Chancellor Rachel Reeves has announced plans to broaden her deregulation drive beyond the City of London to the wider UK economy, calling for a shift away from what she described as Britain’s “obsessive” culture of risk aversion.
Writing in the Financial Times, Reeves argued that excessive regulation is hampering business growth and innovation, stating, “It is bad for businesses, bad for growth and bad for working people.” The remarks follow her high-profile speech at the Mansion House, where she outlined the need for a bold regulatory overhaul to promote national prosperity.
The chancellor unveiled what she called the most significant cut in financial services regulation in over a decade, including reforms to ringfencing rules separating retail and investment banking, reductions in capital and reporting obligations, and changes to the Senior Managers Regime. The widely criticized Financial Ombudsman Service is also set for restructuring.
Reeves emphasized that Britain must be willing to take more economic risks, suggesting that post-2008 financial crisis reforms may have gone too far in curbing financial innovation. As an example, she compared strict wildlife protections blocking infrastructure projects to regulatory requirements demanding that nearly 140,000 finance professionals annually self-certify their fitness for their roles.
In a bid to revitalize the London Stock Exchange, Reeves also announced the formation of a new task force to support domestic business listings and growth. Meanwhile, she hinted at further potential changes to ISA investment rules and confirmed her willingness to encourage pension funds to diversify into higher-risk assets, though she does not plan to enforce mandates at this stage.
A national advertising campaign is also in the works to encourage the public to shift savings from cash to stocks and shares, aimed at boosting long-term returns and supporting capital markets.
Despite Labour’s promises of reform, some economists remain skeptical. Helen Miller, director at the Institute for Fiscal Studies, acknowledged efforts to boost investment but said the approach lacks the urgency and scale required: “Growth should be the number one mission. We should be throwing the kitchen sink at it, but it doesn’t feel like that.”
She added that the government’s increasing focus on defence spending is limiting its capacity to invest in critical areas like local infrastructure and non-military research.
Meanwhile, Richard Hughes, chair of the Office for Budget Responsibility, warned of Britain’s precarious fiscal position. Public debt levels are near historic highs, and Hughes cautioned that the UK’s ability to absorb future economic shocks may be limited, especially given the high existing tax burden.
Reeves, aware of internal pressure from Labour MPs and the looming autumn Budget, reiterated her commitment to fiscal discipline. “Fiscal stability is a choice that reflects economic reality,” she said. “The prime minister, this government, and I remain committed to our non-negotiable fiscal rules.”
In a lighthearted moment, Reeves referenced her emotional appearance in Parliament: “Recently, a girl at a school visit asked me, ‘What job would you do if you could do any job in the world?’ Given the events of the last few weeks, I suspect many of you would sympathize if I said, ‘Anything but chancellor.’ But I didn’t.”
Despite her ambitions, Reeves faces the dual challenge of spurring economic growth while managing a fragile fiscal landscape. Whether her deregulation push will deliver the economic transformation she envisions remains to be seen.
