Make use of new Brexit freedoms – City demands major shake up after UK takes back control

This week the Treasury hailed a “once-in-a-generation” opportunity to reform the way finance is regulated with proposals aimed at boosting growth and competitiveness. The Future Regulatory Framework Review aims to take advantage of the UK’s new freedoms since Brexit and would involve replacing EU financial services law with new rules from UK watchdogs the Financial Conduct Authority and the Prudential Regulation Authority. An overhaul of UK financial rules is something a number of sectors and groups have expressed growing interest in since Brexit. Speaking to Jack Neill-Hall of lobby group TheCityUK explained there were “real opportunities to work in rapidly developing areas like FinTech and Green Finance and put in new rules in an agile and responsive way.”

“The UK has an opportunity to innovate here which is one of the benefits of not negotiating with 27 other countries.”

Mr Neill-Hall explained the changes would strengthen Parliamentary oversight and give MPs more of a role.

He added: “After Brexit the UK onboarded the entire EU regulatory system pretty much word for word.”

“The result is longer than it needs to be and a bit of a mess.”

“Most don’t want to see huge changes but certainly some tweaks.”

Founder of investment services platform Vauban, Rémy Astié also believes there are big post-Brexit opportunities for a lighter and more modern regulatory framework.

He explained: “Currently, setting up a venture capital fund in the UK is close to 3x more expensive than in the US because of the heavy regulations.

“What this means is that more money is spent on fees and less on investing in the businesses of the future, but what it also means is that only big VC funds can exist.

He also pointed out that, unlike in the US, in the UK members of the public are not able to invest in venture capital funds despite being able to invest in “riskier” areas such as cryptocurrencies and directly into start-ups.

Changes to this he added would benefit the UK in terms of creating jobs and boosting innovation and GDP.

The announcements this week were met with support from a number of other players in the UK’s financial industry including the City of London Corporation.

Policy Chair Catherine McGuinness said: ““This aligns with the recommendations put forward by the sector to ensure the regulatory regime remains fit for purpose now that we have left the EU.

“It is crucial that our regulatory system is agile and dynamic – while maintaining high standards – as the UK makes its way as an independent trading nation.

“In particular, we welcome the Chancellor’s proposals to strengthen scrutiny and formalise the focus on international competitiveness.”

However the Bank of England have previously warned that attempting to increase competitiveness shouldn’t lead to softer regulation.

One area looking for change is the insurance industry with the Association of British Insurers arguing reforms could unlock £95bn worth of funding to boost the UK economy and tackle climate change.

Currently insurers are limited on their ability to invest in other companies by a set of regulations known as Solvency 2 which has been described as overburdensome and unnecessary, acting as a buffer to investment.

With greater ability to invest the ABI claim around £60bn a year could be put into green infrastructure initiatives to help the UK meet its Net Zero targets.

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The Government is currently also reviewing potential changes to Solvency 2 which the group has welcomed.

Charlotte Clark, the group’s Director of Regulation, said: “Solvency 2 reform will be key in increasing UK competitiveness, driving investment in the green economy and supporting economic growth across the UK.”

“We are pleased that the Government recognises our proposals for reform of the Risk Margin, for the Matching Adjustment to be less burdensome, and for reduced reporting requirements.”


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