HMT announces new approach to ensure regulators support of growth

On 17 March 2025, the UK government published a policy paper outlining its new approach to ensure that regulators and regulation support economic growth. This document, released by HM Treasury (HMT), addresses the challenges within the current regulatory landscape and proposes actions to reform and enhance the regulatory system in the UK.

Key challenges identified:

• Complexity and burden of regulation: The current regulatory system is seen as overly complex and burdensome, stifling innovation and growth. There are over 100 regulatory bodies in the UK, not including related non-regulatory bodies, professional associations, public functions, voluntary bodies or wider regulator professions. The administrative costs for businesses are high, and there is a need to streamline processes to reduce these costs.
• Uncertainty in the regulatory system: Businesses face uncertainty due to inconsistent regulatory objectives and frameworks. This unpredictability affects investment and growth.
• Excessive risk aversion: The regulatory system is perceived as too risk-averse, limiting the ability of regulators to adapt to new technologies and industries.

Proposed actions:

1. Tackling Complexity and Burden:

• The government aims to reduce administrative costs for businesses by 25% by the end of the Parliament.
• A baseline for the administrative costs of regulation will be established to identify areas for reform.
• Simplification of regulatory structures, including potential consolidation of regulators, is planned.
• It has already been announced that the Payments Services Regulator (PSR) will be consolidated into the Financial Conduct Authority (FCA). HMT will consult on this over the course of the summer and legislate “as soon as possible”.

2. Reducing uncertainty:

• The roles and duties of regulators will be clarified to focus on growth and investment.
• HMT will look to review the number of the Prudential Regulatory Authority’s (PRA’s) and FCA’s “have regards” to identify opportunities to rationalise them (i.e. considerations that these regulators must take into account).
• Transparency and performance metrics will be strengthened to ensure accountability. These metrics will be time-bound, stress-tested and stakeholder-tested.
• Where relevant, HMT will work with regulators to identify process improvements including the introduction of paid-for “fast lanes” for regulatory approvals.
• HMT will work with regulators to establish a “concierge service” to enhance the attractiveness of the UK as a destination for global financial services. HMT say doing this will make it easier for firms to navigate the UK regulatory landscape and reduce barriers to entry.
• HMT wants to build on a package of measure to enable the FCA to support early-stage innovative firms to start conducting regulated activities. This would include the ability to issue “minded to approve” notices and considering whether the regulatory framework can be updated to allow relevant firms to conduct limited regulated activities before they are fully authorised.
• Over the summer, the Economic Secretary to the Treasury will review whether the Financial Ombudsman Service (FOS) is delivering in its role as a simple, impartial dispute resolution service. This will include addressing concerns around:
  1. The framework within which the FOS operates resulting in it acting as a quasi-regulator;
  2. Whether the FOS is incorrectly applying today’s standards to past actions; and
  3. The practices that have emerged over time around compensation.

3. Challenging risk aversion:

• A more balanced and consistent approach to regulation will be promoted, ensuring consumer protection while supporting growth.
• HMT will strengthen accountability within regulators by holding to them to account for their performance as against their statutory duties and for reducing costs.
• The government will work with regulators to enhance their capability to manage risks associated with new technologies (e.g. AI).
• The work of the Regulatory Innovation Office (RIO) will continue to be essential in commercialising technologies and innovation.

Specific pledges made by the FCA and PRA:

FCA - Provide a dedicated case officer to every firm within the FCA’s regulatory sandbox.

FCA - Provide 50% more dedicated supervisors to early and high growth firms, to help them navigate the regulatory system and support their growth.

FCA - Extend pre-application support to all wholesale payments, and crypto firms.

FCA - Indicate more often that the FCA is ‘minded to approve’ start ups to help them secure funding.

FCA - Simplify its mortgage and advice rules to support greater home ownership

FCA - Welcome FCA work to review the contactless payment limits, including removing the £100 limit on individual payments.

FCA - Accelerate a review of capital requirements for specialised trading firms.

FCA + PRA - HMT will review the FCA’s and PRA’s ‘have regards’ to rationalise them and ensure a focus on their priorities.

FCA + PRA - Reduce regulatory reporting requirements for firms.

PRA - The PRA will consult this April on a matching adjustment investment accelerator aimed at reducing the time between life insurers identifying a productive investment opportunity and making that investment.

The vision for the future:

The government envisions a regulatory system that supports growth, is targeted and proportionate, transparent and predictable, and adapts to innovation. This approach aims to position the UK as a leader in global competitiveness by fostering an environment conducive to investment and innovation.

Conclusion:

The proposed reforms represent a significant shift in the UK’s regulatory approach, aiming to create a more efficient and growth-oriented system. FCA and PRA-regulated firms should prepare for changes in regulatory processes and engage with consultations to shape the future regulatory landscape.

Please let us know if you would like to discuss. We will be following these developments closely.

Oct 2025 update

On 21 October 2025, HM Treasury (HMT) published a paper outlining the Government's progress in delivering the reforms that it set out in its March 2025 action plan to support growth. A summary of individual key regulators' progress against their action plan pledges is set out in a table in Annex B to the paper. We have summarised what these are and what the current status is below.

FCA

The FCA committed to:

• Provide a dedicated authorisations case officer to every firm within the FCA’s regulatory sandbox.
• Update: All firms applying to the FCA’s regulatory sandbox now receive a dedicated case officer in authorisations, ensuring a smoother experience for applicants.

• Provide 50% more dedicated supervisors to early and high growth firms to help them navigate the regulatory system and support their growth.
• Update: The FCA increased headcount in their Early and High Growth department by 50%. A pilot programme has commenced in Payments, Asset Management, and Wealth Management, with dedicated supervisors for a small cohort of 15 growing firms.

• Extend pre-application support to all wholesale payments and crypto firms.
• Update: The FCA has started providing pre-application support (PASS) meetings to all firms in the wholesale, payments, and crypto sectors, including those seeking to conduct new ‘targeted support’ activity as part of the Advice Guidance Boundary Review.

• Indicate more often that the FCA is ‘minded to approve’ startups to help them secure funding.
• Update: The FCA has updated systems and trained staff to use this function. Between April and August, 132 cases were ‘minded to approve’, with 129 approved and 3 withdrawn.

• Simplify mortgage and advice rules to help more people access sustainable home ownership.
• Update: The FCA clarified affordability rules, leading to policy adjustments by major lenders. Rule changes confirmed in July to ease re-mortgaging and advice access. Two pieces of guidance retired to reduce burden. A Discussion Paper on the future of mortgage regulation was published in June.

• HMT will review FCA and PRA’s ‘have regards’ to rationalise them and ensure a focus on their priorities.
• Update: the Government will require FCA and PRA to set out long-term strategies. A consultation on rationalising ‘have regards’ has closed and responses are being analysed.

• HMT will welcome FCA work to review the contactless payment limits, including removing the £100 limit on individual payments.
• Update: the FCA has closed a consultation to allow firms to disapply Strong Customer Authentication (SCA) for low-risk contactless payments.

• Accelerate a review of capital requirements for specialised trading firms.
• Update: the FCA is progressing policy development, with an engagement paper expected before year-end.

• The FCA and the PRA both committed to reduce regulatory reporting requirements for firms.
• Update: the FCA’s Transforming Data Collection programme has reduced reporting burdens, consulted on proposals to save over £28m annually for 36,000+ firms, and launched the myFCA portal. The PRA has proposed or implemented cuts saving over £100m per year and published a consultation as part of the Future Banking Data review.

PRA

The PRA committed to:

• Consult this April on a Matching Adjustment Investment Accelerator aimed at reducing the time between life insurers identifying a productive investment opportunity and making that investment.
• Update: the PRA closed its consultation on 4 June and will publish its response by the end of October.

The Action Plan update also sets wider future regulatory reforms that the Government will take. We have summarised and grouped these into themes:

• Administrative burden reduction
  • The Government will continue to pursue further opportunities to reduce business burden and is announcing an expanded review of the Modernisation of Corporate Reporting covering the whole of the Annual Report and Accounts, with an ‘ambitious consultation’ to be launched next year.
  • The Government will prioritise reforms that require primary legislation to support delivery of the target to reduce administrative burdens by 25%.

• Regulatory landscape simplification
  • HMT will consolidate the anti-money laundering (AML) and counter-terrorist financing (CTF) supervisory functions of 22 professional services supervisory bodies, with the FCA assuming responsibility.
  • The Government intends to abolish the British Hallmarking Council and consolidate its functions alongside wider product regulation functions when parliamentary time allows.

• Clarifying regulator duties and economic regulation
  • The Government will reform the Growth Duty so that the legal framework is ‘clearer, more focused, and ensures regulators must consider and promote growth’.
  • The Government will set out an updated approach to economic regulation by the end of 2025, following sector-specific reviews.

• Performance and accountability
  • The Government will launch a Regulator Dashboard, displaying performance against KPIs and authorisation processing times across key regulators, with plans to expand coverage and functionality.
  • A Regulators Council, chaired by the Business Secretary, will be convened to foster alignment on growth and share best practice.
  • Independent expert performance reviews for key regulators will be delivered, starting with the Office of Rail and Road.
  • A targeted deep dive will review the burden of central Government regulation implemented at the local level, engaging with businesses and local authorities to identify policy solutions.

• Certainty for investors, businesses, and consumers
  • The Department for Business and Trade will consult on proposals to provide greater certainty for businesses on merger control, remedies, and CMA decision-making processes.
  • The Government will bring forward a consultation on specific reform proposals to strengthen predictability, incentivise alternatives to litigation, and ensure effective consumer protection in the opt-out collective actions regime.

• Outcome-focused and pro-innovation regulation
  • The Government will continue to work with the British Standards Institution and UK Accreditation Service to promote digitalisation of systems and development of smart, machine-readable standards.
  • The Government will consult on establishing an AI Growth Lab, a cross-economy sandbox enabling supervised deployment of responsible AI applications, with potential statutory powers to temporarily modify or disapply specific regulations for qualifying participants.
  • The Government is also seeking business input on where a regulatory sandbox approach would be beneficial in other areas of the economy, particularly for new technology or rapid development.