UK Calls for Better Regulation to Drive Financial Innovation

Britain’s financial services trade surplus has topped that of the United States, according to data from TheCityUK, which represents British financial services and professional services companies. 

Despite the country’s economic challenges, the UK remains the world’s largest financial services net exporter (exports minus imports), generating a trade surplus of US$127bn, ahead of the US (US$64.2bn). 

Both countries are ahead in terms of the surplus versus other leading financial services markets, including Singapore (US$37.7bn), Switzerland (US$31bn) and Luxembourg (US$30bn).

The data is released a year behind, so it relates to calendar year 2024.

Anjalika Bardalai, Chief Economist and Director of Economic Research at TheCityUK, says: “The global economic landscape remains highly uncertain, with geopolitical tensions once again to the fore and the impact of any increased market volatility also potentially in prospect. 

“Against this backdrop, UK-based financial and related professional services exports remain resilient.

“The UK’s substantial trade surplus in financial services and its market-leading positions in a number of financial services and related professional services sectors reinforce its position as a leading global hub for such services and the important contribution these sectors make to the domestic economy.”

The UK is in second place in terms of global investment in fintech, with US$3.6bn invested in 2025 – significantly behind the US$25.1bn seen in the United States. The second half of the year was stronger than the first for the UK.

Tackling outdated regulation

TheCityUK instigated a workshop with the World Economic Forum that considered what kind of regulation would be fit for the future for the financial services industry.

Participants at the workshop emphasised the need to build deeper partnerships between industry and policymakers. They argued that policy, regulation and cross-border cooperation should collectively enable innovative technologies and business models to achieve their potential.

The lobby group is calling on financial regulators to reform market rules to unlock innovation and build resilience.

Unlocking the full potential of the industry requires smart, harmonised regulation and co-operation, according to its LOTIS committee (Liberalisation of Trade in Services). 

In a joint article with, and published by, the World Economic Forum ahead of WEF’s Annual Meeting in Davos, Switzerland, LOTIS’s Co-Chair John Cooke and Mingcong Li, the Forum’s lead for trade in services, argue that the global financial services and insurance industries will be instrumental in addressing the challenges and risks that the world faces, saying that increased resilience is needed to address these challenges.

They feel that the possibilities provided by new technologies and business models could provide some of the solutions needed.

AI and cyber create opportunities and threats

AI and predictive modelling is a huge opportunity to shift from reactive to proactive strategies to predict failures, fraud, cyber threats and automate responses, John and Mingcong say.

They recognise that the adoption of AI across the financial services industry is creating new risks, and there are concerns and uncertainty around liability for errors made by AI systems. 

The pair add their concerns to the voice of many others with regards to how AI will make it easier for adversaries to launch complex cyber threats, but acknowledge how useful advanced AI solutions can be for financial services organisations to defend against these attacks. 

They say that while the industry stands ready to expand its expertise and impact, it must contend with a range of regulatory barriers. Some are longstanding, arising from regulation not being attuned to new types of risk.

New regulatory barriers can threaten competition

But newer barriers threaten much-needed competition in the global provision of solutions, they say. 

This new generation of regulatory barriers can be grouped into themes that illustrate areas where cross-border regulatory divergence is growing, according to the authors. These are:

• Data governance and digital identity
• AI and technology requirements
• Sustainability and ESG requirements
• Emerging geoeconomic measures

To address these challenges, they are calling for governments and regulators to work alongside the financial services sector to harmonise approaches across jurisdictions and reduce unnecessary regulatory complexity.

They believe that by fostering greater international co-operation and aligning frameworks, policymakers can help create a more predictable environment that encourages innovation and investment and the effective deployment of industry solutions on a global scale. 

And that only through these co-ordinated efforts can the financial services industry fully leverage its capabilities to support resilient, sustainable growth.