24 July 2025
When UK Chancellor Rachel Reeves declared regulation a “boot on the neck of businesses” at the Mansion House dinner, she wasn’t just addressing City elites - she was firing the starting gun on a new era of economic risk-taking. Her sweeping pledge to roll back financial red tape wasn’t just a policy shift; it was a commitment to reform. It was an ideological pivot, aligning Britain with a broader global trend: the return of animal spirits.
From Washington to Westminster, policymakers are once again betting that growth demands a lighter regulatory touch, even if that means tolerating more risk. But after more than a decade of stability built on post-crisis safeguards, the question looms: are we rekindling enterprise, or simply rewinding the tape to 2008?
Since the 2008 global financial crisis, the financial services sector has faced wave after wave of regulation. While much of it was necessary to restore trust and systemic stability, it hasn’t come cheap. The global financial sector spends billions of dollars annually on compliance, supervision, and audit processes. In the UK alone, major institutions are required to allocate significant compliance budgets, shaped by oversight from the FCA, PRA, and global regulatory frameworks, including Basel III, MiFID II, and Solvency II.
This burden, critics argue, has stifled innovation, deterred listings, and clogged the pipeline for capital creation. Reeves’ Mansion House proposals seek to shift the balance, tearing down rules that are seen as outdated or unnecessarily punitive.
The goal? Free up capital, restore risk appetite, and breathe life back into Britain’s stalled financial sector.
The timing is critical. The UK financial services industry has contracted by 7% in real terms since 2010, while the rest of the economy has grown by 28%. London’s IPO scene is on track for a 30-year low, and the country’s share of global financial services exports has slipped from 21% to 15%.
Reeves’ proposals include reforming the costly ring-fencing of retail and investment banks, overhauling the Financial Ombudsman Service, and rethinking the Senior Managers and Certification Regime - once a keystone of post-crisis accountability. There’s also a nod to the past with plans for a public campaign to drive retail investing, reminiscent of Thatcher’s “Tell Sid” privatisation push.
At the same time, regulators are moving to loosen mortgage lending constraints, speed up equity issuance processes, and delay the implementation of key Basel III provisions - a move that mirrors steps taken in the EU and US.
Veterans of past crises are sounding the alarm. The historical pattern is all too familiar: a boom leads to complacency, followed by deregulation, then excess, and finally, collapse.
“We know that when we take a more lax approach to financial rules, bad things happen,” warns Nicolas Véron of Bruegel. Michael Barr at the Fed echoed similar concerns last week, stressing that weakening regulatory architecture played a key role in past US financial crises.
And unlike the post-2008 environment, today’s fiscal firepower is far more limited. Governments are burdened with high debt levels and expensive welfare states. The capacity to bail out or stabilise in a future crisis is markedly reduced.
Still, for many in the financial sector, these reforms are long overdue. The regulatory pendulum had swung too far. Compliance had become a defensive industry in itself, rewarding box-ticking over real accountability. As one banker put it, “We’ve been punished long enough for 2008 - it’s time to get back to business.”
But the question is: what kind of business?
Are we rebuilding productive, innovation-driven markets? Or inviting speculative froth under the banner of deregulation? There is a fundamental difference between targeted reform and wholesale risk recalibration, between using a scalpel and a chainsaw.
However, the UK's reforms appear measured compared to the US, where watchdogs are being defunded, crypto rules are being diluted, and consumer protections are being weakened. The EU, meanwhile, is more focused on simplifying ESG rules and harmonising fragmented markets, with less appetite for higher-risk reforms.
With tax hikes expected in the Autumn Budget, the UK’s deregulatory push may only have a narrow window to generate goodwill and momentum. If the Mansion House vision is followed by higher levies on banks and businesses, any “animal spirits” revived in the City could evaporate just as quickly.
Britain’s long-term growth challenge is real, but so is the risk of repeating old mistakes. Reforms must strike a delicate balance: reviving dynamism without eroding resilience. Because when we forget why the red tape was tied in the first place, we risk one day having to wrap it back on - in a hurry, and at a far higher cost.
Back to News
+44 (0)20 7048 9400
Email Us
Client login
