Background to the report

The financial services industry was worth an estimated £173.6 billion to the UK economy in 2021. Financial services include banking, insurance and investment fund management, and the sector has an impact on other businesses and individuals who use the services it offers. The Financial Conduct Authority (the FCA) regulates financial services firms and financial markets in the UK.

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The FCA regulates nearly 50,000 firms, from large banking corporations down to individual financial advisers. It does not regulate all financial activity – for example, buy-now pay-later lending arrangements or many transactions involving crypto-assets. It also does not regulate all aspects of the financial services industry – for example, stability of the financial system as a whole.

Following the UK’s exit from the EU, HM Treasury (HMT) and the FCA have more freedom in the design and operation of the financial services regulatory framework, in terms of tailoring it to the UK market. The Financial Services and Markets Act 2023 (FSMA 2023) gave the FCA more responsibility to develop regulation and also a new secondary objective to facilitate the international competitiveness and growth of the UK economy. The financial services sector is also undergoing significant changes: whole new sets of products, such as crypto-assets, and rapid advances in technology, such as AI, provide opportunities for innovation but also risks to businesses and consumers which the FCA must plan for.

Scope of the report

This study examines how well placed the FCA is to respond to the changes that the financial services sector is undergoing, and to support government’s ambitions for the sector. Our evaluation is based on our published good-practice principles of effective regulation and criteria for performance measurement by regulators. We have identified and focused on the key processes and enablers for managing change and this approach is supported by insight from previous work on regulators facing change.

This report examines how the FCA is responding to changes in its regulatory powers and remit, and wider developments in the financial services sector. It sets out:

  • the changes to the financial services landscape, what this means for the FCA’s accountability and strategy, and how it is changing in response
  • whether the FCA has the tools and resources it needs to identify and respond to change, and to influence future innovation and change
  • how the FCA measures, reports and learns from its performance

As this report is focused on how the FCA is responding to changes in the market and to its remit, it does not seek to establish the overall effectiveness of the FCA’s business-as-usual work, nor does it review how the FCA has managed individual regulatory decisions or cases.


The government has made major changes to the financial services regulatory framework to achieve its ambition that the sector is technologically advanced, globally competitive and acts in the interest of consumers. The FCA has responded by initiating a series of changes designed to help it meet those ambitions and improve on past regulatory failures. It is carrying out significant work to re-shape the organisation, and has put in place a multi-year strategy with a clear focus on outcomes, as well as developing the work needed to support its new responsibilities.

The FCA is attempting a significant amount of change, on a number of fronts, all at the same time. This brings risks. It has recently experienced high staff turnover, which is disruptive; it is still working on the transformation programme it started in 2020; and it must now respond to its new role under FSMA 2023.

As it works towards its new objective, the FCA must complete its work on optimising its use of data, assessing whether it is achieving the outcomes sought and being able to direct resources to where they can have most impact. It must also be clear on which of the long list of activities it is monitoring internally are its priorities. If the FCA can do this, it will be well placed to demonstrate that it can act when it needs to, in an agile and targeted way.


Publication details

Press release

View press release (8 Dec 2023)

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