UK Government vs FCA: A Public Clash, But What’s the Endgame?

The UK Government and the FCA are openly calling each other out—one pushing for economic growth and cutting red tape, the other defending a risk-based regulatory regime. But in this back-and-forth, are we losing sight of what regulation is really for? Markets must run well—but for whom? 

• For firms—to ensure they can grow, compete, and drive the economy forward. 

• For consumers—to empower informed decision-making without stripping businesses of competitiveness. 

Right now, arguably regulation is dumbing down consumer choice to the point where "informed decisions" almost don’t matter as firms continue to take most of the burden. Yes, consumers must be protected, but they must also take responsibility for their financial decisions. Businesses cannot bear ever-increasing costs just to attract and retain customers in an over-regulated system. 

The Motor Finance Saga & the Capital Squeeze 

Take motor finance as an example. Motor finance companies are now provisioning billions due to complaints about commissions. Yet, in a high-cost economy, dealership margins are already razor-thin. If a consumer chooses car finance, should that decision be considered "potentially unfair" simply because of dealership receiving a commission from the motor finance? Where is the accountability for consumer choices? 

But there’s a bigger issue—businesses need capital and liquidity to weather these challenges. If regulatory and legal pressures keep mounting without a sustainable way for firms to raise funds, we risk lenders, and financial firms exiting the UK market entirely. The unintended consequence? Less competition, fewer choices, and higher costs for consumers. 

APP Fraud: A New Liquidity Nightmare? 

The reimbursement model for APP (Authorised Push Payment) fraud is another example of how regulatory shifts create huge liquidity burdens for financial firms. While fraud prevention is critical, the liability that banks, payment service providers, and e-money firms must now manage is substantial. The upcoming reports in the next few weeks and months will be crucial in determining whether the new system effectively tackles fraud or it is being abused, creating unsustainable costs for financial institutions. 

The Bigger Picture 

This ongoing public spat doesn’t help the economy. On the world stage, the UK looks uncoordinated and uncompetitive. I might remind the regulator that it has received a further statutory mandate to ensure international competitiveness and growth. However, we’re not attracting talent or investment—just look at the declining VC funding in Fintech and appalling IPO rates in the UK vs the US over the past five years. 

Following Brexit and the ongoing focuses on the UK financial services centre, if the UK wants to be a financial powerhouse again, we need:

• Lower business costs and taxes to drive real competition. 

• A sustainable capital-raising environment so firms can stay afloat. 

• Regulator-Government collaboration—not public bickering but creating a balanced approach to regulation for all. 

• Cross-border cooperation to stay relevant globally. 

Right now, we're losing out to the US, UAE, and Asia. If we don’t act as a unit, we won’t just fall behind—we’ll be left behind. 

What do you think?