by Jonathan Eida, researcher
The chancellor claims to be desperate for growth. The latest quarterly GDP data made grim reading, with output rising by a meagre 0.1 per cent. This was hardly surprising. It follows years of anaemic economic performance and the forward outlook remains similarly bleak. The IMF has nudged up its UK GDP forecast for 2025 from 1.2 to 1.3 per cent, yet lowered the 2026 projection from 1.4 to 1.3 per cent. In short, the UK remains stuck in a low-growth cycle.
Against this backdrop, Rachel Reeves has turned her focus to deregulating the financial services sector. In her Mansion House speech, she set out a deregulatory agenda that included reforming the Financial Ombudsman Service, reducing bank capital requirements, reviewing the impact of Consumer Duty on wholesale markets and ensuring regulators interpret their mandates with growth in mind. This followed an earlier pledge to abolish the Payment Systems Regulator (PSR).
However, the scale of realignment required to genuinely catalyse growth is far greater than these measures suggest. Recent research from the TaxPayers’ Alliance reveals the dramatic expansion of financial regulators over the past decade, the implications of which are stark.
Across just five financial regulators, total headcount has risen by more than 50 per cent in ten years, equivalent to almost 4,500 additional personnel. The PSR experienced the sharpest increase, with its workforce growing by nearly 200 per cent. Staffing costs have surged accordingly. At the Financial Conduct Authority (FCA), staff costs grew from £324 million in 2015-16 to £492 million in 2024-25, a rise of 52 per cent or £168 million. The FCA’s income also climbed steeply, from £554 million to £820 million, up £266 million, the largest cash-terms increase among regulators examined.
These trends highlight the expanding scale and influence of the regulatory state. Firms face rising compliance burdens, not only through higher regulatory fees, but also through the substantial time and manpower required to meet ever-growing reporting obligations. Yet understanding the cause of this growth is crucial to diagnosing the deeper issues at play.
In response to the TPA’s findings, the FCA told City A.M. that “we need to make sure we have the people to cover a remit that parliament has regularly expanded.” This reveals a central tension: regulators may partly be responsible for their own growth, but government has consistently broadened their responsibilities in ways that make expansion inevitable.
For example, the government recently consulted on bringing ESG rating firms under FCA oversight, almost certainly this will require further increases in regulatory capacity. This follows the 2023 introduction of a new secondary objective for both the FCA and PRA to promote economic growth and international competitiveness. While well-intentioned, such additions widen mandates, complicate priorities and create incentives for regulators to involve themselves in a broader range of activities. Undoubtedly, it will be argued that more staff are required to handle these extra burdens
Moreover, both the FCA and PRA are legally bound by requirements relating to the Climate Change Act 2008 and the Environment Act 2021. They must consider how their actions contribute to meeting net-zero and environmental targets wherever relevant to their functions. This adds another layer of duties and reporting obligations, expanding the workload further. The Financial Services Regulation Committee has already found evidence of mission creep at both regulators in these areas although it also acknowledged Parliament’s role in steadily enlarging their remits.
This is not a problem confined to just these regulators. The Competition and Markets Authority (CMA) demonstrates similar dynamics. Between 2022-23 and 2024-25, its headcount grew by over 20 per cent, rising from 928 to 1,130. Over this period, the CMA was given major new responsibilities under the Digital Markets, Competition and Consumers Act 2024, including far-reaching powers over large technology platforms. The CMA has already used these to launch investigations into online pricing practices, issue warnings to around 100 firms, and impose new obligations on Apple and Google regarding their mobile ecosystems. These actions were only possible because government had expanded the CMA’s remit and authority.
If the government is serious about deregulation as a route to growth, it must confront both cause and effect. Ministers cannot argue that regulators are a “boot on the neck” of business while simultaneously loading them with new duties, objectives and enforcement powers. A credible deregulatory strategy requires a clear-eyed assessment of how the regulatory landscape became as complex and expansive as it is today and an acceptance of the state’s own role in producing it.
To unlock growth, regulators will need slimmer structures and more tightly defined mandates. But government too must undertake serious self-reflection. Unless both sides address the root causes of regulatory expansion, declarations of deregulation will remain little more than rhetoric while the UK’s low-growth trajectory continues unchecked.