Regulatory bodies, led by the Financial Conduct Authority (FCA), urge the establishment of a more dynamic and agile regulatory landscape

Regulatory bodies, led by the Financial Conduct Authority (FCA), urge the establishment of a more dynamic and agile regulatory landscape

UK Financial Regulation: A Catalyst for Growth and Innovation

The Financial Conduct Authority (FCA) is taking a proactive approach to recalibrate regulation in the UK, seeking to manage systemic risk while creating space for innovation. This shift comes in response to the changing landscape of the financial sector, particularly the rise of fintech and cryptocurrency markets.

A recent FCA economic research competition has highlighted the potential of financial regulation as a platform for innovation and competitiveness in the financial sector. The competition's findings suggest that regulation can support growth in three main ways: fostering broader economic growth, enhancing productivity within financial services firms, and strengthening the sector's global competitiveness.

One of the key insights is that regulation should be viewed as an enabler of innovation. This is particularly evident in fintech and cryptocurrency markets, where regulatory clarity and engagement have facilitated their growth. The FCA's evolving regulatory role now includes a secondary objective focused on fostering international competitiveness and growth of the UK economy.

Collaboration among industry, government, consumer groups, and parliamentarians is essential for creating a coordinated and effective regulatory environment that sustains growth and innovation. Emerging areas such as Open Finance, which facilitates expanded data sharing across a variety of financial products, are highlighted as innovations fostered by regulation, aimed at increasing competition and personalized financial services for consumers and businesses while safeguarding data privacy.

The FCA can play a vital role in simplifying cross-border investment approvals and improving the environment for international listings. However, deeper structural issues remain in the UK's capital markets, with high entry costs and burdensome regulations deterring both domestic and foreign listings.

The UK government has made economic growth a national mission, with a focus on evolving the financial services sector to promote sustainable, innovation-led growth. The financial sector, which contributes over 8% of the UK's gross domestic product, has undergone transformative changes over the past decade.

Despite these efforts, the UK has trailed behind the US and EU in initial public offering activity, with high-growth firms favoring more flexible overseas markets. Since Brexit, export competitiveness has declined, even as outward foreign direct investment surged into EU centres like Germany and the Netherlands.

The FCA's new secondary objective is a call to action, embedding growth considerations into the regulatory DNA to reshape financial services as a catalyst of long-term, inclusive, and internationally competitive growth. Interested readers can find more information about OMFIF's work on this topic by subscribing to their newsletter. Deeper co-operation between regulators and trade bodies could help amplify UK financial services' global brand, especially in emerging fields such as green finance, digital assets, and environmental, social, and governance-aligned investment.

References:

[1] FCA (2025). FCA Economic Research Competition: Key Insights. [Online] Available at: https://www.fca.org.uk/publications/economic-data-and-analysis/fca-economic-research-competition-key-insights

[2] FCA (2025). FCA's Secondary Objective: Enhancing the UK's International Competitiveness. [Online] Available at: https://www.fca.org.uk/publications/corporate/fca-second-objective-enhancing-uks-international-competitiveness

[4] FCA (2025). Open Finance: A Regulatory Perspective. [Online] Available at: https://www.fca.org.uk/publications/policy/open-finance-regulatory-perspective

[Optional] For more insights on public finance management and how governments can more effectively allocate public funds to support better fiscal, economic, and societal outcomes, visit OMFIF's collaborative project with EY at [OMFIF website].

1. The Financial Conduct Authority (FCA) is recalibrating UK financial regulation to manage risk while fostering innovation, particularly in emerging markets like fintech and cryptocurrency.
2. Research and competition findings suggest that regulation can support economic growth, enhance productivity, and strengthen global competitiveness within the financial sector.
3. Regulation should be seen as an enabler of innovation, especially in areas like Open Finance, which facilitates data sharing to increase competition and personalized financial services while safeguarding privacy.
4. Collaboration between industry, government, and consumer groups is crucial for creating a sustainable regulatory environment that supports growth and innovation.
5. The FCA can improve cross-border investment approvals and international listings, but high entry costs and burdensome regulations may still deter domestic and foreign listings.
6. Economic growth is a national mission in the UK, with a focus on evolving the financial services sector to promote sustainable, innovation-led growth, and compete globally in emerging fields such as green finance, digital assets, and environmental, social, and governance-aligned investment.
7. Deeper cooperation between regulators and trade bodies could help amplify the UK's financial services' global brand, especially in emerging fields, and more insights on public finance management can be found at OMFIF's collaborative project with EY, available on their website.

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