UK financial services will see a year of change in 2025

Financial services firms are used to seeing regulatory change, but 2025 promises to be a year in which the UK regulatory landscape evolves more than usual and can be expected to continue evolving beyond the end of this year 

Some of the changes will merely pull former EU law properly into UK regulatory rulebooks with minor tweaks, but other proposals are new and significant and include a number of new regulated activities.  

With the Financial Services and Markets Act 2023 (FSMA 2023) now law and a new government in place, firms can look to how the UK’s smarter regulatory framework will be built – a framework which will apply for years to come. This framework will encompass authorised and regulated firms as well as unauthorised firms. 

In an environment of perma-change, it is easy for firms to get caught up in meeting compliance deadlines for individual legislative or regulatory initiatives. The early days of the year offer a good time for boardroom executives, and senior managers and others responsible for compliance, to look at the bigger picture; the core themes driving forthcoming policy and regulatory change, to ensure that their regulatory change programs take into account how such themes could impact long-term business strategies, and not just focus on piecemeal implementation. 

Growth 

In November 2024, the government opened a call for evidence on a planned new financial services growth and competitiveness strategy. The resulting strategy is expected to be published this spring. In the paper, the government identified five core policy pillars central to the sustainable growth of the sector. 

• innovation and technology; 
• regulatory environment; 
• regional growth; 
• skills and access to talent; 
• international partnerships and trade; 

The government also provisionally identified priority growth opportunities. These include: 

• fintech; 
• sustainable finance; 
• capital markets, including retail investment; 
• insurance and reinsurance markets; and 
• asset management and wholesale services. 

In addition to the strategy, other priorities within financial services policy were identified, including: increasing access to finance, to ensure that SMEs have the capital they need to grow and compete, and doubling the size of the mutuals sector to help drive innovation and inclusive growth throughout the UK. Further priorities include addressing barriers to financial inclusion, working with industry to roll-out 350 banking hubs over the current parliament, tackling financial and economic crime, and increasing representation of women in senior roles through the Treasury’s Women in Finance Charter. 

The Financial Conduct Authority (FCA) has made various announcements along similar lines. Notably, at the end of November 2024, Emily Shepperd, the regulator’s chief operating officer, delivered a speech introducing the FCA’s five-year strategy, which will shape the FCA’s work up to 2030. The new strategy has four themes: becoming a more efficient and effective regulator; tackling financial crime; building consumer resilience; and supporting economic growth and innovation. 

Whilst the FCA is independent of government, under FSMA 2023 the Treasury can require the regulator to “have regard to” certain government policy matters. We can expect to see more on the five year strategy in the first quarter of this year.

In addition to the strategy, other priorities within financial services policy were identified, including: increasing access to finance, to ensure that SMEs have the capital they need to grow and compete, and doubling the size of the mutuals sector to help drive innovation and inclusive growth throughout the UK. Further priorities include addressing barriers to financial inclusion, working with industry to roll-out 350 banking hubs over the current parliament, tackling financial and economic crime, and increasing representation of women in senior roles through the Treasury’s Women in Finance Charter. 

The Financial Conduct Authority (FCA) has made various announcements along similar lines. Notably, at the end of November 2024, Emily Shepperd, the regulator’s chief operating officer, delivered a speech introducing the FCA’s five-year strategy, which will shape the FCA’s work up to 2030. The new strategy has four themes: becoming a more efficient and effective regulator; tackling financial crime; building consumer resilience; and supporting economic growth and innovation. 

Whilst the FCA is independent of government, under FSMA 2023 the Treasury can require the regulator to “have regard to” certain government policy matters. We can expect to see more on the five year strategy in the first quarter of this year.    

Engagement 

The idea of a more efficient regulator will be welcomed by firms. Knowing what regulatory expectations are and the likely timings for engagement with regulators, for example around variations of permission, allows more accurate planning for future growth and development. Too often we have heard grumbles from clients that dealing with the FCA is often like dealing with a black hole.  

Whilst it is fair to say that the FCA has significantly improved on its own service levels metrics in recent times, there is still room for improvement on response times from the regulators – not least considering the tight response times that the regulators often impose on authorised firms. There also remains a need for better dialogue, both generically and specifically.