Labour must fund regulators or UK fintech could ‘falter’, Tony Blair’s think tank warns
A potential future Labour government must pump more cash into financial regulators and ensure they are properly “resourced” or the UK’s fintech sector could slide into obscurity, Tony Blair’s think tank has warned.
In a sweeping package of policy recommendations published today, the Tony Blair Institute for Global Change and tech lobby group the Start-Up Coalition said the UK’s financial tech sector “may have blossomed fast, but it could falter just as quickly” without close attention from lawmakers.
“From regulatory stagnation and regulator resource limitations to growing international competition, the UK’s prize fintech sector should not be taken for granted,” the two groups warned in a new report.
“Investment in the sector has decreased 48 per cent year on year in 2023 in contrast to sustained growth in the preceding years, demonstrating that the sector is far from immune to global macroeconomic headwinds.”
Among its list of policy asks, the report said that if Labour wins the next election it must inject more cash into regulators like the Financial Conduct Authority to ensure they can handle a swelling remit, which is set to stretch across new sectors like crypto and buy-now pay-later.
Labour has already said it is targeting a shake-up of financial regulation if it is elected to power.
In a major offensive on financial services earlier this year, shadow City minister Tulip Siddiq said the party would look to “modernise the regulatory burden” on UK financial firms and push City watchdogs to identify and cut “redundant” rules that have hampered the growth of the financial services sector in general.
However, the new report from the two think-tanks said that while “‘reducing red-tape’ often makes for great rhetoric, it can mean uncertainty for startups”.
“To maximise the chances of success on regulatory reform, the next government must commit to adequately resourcing the financial regulators,” they added.
In its recent annual plans, the FCA said it annual funding requirement is likely to increase by 10.7 per cent to £755m for the 2024-25 financial year.
The call from Blair’s group and the Start-Up Coalition came alongside a list of policy recommendations including a call to push ahead with buy-now pay-later regulation in the first 100 days of government and an overhaul of the R&D tax credit system.
A future government should also “not hold financial services institutions’ use of AI to a higher standard by default,” they added, calling for the regulator to be empowered to issue AI-specific guidance for compliance.
The Labour party was contacted for comment. The report has not been endorsed by the party.
In its financial services review last year, the party said it would “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.”