UK Regulatory Reform: Turning Bold Ambition into Bold Action

This week’s Mansion House speech and the publication of the Financial Services Growth and Competitiveness Strategy marked an important statement of intent. The Government has committed to modernising the UK’s regulatory environment to drive investment, unlock capital and reinforce the country’s position as a leading global financial centre.

For the private capital industry, a significant and growing part of the UK economy that already supports 2.5 million jobs and backs more than 13,000 businesses across the nations and regions of the UK, this is a welcome direction of travel. Notably and importantly, the strategy sets out the Government’s ambition to “make the UK a world leader for managing private market assets”.

The Strategy outlines a series of planned reforms, including commitments to:

• Set new shorter deadlines for determining regulatory applications to make it quick and easier to do business in the UK, and support faster authorisation for new firms.
• Strip away duplicative processes to enable regulators to become more agile and responsive.
• Require regulators to take a longer-term, more strategic approach to regulation and supervision with a new requirement to “have regard” to their growth-orientated remit letters. 
• Conduct a review of the appropriateness of remuneration rules for asset managers and investment firms. 
• Publish an engagement paper on potential reforms to the market risk framework for the Investment Firm Prudential Regime (IFPR).
• Streamline the Senior Managers and Certification Regime.

These steps build on the wider “Leeds Reforms” agenda and form part of a broader push to reduce unnecessary friction, support innovation and improve the UK’s competitiveness and across financial services.

This week, the FCA has also committed to reviewing and modernising its client categorisation rules to unlock investment. This is a long-standing BVCA ask. If designed well, these reforms could expand access to private markets for knowledgeable and experienced investors, as well as ease compliance burdens around employee participation in co-investment and carried interest schemes. If the FCA can deliver on these promises, it will be a proportionate and meaningful step, unlocking new capital and participation without undermining investor protection.

However, the delivery challenge should not be underestimated. As we highlighted in our response to the FCA’s Call for Input on the Future Regulation of Alternative Fund Managers, action must live up to bold ambition. The FCA’s consumer protection mandate overrides its secondary competitiveness and growth objective. Without clear government direction, industry input and support to evidence the need for change, regulatory reform proposals risk missing the mark and falling short of stated expectations. This was especially evident in the FCA’s proposals for a new regime for UK Alternative Investment Fund Managers earlier this year, which proposed changes that would increase regulatory requirements for small firms relative to the existing regime. 

That is why the BVCA is actively engaged across all fronts of the regulatory reform agenda. We are, amongst other things:

• Advocating for more competitive and proportionate future regulation of private capital. 
• Seeking streamlined and more proportionate regulatory application, notification and authorisation requirements. 
• Engaging with the FCA and HM Treasury on tailoring remuneration and prudential rules.
• Supporting constructive changes to the client categorisation regime.

Our approach is underpinned by clear support from our members, working groups and technical committees for a bold strategy. We recognise that regulatory reform is not simply a technical exercise, it is central to the UK’s ability to attract investment, scale businesses and compete globally. The Government has set the ambition, and we are working to ensure that the promised reforms do not just sound good in ministerial speeches but also deliver in practice.

The BVCA will continue to lead from the front to ensure that regulation becomes an enabler of private capital’s potential to deliver UK growth, not a barrier to it.

For more information, contact Nick Chipperfield, Senior Policy Manager.

Authored by Nick Chipperfield, 
Senior Policy Manager, BVCA