of policy focus
From a policy perspective, the Strategy has five areas of focus:
- Delivering a competitive regulatory environment, including through focusing regulatory action on measures to deliver improvement to the priority growth sub-sectors identified (i.e. asset management and wholesale services, insurance and reinsurance markets, sustainable finance, FinTech and capital markets (including retail investment)).
- Harnessing the UK's global leadership in financial services.
- Embracing innovation and leveraging the UK's FinTech leadership.
- Building a retail investment culture and delivering prosperity through UK capital markets.
- Setting up the UK's financial services sector with the skills and talent it needs. This could be important to the success of the reforms - for example, making sure regulators have the skills to supervise fast-moving FinTech developments.
Some of the areas and measures outlined have live consultations and proposals. Many are at the concept stage. The timescale for a number of the reforms that require legislation is "when Parliamentary time allows".
Highlights
In this blog, we briefly round up some of the most significant announcements and developments in the Strategy, taking a thematic approach. For a more detailed overview of the Leeds Reforms, see our blog.
Governance and risk management
Individual accountability: SM&CR reforms
This is an example of a 'made in Britain' regime being reined back to make it less onerous on banks and other financial services institutions.
The SM&CR was introduced to strengthen the individual accountability of directors and other senior management in the financial sector post-financial crisis. The Government considers it has been vital in improving standards and accountability, but it has acknowledged the administrative cost and frictions placed on firms. The current shared ambition of the Government and regulators is to reduce the regulatory burdens of the SM&CR by 50%, without undermining its effectiveness in maintaining high standards across the UK financial services sector.
For phase 1 of the SM&CR reforms, the FCA and PRA are consulting on proposals to improve its efficiency and effectiveness. The aim is to streamline processes and reduce the burden on firms, while retaining the SM&CR's core principles and standards.
HM Treasury has also published a consultation paper on reforming the SM&CR, proposing to:
- Remove the certification regime from legislation and moving it fully into the regulators' regimes, where it can be amended over time more easily.
- Make legislative changes to the senior managers regime (SMR) framework to help significantly reduce the number of pre-approvals that need to be sought from the regulators.
Further phase 2 reforms will be explored by the regulators during a subsequent stage of work.
Safety and soundness
Ring-fencing regime: HM Treasury review
This is another 'made in Britain' regime, introduced in 2019 to de-risk the financial system (and the risk of retail bank failures) by requiring banking groups to ring-fence their core retail banking business from other (higher risk) areas of business such as market trading. The cost benefit analysis of the regime is debatable - although the effectiveness of regulation is inevitably difficult to assess in the absence of failures.
The Government plans to relax targeted areas of the regime, a process that will start with a short BoE/HM Treasury review, reporting by early 2026. The review will consider both the legislative framework and PRA rules. The Government will legislate to take forward reforms when Parliamentary time allows.
Regulatory capital and resolution: tailoring the framework
The Government, the BoE and the PRA are seeking, through the Strategy and related reforms, to tailor the current capital framework for UK banks to focus on growth and enable them to compete internationally. They are also seeking to update the resolution regime to maintain it as fit for purpose and ready to use for managing firm failures.
The key measures in this context are:
- Ensuring proportionate minimum requirements for own funds and eligible liabilities (MREL). The BoE has confirmed its revised approach to setting MREL requirements. With effect from 1 January 2026, the BoE has increased (from £15-25 billion) the total assets indicative thresholds for a transfer or bail-in preferred resolution strategy to £25-£40 billion. It will update this on a three-year basis, starting in 2028, to reflect changes in nominal economic growth.
- Updating the resolution regime. HM Treasury intends to make several statutory instruments relating to resolution (the BoE considered these in finalising its MREL policy). Separately, the PRA has issued three consultation papers relating to the resolution assessment threshold and recovery plans, MREL reporting and Pillar 3 disclosures. The publications reflect the BoE's approach to calibrating the resolution regime. They take into account the BoE's experience of the Silicon Valley Bank UK resolution in March 2023, together with market and regulatory developments.
- Implementing Basel 3.1. The PRA is consulting on proposals to implement Basel 3.1, seeking to give certainty and reduce complexity. In broad terms, the proposals would mean that, other than modelling requirements (which will be implemented on 1 January 2028), Basel 3.1 will be implemented on 1 January 2027.
Consumer choice and access
Retail advice: new "targeted support" regime
This is an example of a fundamental change in public policy on what is acceptable consumer investment risk. The UK has a comparatively low rate of retail investment (higher savings and lower pensions/other investments); and many who do invest do not have access to investment advice (which is heavily regulated and expensive). The Government wants to change the dynamic by introducing a new streamlined form of advice regime, known as "targeted support".
The Government will be working with the FCA to launch targeted support for consumers "by ISA season 2026". For a discussion of the Government's proposals in this area, and information on the HM Treasury and FCA consultations on the proposed legislative and regulatory framework, see our blog.
To further support consumers and address risk aversion to retail investment, the Strategy notes that the Government will be:
- Getting behind an industry-led campaign promoting the benefits of retail investment to consumers.
- Supporting (with the FCA) industry-led action to move towards informing, rather than warning, consumers about investing's benefits and risks.
- Moving long-term asset funds (LTAFs) from the Innovative Finance ISA to the Stocks and Shares ISA, with effect from April 2026. This is designed to enable greater consumer access to longer-term investment options and offer private firms another capital-raising route, helping them to grow, as well as increasing demand for UK asset managers' products.
Consumer Duty: application to wholesale firms
The FCA introduced the Consumer Duty (a high-level, overarching principle, supported by cross-cutting rules and guidance) in 2023, requiring regulated firms to act to deliver "good outcomes" for retail customers. Its application to distribution chains involving firms who have no direct client relationship with the retail customer has always been unclear and controversial.
The Chancellor has requested that the FCA report to her, by the end of September 2025, on how it intends to address concerns about the application of the Consumer Duty for firms primarily engaged in wholesale activity (e.g. asset managers and other wholesale firms) - including the way the Consumer Duty operates for wholesale firms engaged in distribution chains that impact retail consumers.
Redress: Financial Ombudsman Service (FOS) reforms
Dealing with customer complaints and compensation can be a significant commitment for financial institutions. The FOS is a key element of the redress ecosystem. It makes decisions on unresolved complaints without the constraint of normal legal judicial principles.
Following its recent review of the FOS, the Government is consulting on proposals to deliver the "most significant reform ... since its inception".
The aim is to address the issues identified in the review, to end the FOS' position as a quasi-regulator and ensure it returns to its purpose of being a simple, impartial dispute resolution service. The proposals include adapting the FOS' "fair and reasonable" test and imposing an absolute time limit of 10 years for bringing cases to the FOS.
In parallel, the FCA and the FOS are jointly consulting on modernising the redress system, including introducing an updated framework for dealing with mass redress events and a new FOS case process to streamline case handling and ensure decisions are taken at the right level.
Innovation
Digital, AI and payments
Facilitating FinTech and innovation generally in financial services is a key plank of the Strategy, comprising a number of initiatives.
In the wholesale markets area, the Government has published its Wholesale Financial Markets Digital Strategy, setting out its vision for digitalising UK wholesale markets. It identifies three broad areas of focus: market optimisation; market transformation; and market leadership (which includes appointing a Digital Markets Champion to lead and coordinate work).
Other innovation-related workstreams include:
- The FCA and the PRA will jointly launch a Scale-Up Unit to enhance engagement with fast-growing, innovative regulated firms.
- The FCA is launching a Smart Data Accelerator to help with use case testing and the development of regulatory policy for Open Finance. The Government will work with the FCA to set out an Open Finance roadmap by March 2026.
- The Government will appoint an AI Champion in financial services.
- The Government will work with the regulators to help the financial services industry benefit from widespread adoption of personal digital identity.
- The Government will modernise and future-proof the legislative framework for payment services and e-money regulation, supporting interoperability between existing and emerging forms of digital money. The Strategy sets out a series of measures that the Government and regulators intend to take in relation to payments and settlement systems, including work on tokenisation. An HM Treasury update on the Digital Gilt Instrument (DIGIT) pilot details a further set of features to be tested as part of the pilot.
Regulatory process
Cutting red tape: targeted cross-cutting reforms to the regulatory environment
HM Treasury sets out in a consultation paper published alongside the Strategy a series of cross-cutting reforms in certain areas to improve the efficiency of regulatory processes and reduce the burden on the industry. For example, the Government intends to set new, shorter statutory deadlines for the regulators to determine key applications (i.e. new firm authorisations, variations of permissions and senior manager approvals). The Government has also agreed with the FCA and the PRA a series of stretching, non-statutory targets for processing other applications.
Interestingly, there are no published plans to reduce the timeframe for application for 'change in control' approvals, which can have a negative impact on the speed with which investors can acquire controlling interest in UK banks and other financial institutions.
The Government also intends to legislate to change how the regulators' "have regards" operate (to streamline regulator policy-making) and to require both the FCA and the PRA to set out long-term strategies explaining how they will meet their objectives through regulation and supervision.
In addition, the Government is considering a new streamlined authorisation regime for innovative start-ups that would allow them to conduct limited regulated activities with reduced conditions. It intends to consult on its proposals in autumn 2025.
Markets
Market reform (including capital raising)
Facilitating more efficient capital markets is another key element of the Strategy. The Government commits in the Strategy to reviewing and streamlining the UK regulatory regime in certain key areas, to improve the competitiveness of UK markets.
Some progress has already been made: under its market reform programme, the FCA is revising the prospectus regime and introducing a new public offer platform (POP) (see our Corporate blog for more information). Future FCA work includes, in Q4 2025, issuing an update on the next steps in its review of who can be treated as a professional investor for investment firms and how retail consumers access investments.
Market access
On the international competitiveness objective, the Government is working to facilitate greater market access, including through bespoke treaties like the mutual access Berne Financial Services Agreement, which the UK and Switzerland signed in December 2023. The parties have committed to ensuring the agreement is fully implemented by the end of 2025. This means that, from 1 January 2026, firms can begin registering to use the agreement.
Overseas Recognition Regimes (ORRs) will also support the further opening-up of the UK's financial services sector and facilitate cross-border financial services, through a new harmonised approach to the UK's regulatory recognition of overseas jurisdictions.
The Government will establish the Office for Investment: Financial Services, a "new, dedicated concierge service", to guide and support international investors seeking to establish or grow a presence in the UK financial services sector. It will formally launch in October 2025.
Growing the transition finance market to make the most of opportunities for UK financial services firms and support decarbonisation is another Government priority under the Strategy. Having commissioned the market-led Transition Finance Market Review in 2023, the Government is taking action to support growth in this area, including through working with the regulators.
New UK framework for captive insurance companies
The Government intends to introduce a dedicated, competitive framework for captive insurance in the UK and it has launched a consultation. The aim is to support the growth of the captive insurance market by making it easier and more attractive to use this means of self-insurance and risk management in the UK, including through protected cell companies.
The FCA and the PRA intend to consult in summer 2026 on rules and guidance for a UK captive insurance regime, with a view to implementation by mid-2027.
Strategy implementation and monitoring: next steps
The Government will report on an annual basis on the progress made in implementing the Strategy, as well as setting out its plans for further policy measures in the five focus sub-sectors identified.
The importance the Government attaches to the successful delivery of the Strategy is clear. As the Chancellor notes in the Strategy's foreword: "Financial services is at the heart of this government's mission for economic growth."
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