Modern building facade

The UK Chancellor announces a growth-focused agenda for financial services.

By Rob Moulton, Nicola Higgs, Becky Critchley, and Charlotte Collins

On 14 November 2024, the new Chancellor of the Exchequer, Rachel Reeves, delivered her first Mansion House speech. She used her speech as an opportunity to announce reforms designed to drive growth and competitiveness in financial services, stating that many of the regulatory changes introduced to eliminate risk after the financial crisis had “gone too far” and led to unintended consequences. Although she did not announce a swathe of deregulatory measures, this speech sets the tone for how the government will likely approach regulation in the financial services sector going forward.

In line with the new government’s overarching strategy, the Chancellor wants to focus on growth, and sees the financial services sector as “the crown jewel in our economy”. She has sent new remit letters to the PRA and FCA, setting out new growth-focused remits. Furtherance of the regulators’ new secondary objective relating to international competitiveness and growth has been a key political focus point, and the regulators are conscious that they have been under considerable scrutiny in this regard, as evidenced by their recent speeches on this topic (see this Latham blog post).

Following this theme, the government plans to publish the first ever Financial Services Growth and Competitiveness Strategy in spring 2025, in which it will focus on five priority growth opportunities in financial services: fintech, sustainable finance, asset management and wholesale services, insurance and reinsurance, and capital markets. HM Treasury has launched a Call for Evidence so that the industry will be able to feed into the Strategy, which runs until 12 December 2024.

The Chancellor also emphasised the importance of global relationships. In particular, she talked of strengthening ties with the US, “our single most important destination for financial services trade”, as well as resetting the UK’s relationship with the EU.

Key Announcements

Ms Reeves used her speech to announce a number of key policy measures. Amongst other things, the government plans to:

  • Consult on replacing the Certification Regime under the SMCR with a more proportionate approach. This follows a HM Treasury Call for Evidence on reviewing the SMCR last spring, which was published alongside a joint Discussion Paper from the regulators (see this Latham blog post). The regulators have previously indicated that consultations on the SMCR would be published by the end of this year. This is a notable development, as the tone of the 2023 papers had suggested that the government and the regulators did not have major amendments in mind.
  • Legislate to establish PISCES (the proposed Intermittent Trading Venue that would allow trading in shares of private companies) by May 2025. The previous government consulted on proposals earlier this year (see this Latham blog post). HM Treasury has published a consultation response and draft legislation.
  • Modernise the Financial Ombudsman Service (FOS) framework so that clearer expectations are set out for firms and consumers. The FCA and the FOS have published a joint Call for Input, which seeks to significantly improve the rules governing how the FOS operates.

The Chancellor also confirmed that, as previously publicised, the PRA will consult on reducing the length of deferrals under the remuneration regime, and the FCA will shortly consult on “transformational changes” to financial advice and guidance. Further, HM Treasury has set out the next steps on the repeal and restatement of MiFID II. HM Treasury confirms that it will commence work on the revocation of the provisions on transaction reporting and organisational requirements. The FCA also issued a Discussion Paper on transaction reporting, and has previously indicated that it will issue a Consultation on organisational requirements before the end of this year. Further, HM Treasury plans to legislate to give the FCA additional powers of direction in relation to the reporting of over-the-counter positions.

The speech also significantly focuses on sustainable finance, with the Chancellor aiming to reclaim the UK’s position as a global leader in this space. The government’s plans include the following:

  • Taking forward proposals to regulate ESG ratings providers. HM Treasury has published a consultation response and draft legislation for comment.
  • Gathering views on the value case for introducing a UK Green Taxonomy. The government has published a consultation on this, which runs until 6 February 2025. Since work on creating  UK Green Taxonomy has stalled over the last few years, the government wants to take stock and assess the need for such a framework before deciding to proceed.
  • Consulting on economically significant companies disclosing information using future UK Sustainability Reporting Standards.
  • Launching a set of integrity principles for voluntary carbon and nature markets.
  • Launching the Transition Finance Council with the City of London Corporation.
  • Consulting in the first half of 2025 on how best to implement requirements in relation to transition plans.

Comment

Since the January Financing Growth paper, the new government has said very little on its vision for financial services, so the Mansion House speech is helpful in providing the industry with an insight into the government’s priorities. Rachel Reeves has emphasised that the government is pursuing a growth-focused agenda, and that she is highly supportive of the industry as a driver of growth. Although the Chancellor did not announce a large list of significant measures for firms, the speech clearly establishes that in future the government will not shy away from championing sensible and measured relaxations in areas that are preventing growth, and that it remains committed to both bolstering UK capital markets and cementing the UK as a leader in sustainable finance.