How (not) to regulate for growth: House of Lords committee report on the UK regulators’ secondary international competitiveness and growth objective

On 13 June 2025, the House of Lords Financial Services Regulation Committee (the Committee) published its report on the secondary international competitiveness and growth objective for the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). Taking stock almost two years after the secondary objective entered into force in August 2023, the Report sets out the Committee’s assessment of the current position and outlines its recommendations to the regulators and the government to maintain the attractiveness of the UK as a place for investment and to ensure that the regulators can facilitate growth in the wider economy.

This post provides a high level summary of some of the key points coming out of the Report.  For those wishing to read something a little more detailed we have also published a briefing.

Key criticisms by the Committee include:

• an overly risk-averse culture at the UK regulators;
• disproportionate capital requirements and compliance burdens;
• operational inefficiency; and 
• a lack of certainty and predictability of regulatory requirements. 

The Report also stresses the need for meaningful metrics to assess the performance of the regulators against their secondary objective, including benchmarking against international peers. However, the Committee recognises that the regulators alone cannot effect growth and that a joined-up approach between stakeholders is needed. 

The wider context 

The FCA, the PRA and the government have all been assessing necessary enhancements to the UK regulatory framework in parallel to the Committee’s work, and the Report’s findings are in many ways consistent with areas which they have also identified as requiring improvement. 

Recent publications reflecting these concerns include the government’s March 2025 Action Plan on the regulatory support of growth (which we previously commented on in this blog post), and we took stock more broadly earlier this year on the UK’s vision on ‘regulating for growth’ for financial services in 2025 and beyond. Steps which the regulators have already taken in this regard also include the abolition of the Payment Systems Regulator, the FCA’s initiative to improve the complexity of its rules and guidance following the introduction of the Consumer Duty and the PRA’s ‘strong and simple’ prudential framework for smaller banks and building societies. 

Alignment between authorities, but further work is needed and challenges remain

It is encouraging that the regulators, the government and the Committee broadly seem to be aligned on the key areas of focus to ensure the effective advancement of the secondary objective. But what remains to be seen is how far they agree on the details of how to address them. 

Significant questions also remain as to exactly how the Committee’s recommendations can be implemented. In particular:

1. How should cultural change to reduce regulatory risk aversion be effected? 

To ensure an effective change to the FCA’s and the PRA’s approach to risk-taking, a broader change in attitudes beyond the regulators and extending to government, Parliament and other stakeholders may be needed, which it will be difficult to regulate for. 

1. How can performance be effectively measured – both the impact of the regulators’ actions on the economy and their performance as against counterparts in other jurisdictions? 

This will be key to assessing the regulators’ performance against the secondary objective, but poses practical and conceptual challenges, as we have previously considered in our report with TheCityUK on this topic.

1. To what extent should the government be expected to give guidance and provide parameters to the (independent) regulators on what it means to facilitate growth and international competitiveness? 

The regulators will need to be given sufficient parameters by the government and Parliament to be able to regulate effectively, while maintaining their division of responsibilities. 

The government is planning to publish its Financial Services Growth and Competitiveness Strategy at the Chancellor’s Mansion House speech on 15 July 2025, which may bring some initial clarity on the government’s views on the Report and its recommendations. 

Next steps: evidencing progress 

The Report also calls for reports (i) by the regulators to the Committee on the implementation of the Committee’s recommendations, within 12 months, and (ii) by the government to Parliament and the Committee on whether the secondary objective has facilitated growth in the wider economy, within 12 months and on an annual basis. The Report recommends that the government keep the secondary objective under review.