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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is chancellor of the exchequer
Today I announced the Leeds reforms. The widest ranging set of changes to financial regulation in over a decade, they form a prospectus for driving growth for the UK in an increasingly uncertain and competitive global market.
Our vision for each of the eight high-potential sectors identified in the modern Industrial Strategy, including financial services, can be summed up as follows: a laser-like focus on the global strengths that we possess and a determination to double down on them to attract more investment.
That is a vision I know is shared by Britain’s businesses, entrepreneurs and wealth creators. But for too long the ambitions of our economy have been held back by an unpredictable regulatory system that has a disproportionate attitude towards risk.
Risk, like most things, can be good and it can be bad. It’s not good for an economy to bear too much risk, as happened in the lead-up to the Global Financial Crisis when bad lending built up, assets collapsed and working families paid the price. The protections that were put in place in the years that followed were the right thing to do, with better protections for consumers and more accountability injected into the system.
But more than a decade on, the pendulum has swung too far in the opposite direction, with an excessive focus across our economy on stamping out risk entirely.
The same flawed judgment that has seen newts and bats block major infrastructure projects is the one that requires almost 140,000 finance professionals to certify they are fit for their roles on an annual basis. And it’s the same short-term thinking that slows authorisations for innovative fintech companies, delaying their journey to growth and access to capital.
No other globally competitive financial services hub imposes such relentless bureaucracy on its businesses, and nor should we. This culture of risk aversion, to the point of obsession with stamping risk out in all its forms, is not an approach seen in any of our competitors. It is bad for businesses, bad for growth and bad for working people.
Given that financial services in the UK have not recovered as they should have since 2010, less capital has flowed to businesses. Investment in local economies has stalled. And opportunities to increase jobs or boost the pay of employees have been missed.
Six months ago, I promised we would change our approach and today we delivered on that promise. Indeed, we went further by setting out changes to address the culture of risk that is harming savers. Nearly 30mn people in the UK have cash sitting in accounts that pay around 1 per cent in interest. That was not safe under the last government, where inflation rose to 11 per cent. This has significantly eroded the spending power of people’s savings — and damaged the living standards of these savers.
The Covid-19 pandemic cruelly exposed the lack of savings that the country has to fall back on. Today, there is a broad consensus that supporting people to invest could have significant benefits for the financial health and resilience of many families.
This government will now provide this support, with an industry-led advertising campaign that explains the benefits of investing for everyone. In addition, from next April, banks will be able to alert customers to better investment options so they can make their savings go further and put more money in their pockets.
The Leeds reforms rebalance the scales and deliver on my commitment to regulate for growth. This is the kind of reform I spoke about in my Mais Lecture back in 2024, the kind that builds on stability and investment. It is also a blueprint for the rest of the economy. These reforms herald a new era of growth in financial services, but there’s still a lot of work to be done to get other sectors match fit.
In a world facing profound economic challenges, Britain will champion open markets, responsible innovation and collaborative global growth because we know our prosperity is inseparable from that of our trading partners.
That’s how we, as a globally connected trading nation, create an economy that works for working people here at home. An economy that is built on security and resilience, with Britain once again becoming a beacon of stability and a magnet for investment.
