UK Chancellor Reveals Ambitious Financial Reforms in Landmark Speech

In her inaugural Mansion House speech on July 15, 2025, UK Chancellor Rachel Reeves unveiled a comprehensive suite of financial reforms aimed at stimulating economic growth and enhancing the competitiveness of the UK's financial services sector. The proposed measures encompass pension system consolidation, capital markets revitalization, regulatory adjustments, sustainable finance initiatives, and mortgage market reforms.

The UK has faced economic challenges, including consecutive GDP contractions and fiscal constraints. The government's 10-year vision for financial services and a new industrial strategy, supported by a £725 billion infrastructure commitment, aim to address these issues. The City of London has experienced a decline in competitiveness, particularly since Brexit, which resulted in the loss of approximately 40,000 jobs and a shift of financial business to EU cities and global hubs like New York and Singapore.

Pension System Overhaul

The government plans to consolidate defined contribution pension schemes and the Local Government Pension Scheme into larger "megafunds." This consolidation aims to unlock approximately £80 billion for investment in businesses and infrastructure. The reforms will be introduced through a new Pension Schemes Bill next year, consolidating defined contribution schemes and pooling assets from 86 local government pension scheme authorities. The megafunds will mirror schemes in Australia and Canada, where pension funds take advantage of size to invest in assets that have higher growth potential.

Capital Markets Revitalization

Reforms will allow UK-listed companies to raise up to 75% of their equity through secondary share issues without a detailed prospectus, an increase from the current 20% threshold. This change is expected to save companies approximately £40 million annually. The time between issuing a prospectus and an initial public offering will be halved to three days. Introduction of a simplified standard bond prospectus for retail investor bond issues. Establishment of a platform allowing companies to raise more than £5 million in shares or bonds without lengthy prospectuses, akin to crowdfunding but for larger deals.

Regulatory Adjustments

The Chancellor issued growth-focused remit letters to key regulatory bodies, including the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), emphasizing the importance of supporting economic growth and competitiveness. The Bank of England raised the minimum asset threshold for banks required to issue loss-absorbing debt under the Minimum Requirement for own funds and Eligible Liabilities (MREL) to £25 billion-£40 billion, up from £15 billion-£25 billion. This move aims to ensure that only larger banks must prepare for potential resolution via bail-ins, mitigating the need for taxpayer-funded rescues.

Sustainable Finance Initiatives

Plans include regulating Environmental, Social, and Governance (ESG) ratings providers and consulting on a UK Green Taxonomy. The FCA will introduce disclosure requirements for listed companies in line with new Sustainability Reporting Standards and expand its Sustainability Disclosure Requirements (SDR) regime to portfolio management.

Mortgage Market Reforms

The government will make permanent a scheme that incentivizes banks to offer high loan-to-value mortgages, fulfilling a Labour election campaign promise. The FCA will explore allowing rental payment histories to count as proof of creditworthiness.

Chancellor Rachel Reeves emphasized the importance of these reforms, stating, "We are committed to positioning financial services at the core of the UK’s growth strategy and to spur broader economic benefits." The Financial Conduct Authority supports the changes, noting they will "foster innovation and market competitiveness."

These reforms collectively aim to stimulate economic growth, enhance the competitiveness of the UK's financial services sector, and address various economic challenges facing the nation.