A New Regulatory Direction 

Patrick Adams, Senior Consultant 
16/07/2025

In both tone and substance, Rachel Reeves is a Chancellor rejecting the orthodoxy of the past 15 years. Reeves argues that while the guardrails introduced after the financial crisis were necessary, the UK has since drifted into regulatory overcorrection. The result, she contends, is a business environment burdened by "an obsession with stamping out risk in all its forms", a mindset that is now actively holding back innovation, growth, and investment.

Speaking first at a roundtable in Leeds and later at the Mansion House dinner, Reeves made a clear assertion: Britain's economy has not just been challenged by global headwinds or fiscal constraints, but also by its self-imposed bureaucratic inertia. The Leeds Reforms, announced before the speech and reiterated within it, aim to shift regulation away from risk elimination and toward enabling growth.

The Chancellor’s unveiling of the so-called Leeds Reforms marks a defining moment in the government's approach to economic policy. Positioned as the most significant regulatory shift since the aftermath of the 2008 financial crisis, the reforms are designed not only to revitalise the UK's financial services industry but also to act as a blueprint for how regulation should evolve across the broader economy.

The reform package is structured around four core themes:

Rolling back excessive regulation

The clearest signal of intent is the planned overhaul of the Financial Ombudsman Service, which Reeves criticised for drifting into a quasi-regulatory role. A 10-year limit on claims will be introduced, and compensation interest rates will be significantly reduced. These reforms, paired with a 50% reduction in the compliance burden under the Senior Managers and Certification Regime and new performance targets for the FCA and PRA to speed up authorisations and approvals.

Targeted support for high-growth sectors

Areas where the UK holds a clear comparative advantage, such as insurance, asset management, fintech, and sustainable finance, will benefit from more tailored regulatory regimes. The green taxonomy proposal has been shelved in favour of a more pragmatic focus on transition finance. A new scale-up unit will support fintech firms as they transition from start-up to maturity, and steps are being taken to modernise frameworks for digital assets and tokenised securities.

Reforms to capital requirements

Reeves is intent on unlocking productive capital. The Bank of England's rules on thresholds for certain funds is set to rise, supporting challenger banks and fostering lending competition. The Basel 3.1 framework will be implemented with flexibility for domestically focused banks. A long-awaited review of the UK's ring-fencing regime will aim to release more capital for lending and infrastructure investment, without compromising financial stability.

Boosting retail investment

Perhaps the most politically resonant element, Reeves aims to reshape the perception of retail investing, which has traditionally been very low in the UK. She criticised the "negative" narrative around risk and argued that savers have been discouraged from putting their money to work. A national campaign, modelled on the spirit of the 1980s "Tell Sid" initiative, will encourage share ownership among the public. Stocks and shares ISAs will now include Long-Term Asset Funds, opening access to private equity and infrastructure projects. Risk warnings are being reviewed, and a new type of targeted consumer support is being developed in collaboration with the FCA.

Importantly, Reeves pulled back from cutting the tax-free ISA allowance, a move that many in the industry had expected to be consulted on, but the speech did not include an announcement of a formal consultation. This decision arguably reflects a cautious political instinct: nudging savers into equities through incentives, rather than provoking backlash by restricting access to cash ISA. However, the Chancellor said she "will continue to consider further changes to ISA, engaging widely in the coming months" suggesting that this issue will continue to dominate ahead of the Autumn Budget.

What it means for business

While the headline reforms focus on financial services, the broader message is unmistakable: this is a government increasingly willing to use deregulation as a tool for growth. The Chancellor's Mansion House remarks made clear that this agenda will extend well beyond the City, with infrastructure, housing, planning, and net zero all likely to see similar reform energy under the spotlight in the months ahead.

The Leeds Reforms also suggest a shift in tone within Labour itself, and perhaps one born out of economic necessity. The call to "regulate for growth" is an invitation to businesses, particularly those that have long been frustrated by slow decision-making, rigid processes, or unclear regulatory expectations.

At the same time, this is not deregulation at the expense of stability. Reeves was at pains to link her reforms to fiscal prudence and international credibility. The message to markets is that Britain will remain rule-bound but in a way that is agile, modern, and pro-growth.

A moment of political necessity

The timing of these reforms is no accident. With the government under pressure following the recent u-turn on its proposed welfare reforms and rising calls from backbench MPs about a potential wealth tax, delivering economic growth quickly and visibly is no longer just a strategic ambition; it is a political imperative.

The Leeds Reforms are intended to unlock capital, boost confidence, and catalyse investment. However, if they fail to deliver tangible results, the government may be forced to consider more contentious fiscal options sooner than planned. The next six months will be critical not only for how these reforms are implemented, but also for whether they can demonstrate a real, measurable economic impact.

(Photo credit: HM Treasury on Flickr)