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.

Economic Growth

Baroness Moyo Excerpts

Thursday 23rd January 2025 Lords Chamber

[Baroness Moyo (Non-Afl)]

My Lords, I too thank the noble Lord, Lord Farmer, for bringing this debate to the Chamber. I believe that this debate is fundamentally about determining the correct policy sequence to achieve economic growth. Do we wait for stability in government finances, even if that means raising taxes and deterring investment today, with the view that investors will return once the economy is stabilised, or should the Government prioritise protecting investors in the belief that their investment capital propels growth and in turn increases government tax-take to fund public goods? There is always a risk that a concept such as economic growth gets used so much that it becomes detached from its core elements and the inputs that drive it. As a reminder, it is worth looking at the United Kingdom’s prospects through the prism of the three classical inputs for economic growth: capital, labour, and productivity.

First, in terms of capital—in essence, how much money you have—Britain’s debt and deficits are well known to be distressed on a historic basis. Britain’s public debt-to-GDP ratio is forecast to breach 100% this year. Together with a constrained fiscus, these will be headwinds for growth. The second is labour, which pertains to the quantity and quality of the workforce. On quantity, we know that 9.3 million people between the ages of 16 and 64 were economically inactive as of the end of 2024. On quality, the latest OECD PISA assessment in 2022 shows that the United Kingdom’s scores for reading, mathematics and science all fell from those in 2018. Worse still, science scores have fallen in three consecutive PISA reports. The third is productivity, which explains roughly 60% of why one country grows and another does not. In the third quarter of 2024, UK productivity was estimated to have fallen by 1.8% versus the prior year, and the story of UK productivity is that it has grown by only 1.3% since pre-pandemic levels.

It is my sense that we are tilted too much towards stability today, taking a risky gamble that could lead to too little investment tomorrow. The Office for Budget Responsibility raised cautions of a disturbing future that awaits the United Kingdom by 2050. In its baseline projections, public spending will rise from 45% to over 60% of GDP, while revenues remain at around 40% of GDP. Debt will rise to 270% of GDP. All the while, the Government remain vulnerable to shocks, including: an ageing population with rising healthcare and retirement needs; a falling birth rate; climate change, with threats from more extreme weather, and ever rising geopolitical tensions which will demand greater defence spending.

Without investors and their investment, the picture I paint here will be materially worse. On a more granular level, it is good news that the Government included a £3.5 billion investment in the technology sector in their Budget, with £1 billion dedicated to advancing supercomputing and AI technologies. A bigger and stronger venture capital environment, from which the realised dividends would be considerable, is crucial for this long-term growth story.

Take the United States as an example. According to a Goldman Sachs report, the big six technology firms, all with roots in venture capital, added roughly $5.3 trillion of market value in 2024. This amount is larger than the current nominal GDP of every single country in the world, except the United States and China. Venture capital has significantly influenced the US economy, with some estimates saying that 43% of all public companies since 1979 were venture backed, accounting for 57% of total market value and 38% of employees.

We can drive this sort of dynamism and success here in the UK too by forging, nurturing and creating a culture of risk capital, where, beyond the traditional banking system, entrepreneurs can raise millions in seed capital to do something that has only a low chance of working but where investors bet that the expected value of the investment is still positive. I see no reason why the Government should not, through serious regulatory subsidies and tax incentives, spark the British risk appetite in the same way that the US Government help to ignite Silicon Valley.