The UK financial services sector has seen a sharp contraction in its workforce, according to new analysis of Financial Conduct Authority (FCA) permissions data.
The findings reveal regulated roles dropped across almost every permission type between the first and second quarters of 2025, with automation, regulatory pressures and market conditions accelerating structural change, claims IFA.
The steepest declines were recorded in Mortgage & Home Finance, where the number of authorised individuals fell by 11.6%. Consumer Credit roles also shrank by 10.5%, reflecting pressures in the housing market, tighter oversight, and industry consolidation. Across the sector, FCA-registered individuals dropped by 4.1% while the number of regulated firms decreased by 1.7%.
The research, published on tovodata.co.uk in the report Signals of Change: AI, Regulation, and the Shrinking Financial Services Workforce, highlights that the contraction is reshaping the industry faster than many had expected.
TOVO founder Louisa Laughton-Scott said, “When we analysed FCA permissions data from Q1 to Q2, we found Mortgage & Home Finance roles had shrunk by 11.6%, the sharpest drop across the industry. This is part of a wider contraction in regulated financial services roles, with Consumer Credit and Payment Services & E-Money also down double digits. Our specialists point to automation, regulatory change, and economic pressure as the forces behind this shift. Clear signals that the financial services workforce is being reshaped.”
The trend is also visible within banking. Finbridge Global CEO Barbara Gottardi said: “A 4.4% drop in regulated banking roles shows a structural shift — from traditional headcount to technology-driven horsepower. What we’re seeing now is not experimentation but acceleration: banks are embedding (and must) AI and automation at scale, transforming the way value is created. The winners will be those who don’t just cut costs but reimagine processes and to end.”
In addition, the report highlights a 7.9% decline in Client Money roles, with fewer individuals authorised to hold and control client funds. Analysts suggest this reflects growing reliance on technology to manage compliance and monitoring, alongside the consolidation of oversight responsibilities into fewer specialist positions.
The findings indicate that firms across the financial services landscape are not only reducing headcount but also reconfiguring their operations around new technologies, particularly AI, as they navigate tighter regulation and shifting market conditions.
For more, find on RegTech Analyst.
Keep up with all the latest FinTech news here
Copyright © 2025 FinTech Global
