Further Reform For UK Private Fund Managers: The Government's Road Map For Growth In Financial Services

In our previous alert "Reforming the UK Regime for Private Fund Managers: FCA and HMT Papers Point the Way," we discussed the proposals of the Financial Conduct Authority (FCA) and His Majesty's Treasury (HMT) for reform of alternative investment fund management (the FCA/HMT AIFM proposals). On 15 July 2025, Chancellor of the Exchequer Rachel Reeves delivered her Mansion House 2025 speech unveiling the Leeds Reforms, a programme for financial services reforms to drive investment and growth in the sector. Expressed by Reeves as the widest reforms to financial services regulation in more than a decade, these series of measures include proposals to reassess the current approach to risk and further reduce the regulatory burden for businesses. In parallel, the government, including HMT, has launched the new Financial Services Growth and Competitiveness Strategy (the strategy), setting out a 10-year vision for kick-starting growth in the financial services sector.

Fund Management: A Central Focus

Although the strategy contains general proposals, unlike the FCA/HMT AIFM proposals, it identifies asset management and wholesale services as one of the five priority growth opportunities.¹ The strategy also sets out core objectives to achieve success in this sector:

Placing portfolio management at the heart of policymaking
Making the UK the most attractive place globally for managing investments, emphasising private markets leadership (venture capital, private equity, and private debt)
Staying ahead of innovation impacting the sector
Building a retail investment culture, noting that the UK currently has the lowest rate of retail investment among leading industrialized nations (i.e., the G7)

From the plethora of announcements and related publications, we have identified the topics that follow, which should be especially noteworthy for private fund managers. Before looking at these topics, it is worth noting that the strategy references various initiatives, including the reform of UK Alterative Investment Fund Managers Regulations, covered by the FCA/HMT AIFM proposals; the Pensions Investment Review, an ambitious package of reforms for venture capital funds to follow that sets out a series of measures to ensure that defined contribution pension schemes and the local government pension schemes take advantage of consolidation and scale and invest in a fuller range of asset classes (as discussed in our alert "Gaining Access to UK Pension Investors: Key Questions for Private Fund Managers"); and PISCES (Private Intermittent Securities Capital Exchange System), the new stock exchange for private company shares that opened in June 2025.

Faster Regulatory Processes

The statutory deadlines for the FCA and Prudential Regulation Authority (PRA) are to be cut, with regulators seeking to beat these targets when possible (read "FCA sets faster targets for authorisations"). The deadlines are shortened:

from six to four months for new firm authorisations and variations of permission;
from 12 to 10 months for incomplete applications; and
from three to two months for senior manager approval.

In addition, the introduction of a new streamlined authorisation regime for innovative startups (with a consultation on this to follow in autumn 2025) will allow these firms to conduct limited regulated activities on a provisional basis.

Fewer Statutory Principles

The principles in the Financial Services and Markets Act 2000 (FSMA) that the FCA and PRA must "have regard" to when making decisions are to be reduced, with a requirement to focus on long-term strategy rather than day-to-day decisions. (Refer to "Regulatory Environment – Cross-Cutting Reforms.")

Facilitating Greater Market Access for Overseas Firms

The proposals include continuing work to identify opportunities and facilitate cross-border financial services. Specific policies flagged are: (i) establishing a new concierge service, the Office for Investment: Financial Services, by October 2025, to attract and support firms in the five priority growth opportunities to better navigate the UK regulatory landscape; and (ii) implementation of the Overseas Recognition Regimes to review the recognition of overseas jurisdictions' regulatory frameworks, discussed in "Overseas Recognition Regimes Guidance Document."

A Less Onerous Senior Managers and Certification Regime (SM&CR)

We previously covered the recent changes associated with the SM&CR in "FCA Non-Financial Misconduct Rules: Private Fund Managers, Fintechs, and Other Non-Banks Firmly in Scope." It is not clear that the strategy will affect these changes, but the proposals include reducing the total number of certification roles by 15%.

Changes are also proposed to the "12-week rule" in relation to the performance of senior manager function (SMF) roles without preapproval when an absence is temporary or reasonably unforeseen. This rule will be changed to give the firm 12 weeks to submit an SMF application rather than 12 weeks to receive an approval. The approval process for SMFs will also be streamlined, and the validity period of criminal record checks for SMF applications will be increased.

Longer-term proposals include replacing the certification regime with a less burdensome and complex regime, removing the certified persons directory, and streamlining the reporting of conduct rule breaches.

These reforms are to be split into two phases; phase one contains amendments the FCA and PRA can make without changes to FSMA, and phase two follows the proposed changes to FSMA, which include the removal of criteria relating to the certification regime to give the Authorities greater flexibility to tailor the requirements. Read the FCA and PRA consultations and the HMT consultation, which are open for comment until 7 October 2025.

Clarity on Application of the Consumer Duty

We previously wrote about the consumer duty and private fund managers in "The UK Consumer Duty: The FCA's Reminder for Private Fund Managers." The strategy focuses on the role of the consumer duty for wholesale firms engaged in distribution chains that impact retail consumers and strives to provide certainty on the categorisation of professional clients, with the FCA due to report back by the end of September 2025 (refer to "Regulatory Environment – Cross-Cutting Reforms"). This chimes with the FCA's recent press release announcing its plan to review its client categorisation rules to unlock more opportunities for wealthy investors and support capital market (with details to follow).

Increased Retail Access

The following strategy goals are relevant to retail access:

"Prioritising the growth of the transition finance market," including seeking practical ways to scale; reforms to unlock defined contribution pension investment in transition assets; and increasing funding opportunities.
Moving the "Long-Term Asset Funds from the Innovative Finance Individual Savings Account (ISA) to the Stocks & Shares ISA from April 2026" to broaden access for those seeking long-term investment.
Moving "towards informing, rather than warning, consumers about the benefits and risks of investing."
Facilitating the development of a new "targeted support" regime to create a new specified activity of targeted support, which does not fall under the regulated activity of advising on investments. This is covered in "Targeted Support Policy Note."

Continued Development of Sustainable Finance

The strategy states that "transition to a net zero, climate resilient and nature positive economy represents a significant growth opportunity and will require the significant mobilisation of private capital, as demand for sustainable finance products increases globally." Points of note for private managers are: (i) "consulting on proposed next steps on the UK Sustainability Reporting Standards and the assurance of sustainability reporting"; (ii) considering how to "support SMEs to decarbonise while growing their businesses"; and (iii) "regulating environmental, social, and governance (ESG) ratings providers" (legislation expected later this year). As noted in its response, HMT has decided not to proceed with a UK Green Taxonomy but reiterated its commitment to "drive the green transition and deliver economic growth."

Background and European Landscape

An agenda of growth and competitiveness has been a UK theme for the past few months, and it is helpful to see tangible plans and a timescale to achieve them. Despite its success, including being one of the largest sectors in the UK economy, accounting for 9% of its economic output and employing 1.2 million people, the financial services sector saw a decline in its global export share from 21% in 2010 to 15% in 2023. This is expressed to be a result of the emergence and growth of competitor jurisdictions. The government intends to use these measures as a baseline to double the average growth rate of financial services net exports over the next decade. What will be important to the industry is to make sure that the specific details and measures to follow match the overall aim of facilitating UK growth.

The UK work coincides with that of the EU on its capital markets integration (part of its effort rolling out the Savings and Investment Union strategy) — in which, in a similar vein, it seeks to identify and address barriers to facilitate a more market-driven process for developing and integrating EU capital markets, thereby enhancing financial opportunities and boosting economic competitiveness. However, we still await the specific measures to be proposed from the EU.

Other Parts of the Strategy

The comprehensive package of measures in the strategy includes those relating to payment services and payments infrastructure, technology and digitalisation, UK capital markets, insurance and reinsurance, and the redress system. Although these may be relevant to the managers of funds that invest in these businesses, they should be less directly relevant to the managers' businesses.

In addition to the previously noted briefings, you may also be interested in reading the following:

Footnote

1. The other priority growth opportunities are: insurance and reinsurance, sustainable finance, fintech, and capital markets including retail investment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.