On 14 November 2024 Chancellor of the Exchequer, Rachel Reeves delivered her first Mansion House speech. Governor of the Bank of England, Andrew Bailey also delivered a speech. The Chancellor’s speech was wide ranging in focus and set out the Government’s vision for financial services, prioritising competitiveness and the role the sector can play in driving growth, innovation and the transition to net zero.
In this article
What does this mean?
The Chancellor made a number of announcements as well as confirming plans to progress existing priorities. These are summarised below. To progress the Government’s agenda, HM Treasury (HMT) and the regulators have also released a number of publications.
Supporting investment and innovation
Prior to the speech, HMT announced plans to create pension ‘megafunds’ by consolidating defined contribution schemes and pooling assets from separate Local Government Pension Scheme authorities. HMT estimates the reforms could deliver around £80bn of investment in new businesses and critical infrastructure.
The Chancellor also announced a number of measures that the British Growth Fund and British Business Bank have taken to support investment into UK growth companies, as well as plans to mobilise private capital to support clean energy and growth. The Government has also committed to legislate to establish PISCES, a market for trading private company shares, by May 2025.
Separately HMT has published a consultation on the UK’s regulatory approach to captive insurance to support the development of the market. The FCA will be consulting on approaches to support households make better-informed decisions about their finances. This will form part of the Advice Guidance Boundary Review.
The Government will launch a pilot to deliver a Digital Gilt Instrument, using distributed ledger technology (DLT). HMT has also published the National Payments Vision, setting out the Government’s priorities for the sector. These include the deployment of next generation technology, and ensuring consumers and businesses have a choice of payment methods to meet their needs.
The role of financial services in the transition to net zero
The Chancellor announced a number of measures aimed at supporting the transition to net zero. These include confirming that HMT will publish draft legislation to regulate ESG ratings providers and consult on the value case for a UK Green Taxonomy, as well as economically significant companies disclosing information using future UK Sustainability Reporting Standards. The Government will also publish a set of integrity principles for voluntary carbon and nature markets ahead of a consultation in the new year.
The Government is co-launching the Transition Finance Council with the City of London Corporation and will consult in the first half of next year on how best to take forward transition plans. The Chancellor also emphasised the transition to net zero within the remit of the Monetary Policy Committee, and reinstated sustainable finance as an area the Financial Policy Committee should support as part of its secondary objective.
A competitive financial services sector
The Government is taking forward a number of initiatives aimed at supporting the competitiveness of the UK’s financial services sector. In the context of the Government’s Industrial Strategy, HMT has published a call for evidence on a Financial Services Growth and Competitiveness Strategy. The strategy will aim to deliver long-term certainty and support to the sector and will focus on five priority growth opportunities in financial services. These will be FinTech, sustainable finance, asset management and wholesale services, insurance and reinsurance and capital markets.
The Chancellor has written to the Financial Conduct Authority, Prudential Regulation Committee, Financial Policy Committee and Payment Systems Regulator to ensure they apply a greater focus on supporting economic growth. Economic Secretary to the Treasury, Tulip Siddiq has also written to the regulators asking them to report on ways they can support the mutual and cooperative sector.
In addition, the Government will seek to modernise the Financial Ombudsman Service framework to ensure it provides clearer expectations around its decisions for consumers and financial services firms.
In the context of the review of the Senior Managers and Certification Regime (SM&CR) the Chancellor announced that the Government would be replacing the certification regime with something more proportionate. HMT has also confirmed the next steps on reforming the UK’s MiFID regime.
What do firms need to do?
Consider the strategic opportunities from the direction of travel set out by the Chancellor.
Take advantage of the window of opportunity to influence the Government’s thinking on growth and competitiveness.
Assess the operational implications of an ongoing period of regulatory change.
The Chancellor’s speech and the associated publications represent the next phase in the reform agenda, with a clear focus on supporting growth, investment and the net zero transition. It will be important that all firms consider the strategic and commercial opportunities from this renewed focus.
The publication of the call for evidence on the growth and competitiveness strategy and the Government’s wider focus on an industrial strategy means there is a relatively short period of opportunity for the sector to influence the medium and potentially long term policy agenda.
While the focus on growth and competitiveness is welcome, it is clear that the ongoing period of regulatory change in the UK will continue. Increasingly there is scope to manage regulatory change in a more efficient and effective manner through the deployment of technology and analytics.
“The Chancellor’s announcements outline how the government plans to support the investment so urgently required to keep the UK at the forefront of advances in technology and green finance. They set out a positive statement of intent, and tangible steps to improve the UK’s growth prospects and international competitiveness of the financial services sector”
Darren Ketteringham
Partner, PwC
Next steps
The call for evidence on the growth and competitiveness strategy closes on 12 December 2024, with publication of the strategy due in the spring.
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