A new sense of ambition

Financial services is a vital sector in driving growth and investment in the UK, but over the past five years activity has shrunk relative to GDP and the UK has lost market share in the majority of sectors in domestic and international banking, finance, and capital markets. This report analyses the importance of the industry to the UK economy, reviews the reform process so far, measures the opportunity in a range of sectors, and outlines a series of reforms to maximise the impact the industry can have on investment and growth. New Financial relies on support from the industry to fund its work. Our reports are available to New Financial member firms, government and regulators, and the media. If you would like to enquire about membership or receiving a copy of the report, please click here

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A new sense of ambition

The banking, finance, and capital markets industry is a vital sector of the UK economy in terms of driving growth and investment, and supporting employment, tax receipts, and exports. Over the past five years there has been a substantial programme of reform across the sector with welcome continuity since the general election (and more reforms to come in the King’s Speech). The aggregate impact of the reforms will be significant in removing barriers and improving the regulatory framework. But there is a growing sense that the volume of the reform programme is not matched by its ambition, substance, or impact.

It is not clear whether the reforms fully align the wider architecture of the industry to optimise growth in the UK economy in a rapidly changing and increasingly hostile world. The reforms have not always been backed by a clear and consistent vision for what the UK wants the financial services industry to look like and what role it should play in the economy and society. And they have often been hampered by mixed messages and inconsistency across government.

This report draws a clear distinction between the industry’s separate roles: its domestic role as an enabler of investment in and by UK companies, and its international role as a host venue for international activity and a hub for international firms (what we call ‘The Tale of Two Cities’). Whichever way you look at it, over the past five years the industry has been misfiring (despite an improvement in 2025 and a distinct change in mood). On the domestic side, investment in and by UK companies has shrunk. In international markets, the UK has lost ground in some key sectors to rival financial centres. And on qualitative measures, the relative attractiveness of the UK as a place to do business has deteriorated.

It may be tempting to blame this on Brexit, but this report argues that the challenges are more structural and in many cases can be traced back over decades. While the economic fallout from Brexit has affected market outcomes, in most cases this has either been relatively contained or indirect. The government cannot single-handedly solve this problem, and changing the regulatory framework is not a magic wand. But an ambitious, concerted, and consistent effort from the top down and across government - working in close alignment with the industry and with supervisors - to create the right climate and incentives across the system can lay the groundwork to enable the industry to rise to the challenge.

This report analyses:

• Why we should care about the banking, finance, and capital markets industry;

• How the industry has performed at a domestic and international level over the past five years;

• The progress of the welcome and extensive reform process so far;

• The scale of the need and opportunity for the industry to step up in specific sectors;

• Recommendations to inject a new sense of ambition into the reform agenda and how to maximise the value of the industry to the UK economy and for individuals in every corner of the country.

Here is a 10-point summary of this paper:

1. A vital sector: the banking, finance, and capital markets industry is a vital sector of the UK economy in terms of driving investment, growth, economic output, employment, tax receipts, and exports. It has two main roles: a domestic role in enabling investment by UK companies and UK investors to support growth and productivity; and an international role in acting as a host venue for international financial markets activity and as an important hub for international firms.

   
   

2. A stalling engine: over the past five years the industry has been misfiring. Its economic output has not kept up with the wider economy, its share of economic output and tax receipts has shrunk, exports have declined in real terms, and the number of jobs its supports in the UK has fallen.

   
   

3. The domestic side: in nearly 80% of the measures of domestic activity that we analysed the UK’s share of global activity has declined over the past five years, and in over 70% of cases activity has shrunk relative to GDP. This suggests the industry is struggling to perform its day job of supporting the wider economy.

   
   

4. The international side: the UK is the largest market for international activity in many sectors that we analysed but it is facing increased global competition. In two thirds of sectors its share of global activity has declined over the past five years and in 80% of sectors activity has shrunk relative to GDP.

   
   

5. The reform process: the active programme of reforms to the regulatory and structural framework over the past five years is welcome and in aggregate should have a substantial impact on market outcomes. However, there is a sense that in many areas of reform the UK will need to go further and faster.

   
   

6. A new strategy: the financial services growth and competitiveness strategy puts the sector at the heart of the government’s growth agenda. While it is the most comprehensive iteration of a strategy for the sector, there is a sense that many of the measures outlined don’t match the stated ambition, and that it would benefit from more ambition, more clarity, more specific targets, and more focus on market outcomes.

   
   

7. Blockages and barriers: the potential impact of reforms over the past five years has been held back by a number of factors including: a lack of political clarity and vision for the sector; mixed messages, inconsistencies, and contradictions in government policy; a complex reform process and unclear boundaries between politics and policy; trying to keep everyone happy with every reform; taking an incremental approach to existing regulations; and an underpowered financial services policy function.

   
   

8. Seizing the opportunity: there is a huge and untapped opportunity that is not matched by the government’s strategy or reform programme, including: nearly £200bn of investment in UK equities, growth companies, and infrastructure; more than doubling retail participation in capital markets; supporting more than £400bn in investment in decarbonisation and the transition; rebuilding closer relations with the EU and other like-minded countries; establishing London as the default location for international activity; and ensuring the UK is ready to embrace a digital future.

   
   

9. Recommendations for reform: we outline a series of more than 20 reforms in four broad areas including: further reforms to the regulatory framework; building on the reform of pensions and retail investment to create bigger pools of long-term capital; structural reforms to remove barriers and enable more investment in vital sectors; and ensuring that the regulatory framework is fit to meet future challenges.

   
   

10. The right platform: to enable the industry to deliver on its full potential, it will be vital to have the right platform in place: a refined strategy with more specific targets and more ambitious measures to achieve them; a clear vision for the industry with cross-party support; consistency across government to avoid sending mixed messages; a willingness to embrace winners and losers; and turbo-charging the financial policy function in government.