Chancellor Rachel Reeves has unveiled a package of reforms aimed at boosting the UK’s financial services sector and driving economic growth.

In her first Mansion House speech, Reeves argued that post-financial crisis regulatory changes have gone too far, stifling innovation and hindering growth. She pledged to rebalance the regulatory system to foster a more dynamic and competitive environment.

Commenting on the news the UK Government will consult on the introduction of a new framework for UK-based captive insurance companies, Chris Lay, CEO of Marsh McLennan UK, said: “This is an important step forward to help the UK’s world leading insurance market become an important home for captive insurers.”

Key reforms include:

• Growth-Focused Regulatory Remits: The Chancellor has sent new growth-focused remit letters to financial regulators, encouraging them to support economic growth while maintaining high standards.
• Financial Services Growth and Competitiveness Strategy: The government will publish its first-ever Financial Services Growth and Competitiveness Strategy next year, outlining a long-term vision for the sector.
• Pension Megafunds: The government plans to introduce measures to create pension megafunds, unlocking billions of pounds for investment in UK businesses and infrastructure.
• Sustainable Finance: The UK will continue to concentrate on sustainable finance, with plans to strengthen its regulatory framework and mobilise trillions of pounds of private capital for green investments.
• Financial Services Innovation: The government will support innovation in areas such as fintech, payments, and digital assets.
• Consumer Protection: The government pledges to modernise the regulatory framework to ensure strong consumer protection while reducing unnecessary burdens on businesses.

By implementing these reforms, the UK government aims to cement the country’s position as a global financial centre, attract investment, and create jobs.

Lay continued: “The regulatory regime must be developed to allow a UK captive regime to compete on the international stage.  Establishing a proportionate and competitive UK captive framework could deliver a major boost to the UK insurance market, demonstrating our innovation and signalling we are open for business.”

Cara Spinks, Head of Life & Health at leading independent financial services consultancy Broadstone, also commented, saying: “It is encouraging that the Chancellor recognises the benefits of a flourishing Co-operative and Mutual sector.

“For starters, it makes a vast contribution to our public health services – a key focus for the government and future driver of growth – with cost-savings of around £1 billion to the NHS, welfare state and employers through health protection policies. Their bespoke, customer-centric approach improves financial inclusion at a time when it has never been more important to provide financial services to a diverse range of customers.

She added: “The pledge to support Credit Unions is also to be welcomed. These institutions play a growing role in the financial ecosystem with Credit Union lending rising from £1.6 billion at the end of 2019 to £2.3 billion as of the end of 2023, a rise of 42%.”

Matt Austen, Consumer Duty Lead for Kroll’s Financial Services and Regulatory Division, said that  although Consumer Duty is still in its early phases, industry observations suggest it is already influencing priorities. He pointed out that businesses are increasingly focusing on delivering long-term value to customers by considering how their products and services can contribute to financial stability and promote well-being, particularly for individuals who may be more vulnerable during certain interactions.

He added: “Balancing profitability with increasing costs of compliance is always a challenge, and Consumer Duty has, for many firms, resulted in further compliance costs, and for smaller firms these costs can be harder to absorb. As a result, it is imperative that firms prioritise investment in compliance and align this with business growth to meet regulatory standards while supporting their long-term health.”

Report by Joanna England