Secondary International Competitiveness and Growth Objective (FSR Committee Report)

Baroness Moyo Excerpts

Wednesday 11th March 2026 Grand Committee

[Baroness Moyo (Non-Afl)]

My Lords, I point to my registered interests: I serve on the boards of Chevron Corporation, Starbucks and the Oxford University investment endowment, all of which are impacted by the regulatory environment in the United Kingdom. I welcome that we are having a debate about a growth objective for our financial regulatory environment and regulators—the Financial Conduct Authority and the Prudential Regulation Authority. Even so, this report is clear that, although Parliament gave the mandate of a growth objective to the regulators back in 2023, it has not yet adequately been acted upon.

It is understandable that, in the report, many in the financial services industry have expressed frustration at the persistently high regulatory burden in the United Kingdom. But, in the historic context, the intrinsic caution shown by regulators is not a surprise, given the scale of the damage caused in the 2008 global financial crisis to both the financial system and the wider economy. Yet such an aggressive regulatory stance has considerable costs. For example—I know this from my own experience, having served as a board member of Barclays bank from 2009—the regulatory reaction and, specifically, the costs ascribed by the UK regulators to holding certain assets ultimately led to the disposal of international businesses, a decision that the firm would likely not otherwise have taken.

Overcoming regulatory caution is clearly not simply down to a mandate in a piece of legislation; it is about a fundamental shift in mindset, culture and risk aversion, which has already been mentioned—a shift that those working in a regulatory body may see as counterintuitive. Yet this shift is much needed. I therefore support the call in the paper for the FCA’s and PRA’s senior leadership to drive cultural change through their organisations. We of course must all recognise that, although not impossible, this is a very difficult proposition.

Such a shift must surely recognise and involve a concerted investment in education around two specific points. The first is the need for a fundamental understanding of the harm of the prevailing regulatory burden and the cost to business and economic growth of the status quo. In particular, it is vital to understand the consequences of regulatory duplication and overreach for business output, productivity, employment, taxation and wider economic growth. Specifically, regulators need a better and more practical understanding of how high regulatory burdens impose real costs in terms of time and financial expense, making the UK less competitive on the international stage. I was struck by the data showing that one firm employed 78 compliance officers for the UK market alone, compared to 73 covering 40 other countries in its European and Middle Eastern operations.

Secondly, it is important to innately understand the impact of regulation on innovation. This is a particularly crucial point given the enormous benefits as well as the costs that AI promises. It should be a priority to really grasp how this AI supercycle could append the UK’s growth fortunes and longer-term outlook for the country’s prosperity. In the United States today, for example, estimates suggest that, through productivity gains and increased capital investment, AI could add as much as 1.5 percentage points per year to the country’s GDP growth.

Were similar gains to occur in the United Kingdom— I am in a sense spitballing here—GDP growth could soar close to 3% per year here in the UK, thereby clearing a crucial hurdle to where we can put a dent in poverty and materially improve living standards within a generation. Yet, despite this appealing prospect, UK regulation is regularly blamed for weak capital markets, including a poor IPO environment, and paltry investment by cornerstone investors such as UK pension funds, endowments and insurance companies, all of which should be powering AI investment.

The unattractive UK investment landscape, buttressed by constraining regulation, could at least in part explain why the report highlights concern over a series C funding gap, which is forcing much-needed growth companies to leave the UK when they seek to raise in excess of £50 to £100 million.

To put it simply, the country needs less regulation, not more. In essence, policy should be attracting investment, not forcing investors, and a more growth-focused regulator is bound to attract more capital investment. I therefore agree with the serious reservations expressed by the committee regarding any proposal to mandate pension funds to comply with the prescribed asset allocation.

This debate comes when the Chancellor of the Exchequer has downgraded the growth outlook of the country to just 1.1% in 2026. Worryingly, this reflects how the country was already on a long-term structural economic decline, and the war in Iran will only dampen our growth prospects.

The essential question is this: in five to 10 years from now, will Britain’s economy in real terms be bigger, smaller or just the same? To alter our economic prospects from today’s growth malaise and set us on a prosperous trajectory, regulation must be relevant, on point and, most importantly, appropriately curtailed. Doing so will ensure the longer-term prospects of the financial services sector, which, as noble Lords have already heard, is critical for the economy. It will ensure that the sector is stronger and better equipped to serve as an engine of growth for our economy.