UK chancellor Rachel Reeves has announced a sweeping set of financial services reforms, headlined by a move to reform the controversial bank ringfencing rules, as part of an ambitious drive to make the UK a more attractive hub for global finance and boost long-term investment.
According to The Financial Times, speaking from Leeds ahead of her Mansion House speech in London, Reeves introduced what she described as “the widest set of reforms to financial services for more than a decade”. The overhaul aims to loosen regulatory constraints and drive capital into productive sectors of the economy, while reinforcing the UK’s competitiveness on the world stage.
One of the flagship measures includes a revamp of the bank ringfencing rules, originally designed to separate retail and investment banking. The Treasury claims the reform will free up capital and allow banks to offer a broader range of services to retail customers. This change is set to be reviewed under the guidance of City minister Emma Reynolds, and could allow back-office services and certain riskier products to be offered across both arms of banks.
In addition, the chancellor pledged to double the growth rate of net financial services exports over the next decade. Several regulatory simplifications have been proposed to support this, including narrowing the scope of the Financial Conduct Authority’s consumer duty rules, which will no longer apply to business-to-business transactions.
The Financial Ombudsman Service is also set for significant changes, with the aim of aligning its decisions more closely with FCA rules after complaints from industry players who viewed the organisation as acting beyond its remit.
Other key reforms include launching a concierge service to help foreign firms enter the UK market, relaxing rules to allow listed companies to raise more capital without a prospectus, and helping banks lend more to first-time buyers by easing capital requirements.
The government is also eyeing retail investor engagement. In a nod to Margaret Thatcher’s 1980s “Tell Sid” campaign, Reeves revealed plans for a large-scale advertising drive encouraging savers to move their money from low-interest cash Isas to stocks-and-shares Isas. The Treasury estimates such a switch could make savers £9,000 better off over 20 years, based on current trends.
Banks will also be permitted to promote investment opportunities directly to customers with idle cash, with a review of “risk warnings” underway to reduce friction in product access. Long-Term Asset Funds, which invest in private equity and infrastructure, will be made available through stocks-and-shares Isas.
Although there had been discussions around cutting the tax-free allowance on cash Isas, Reeves has backed away from the move following pushback from consumer groups and building societies. However, further Isa reforms are still under consideration to strike a balance between cash savings and longer-term investments.
Reeves said, “We now need to work together to bring these to life, to make sure — whether it is more first-time buyers getting access to mortgages [or] more businesses getting access to capital to start up, to scale up, and then ultimately to list in the UK — that is now our job.”
The reforms underscore the new government’s ambition to revitalise the UK’s financial services sector and shift focus toward investment-led growth.
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