“This is not a return to pre-crisis light touch… because frankly that ended in tears.” That was the response of the heads of the Financial Conduct Authority (FCA) when questioned by MPs about their new growth remit. No one can deny that the 2008 financial crash devastated lives. But the consequences of the low growth the UK economy has experienced since have been catastrophic for living standards too. 

Average wages are roughly the same in 2024 as they were in 2008, adjusted for inflation, and GDP per head is nearly £11,000 lower today than it would have been if pre-crisis trends had continued. The government recognises this as its defining challenge and that is why it has tasked financial services regulators with “embed[ding] the secondary International competitiveness and growth objective” in their policymaking.

Yet the idea that you can “regulate for growth” – as City minister Tulip Siddiq wrote recently in City AM – will require a fundamental rethink in how the UK’s watchdogs operate. London benefits from its reputation for transparency and high standards but this comes at a cost. The administrative burden of compliance is estimated at £70bn a year – that’s nearly four per cent of GDP, more than the annual defence budget. 

And the regulatory estate has expanded significantly in recent years, often faster than the sectors in its purview. From 2017-2022, staff numbers at the FCA grew 10.7 per cent while the headcount in the financial services sector grew by just 6.5 per cent. This is hardly surprising – any organisation is incentivised to perpetuate its own existence and expand its territory. But the problem, as James Vitali wrote in these pages yesterday, is that the rise of the regulators has created a “risk aversion ratchet” that increasingly forces businesses away from wealth creating activities with very little democratic accountability.

So instead of paying lip service to growth at Select Committees, perhaps regulators like the FCA should use next year to begin taking action.