bpesearch works closely with organisations within the financial services sector so has been particularly interested in the Labour Party’s manifesto points surrounding the industry.
The financial services industry contributed 12% of the UK’s economic output in 2023 so it is crucial that the policies our new Government implements are robust and prioritise the growth of the sector.
Our new Government’s vision for the sector is based on six policy priorities:
1. Deliver inclusive growth of the UK’s financial services sector by scaling regional financial centres alongside established hubs in London and Edinburgh and unlocking the full potential of the mutuals sector.
The party has a longstanding commitment to doubling the UK’s overall co-op economy which means this is positive news to member-owned mutual organisations. Regulatory reform has long been on the wishlist for the co-op and mutuals sector, spurred on by cases such as the attempted demutualisation of LV= in 2021.
Labour supported last year’s reforms in the Financial Services and Markets Act which allow credit unions to offer more products, and said that that, if elected, it would build on this to “require financial services regulators and policymakers to report annually to Parliament on how they have considered the specific needs of mutuals and the need for a level playing field with the wider financial services sector“.
2. Enhance the international competitiveness of the UK’s financial services sector by pursuing a more joined up and innovation-centred approach to regulation and supervision, streamlining the regulatory rulebook in line with the Consumer Duty, strengthening our international engagement in financial services, and building a more collaborative relationship with the EU.
The introduction of the Financial Conduct Authority’s consumer duty in 2023 marked a significant milestone in the financial services industry, compelling firms to undergo a substantial cultural transformation.
Streamlining the FCA’s 10,000 page regulatory handbook will be a lengthy process and not one we imagine will be implemented in the near future however we are interested in seeing the impact this has on financial institutions and whether a pared back version will mean those that flout the rules, will have less places to hide and be held accountable.
3. Reinforce consumer protection and financial inclusion by exploring alternative models for increasing financial resilience including longer-term fixed rate mortgages, adopting a coordinated cross-sectoral approach to fraud prevention, creating a national financial inclusion strategy, and regulating the Buy Now Pay Later sector.
We believe that the Buy Now Pay Later sector is here to stay and introduction of aggressive consumer facing marketing for the likes of Klarna has normalised credit lines for low value purchases amongst younger demographics. The introduction of regulations on this sector is much welcomed and these new lines of credit should be treated and regulated like traditional credit cards.
With regards to mortgages, longer fixed-rate deals would enable people to buy houses with smaller deposits and with lower monthly repayments allowing more people to get on the property ladder however to authentically do this, significant strides need to be made with how ready available accessibly priced homes are.25-year fixed mortgages are already available in the UK, but receive relatively little interest as people tend to choose the product that offers the lowest interest rate at that time meaning the policy is good in principal but it’s yet to be seen whether it will be as successful in practice.
4. Lead the world in sustainable finance by making the UK a global hub for green finance activity, delivering a world-leading green finance regulatory framework, and partnering with the financial services sector to support the decarbonisation of our homes.
Labour has promised to support “greening” of the housing stock, including expanding the offering of green mortgages and affordable products to meet increased demand for retrofitting work such as insulation, heat pumps, and solar panels. However, to secure the UK’s position as the world leader in green finance and capture over £1 trillion of the global green economy, the Party must establish a clear, credible, and transparent framework to provide investors with the certainty they need to invest in the UK.
5. Embrace innovation and fintech as the future of financial services by becoming a global standard-setter for the use of AI in FS, delivering the next phase of Open Banking, defining a roadmap for Open Finance, embracing securities tokenisation and a central bank digital currency, and establishing a regulatory sandbox for financial products to reach underserved communities.
We have discussed our predictions regarding the importance of AI in financial services and it is reassuring to see that this is being prioritised by the Labour party. Seen as a key course of innovation in the sector, Labour argues that the UK can lead the work in AI thanks to its strong regulations. The FS industry has adopted AI in innovative ways and it will be interesting to see how this further develops and consequently affects the job market within the industry.
6. Reinvigorate our capital markets by reviewing the pensions and retirement savings landscape, enabling greater consolidation of all types of schemes, empowering the British Business Bank to invest more in growth capital, establishing a British ‘Tibi’ scheme to increase institutional investment in venture capital and small cap growth equity, and increasing investment in infrastructure and green industries through Solvency UK reforms.
Labour says it will encourage UK pension funds to invest in UK assets to strengthen the domestic investment market. It also says it will work with local government pension schemes to develop in-house fund management capabilities within pools to boost returns and create jobs in the regions.
Whilst all of the above sound promising, it will be interesting to see which policies are not just implemented, but implemented properly. The UK is a major player in the financial services industry and the evolution and growth of the sector has generated jobs and revenue across the country so it’s crucial that further investment is made.
What are your thoughts on the impact our new Government will have on the industry?
