When the Chancellor delivered her Mansion House speech, she was keen to present the so-called “Leeds Reforms” as her own Big Bang moment for the financial sector. Accompanying consultations promised deregulation, simplification, and a renewed focus on growth. Yet, as with many reform packages, the question remains: will they really make a difference?
At Prysm Global we believe the reforms should be judged against three critical criteria:
- Do they enhance the predictability and stability of regulation?
- Do they strip out red tape and support innovation?
- Will they unlock financing for growth in the real economy?
Predictability and Stability: The Role of Redress
The UK financial sector has been scarred by waves of redress programmes—mis-selling, poor conduct, and claims management campaigns have cost firms tens of billions. Beyond the direct expense, these liabilities have created profound uncertainty. Some business lines became virtually uninvestible because of the unpredictability of future claims.
At the heart of this dysfunction lies the uneasy relationship between the Financial Ombudsman Service (FOS) and the Financial Conduct Authority (FCA). The FOS, empowered to decide cases on the basis of what is “fair and reasonable,” often acted as a quasi-regulator, exposing systemic harms the FCA’s more rules-based approach had missed. Firms, in turn, faced retrospective liabilities for practices that may have breached principles but not explicit rules.
The Leeds Reforms aim to resolve this by clipping FOS’s wings—possibly even making it a subsidiary of the FCA—and requiring it to interpret fairness strictly within FCA rules. For firms, this promises greater clarity. For consumer advocates, it raises fears of weakened protection.
Our view: stability will only improve if the FCA couples this new control with earlier, more decisive interventions to prevent harm from accumulating in the first place. Without that shift, the reforms risk reducing redress without improving outcomes.
Cutting Red Tape: A Cultural Challenge
The Chancellor has argued that regulatory bureaucracy is a “boot on the neck” of the industry. The reforms target obvious pain points: streamlining the Senior Managers Regime, simplifying ring-fencing, speeding up authorisations, and expanding sandboxes and concierge services. These are welcome, but incremental, changes.
The deeper challenge is cultural. Financial services regulation has ballooned into thousands of pages of rules, driving armies of compliance officers and consultants. Yet this density has not prevented large-scale misconduct cases. Nor has it delivered meaningful gains in competition, particularly for SMEs and retail customers.
The shift from prescriptive compliance to outcomes-based regulation under the Consumer Duty is an opportunity to break this cycle. But it will only succeed if regulators address long-standing issues such as:
- Scope creep and overlap between regimes.
- The balance between consumer protection and risk-taking that fuels innovation.
- Weaknesses in supervisory capability and responsiveness.
- Ineffective cost-benefit analysis that understates cumulative burdens.
Our view: the reforms point in the right direction, but firms should not expect a sudden bonfire of regulation. Instead, success will depend on whether regulators adopt more agile, proportionate, and innovation-friendly approaches over time.
Financing Growth: A Prize Worth Chasing
Perhaps the most ambitious element of the reforms is the attempt to mobilise financial services as an engine of UK growth. The measures span retail and institutional markets:
- Helping consumers channel more long-term savings into equities, with targeted support and clearer communication about risk/return trade-offs.
- Directing institutional capital into infrastructure and private markets.
- Strengthening capital markets’ appeal as destinations for both issuers and investors.
- Creating transparent pipelines of investible projects.
If successful, these initiatives could benefit all stakeholders: banks re-entering the advice space, advisers expanding to underserved segments, institutions diversifying into alternative assets, and consumers improving retirement outcomes.
Our view: the ambition is right, but delivery will be complex. Achieving scale will require coordinated action across regulators, industry, and government to build confidence, protect consumers, and ensure that capital flows where it can genuinely drive growth.
So, Will It Work?
From FOS reform to MREL recalibration, from lighter SMCR processes to broader retail investment opportunities, the Leeds Reforms are almost universally welcomed by industry. But they are modest in scale relative to the entrenched barriers they seek to address.
This is not Big Bang 2.0. It is, at best, the opening chapter of a longer reform journey. The immediate impact will be limited; the long-term potential will depend on whether government and regulators are willing to embrace more fundamental change.
For firms, the implications are twofold:
– Opportunity: early movers can position themselves to take advantage of streamlined processes, new growth markets, and a rebalanced regulatory environment.
– Risk: uncertainty remains around how the FCA will wield its expanded authority, how consumer groups will respond, and whether political appetite will sustain momentum.
Final Thought
The Leeds Reforms are a step towards a more predictable, innovation-friendly, and growth-oriented regulatory framework. But they remain a faint echo rather than a thunderclap. Firms should welcome the direction of travel while preparing for a long road ahead. Strategic engagement with regulators, proactive cultural adaptation, and a clear focus on consumer outcomes will be the keys to turning promise into practice.
