Companies in the financial services sector say that recent changes to the regulatory regime have damaged the UK’s position as a leading financial centre and are reducing their competitiveness, according to research by BDO.
The firm’s survey, Friends or Foes?: From Conflict to Collaboration, examined developments since the formation of the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PCA) in April 2013.
In a poll of 269 senior risk and compliance professionals across the UK's financial services industry BDO found that 79% feel regulation is severely hampering their ability to behave competitively in the market, while 47% said that regulatory bodies do not understand enough about the commercial aspects of the market in which they operate and this is the cause of the industry's decreased competitiveness.
Nearly two thirds (64%) of those interviewed went as far as to say they are considering moving overseas because of heightened regulatory scrutiny.
Almost three-quarters (70%) of respondents believe UK regulators have only a marginal influence over the writing of EU regulation. To maintain the country's position as a leading financial centre, two thirds of firms (67%) believe the UK should focus on developing stronger relationships with global regulators.
Just one in three (33%) firms believe that more time should be spent lobbying the EU for regulation favourable to UK financial services business.
Alex Ellerton, BDO financial services partner, said: ‘There have always been tensions between the regulator and the regulated. However, the UK thrives on its reputation as a global financial centre and these results are concerning. We are in a relationship and this is the honeymoon period coming to an end.
The responsibility for all now is to keep up a clear, honest dialogue and work to ensure the UK remains attractive in a sustainable way. The "belt and braces" approach could end up cutting off the industry's circulation.’
Despite these findings, the report also found that 61% of respondents said the move to the dual FCA/PRA regime had been positive, due to an underlying belief in the need for real change after the financial crisis.
BDO says it now plans to form a working group consisting of major financial services firms, regulators and industry bodies to respond constructively to the challenges highlighted by the research. This group will put together a series of recommendations for a better working relationship between industry and regulators. Results are expected mid-2015.
