On 15 July the UK Government will publish its first ever “Financial Services Growth and Competitiveness Strategy” (“Strategy”). It aims to develop policies that foster growth in the financial services sector for the next 10 years! What can we expect of the Strategy, and will it expedite the uptake of disruptive technologies within financial sector?
Background
The Strategy, scheduled for release on 15th July 2025, will outline HM Treasury’s approach to guiding the financial sector’s growth and maintaining the UK’s competitiveness as an international financial centre. In announcing the release, Chancellor Rachel Reeves highlighted the focus on innovation and FinTech in this strategy.
It follows a public Call for Evidence conducted by HM Treasury in November 2024, which sought opinions on how the financial sector can promote growth and enhance its international competitiveness. It is not surprising that Innovation & Technology, as well as the regulatory environment, were suggested by HM Treasury in the Call for Evidence as two of the five core policy pillars crucial to the growth of the financial industry. Additionally, to pave the way for new financial products and services, Fintech has been recognized as one of the top priority growth opportunities.
Regulations: Maintaining Balance to Foster Growth
It is evident that the adoption of innovative technologies will continue to play a pivotal role in influencing UK financial industry and its growth.
Technological solutions that enable digital identities, data storage and sharing, and improve operational efficiency have been a priority for major banks and will continue to be important for driving competitiveness and innovative business models. And financial industry will continue testing blockchain and artificial intelligence technologies for new products and services.
In the United Kingdom, several significant regulatory and market initiatives have been already launched to foster innovation within the financial sector. These include the National Payments Vision, the AI National Strategy, the Private Intermittent Securities and Capital Exchange System (PISCES), and the Digital Securities Sandbox, which aims to test tokenisation and distributed ledger technology (DLT) in capital markets. Financial Conduct Authority and HM Treasury have made further efforts to introduce regulations on crypto assets and stablecoins.
To ensure that regulatory frameworks continue to support this ongoing trend and act as enablers rather than barriers, it is essential to achieve a balance between mitigating market risks and fostering growth.
High regulatory standards are crucial for maintaining market confidence. However, overly complex, duplicative, and uncertain regulatory frameworks, as well as expensive compliance requirements, can hinder innovation.
One of the primary goals of the Strategy is to enhance the UK’s role as an international financial hub. In this context, a clear and balanced regulatory framework that supports innovation could serve as a competitive advantage.
Uncertainty can lead businesses to seek alternative jurisdictions. This challenge is magnified when competing for globally operating companies. For them, varying regulatory frameworks across major financial hubs can be prohibitive due to the high cost of compliance. Moreover, these differing regulations may hinder their ability to adopt new technologies in multiple markets, thus impeding innovation.
What’s next?
The focus of the upcoming Strategy on innovation and the adoption of new technologies by the financial industry will be a positive development as these trends will gain momentum. However, other financial centres have set a high benchmark. Therefore, to gain a competitive edge at international level and to grow UK financial services industry, it will be essential to implement clear and balanced regulatory frameworks.
The final version of the Strategy will be available soon. Please stay tuned for an in-depth analysis following its release on June 15, 2025.
Author: Polina Evstifeeva
