Risk, reform, reward: Why the UK is the place to invest

Introduction

It’s a pleasure to be here in this remarkable setting, with this special audience. You are the asset owners, stewards and strategic investors that shape markets across borders. 

In many ways, you are customers of the FCA’s work as a regulator. And we want you to be happy customers. 

To find the UK the most constructive, competitive and compelling place to put your money to work. 

This morning I’d like to share some of our work to achieve that goal – the why, the how, and a look at the ‘what next?’ too. 

But first, as a father of a toddler, I would like to start where I often need to: coffee.

Three centuries of coffee and risk

I couldn’t help but admire the sharp instincts on display when the coffee came out after that excellent panel session.  

You were swift, shrewd, decisive. You’d think Arabica beans had just been added to a tariff list.

You may have read the studies suggesting regular coffee drinkers have lower risks of stroke, heart disease and diabetes. You are an audience of prudent risk managers. 

And a recent study has shown even greater benefits for those who drink it in the morning – capturing alpha.

But this should come as no surprise to us here in London’s iconic financial district, where coffee and risk management share a long history.  

It was in a coffee house just 500m down the road that modern insurance was born. 

In 1691 – almost 300 years before anyone dared whisper the name ‘Starbucks’ – Edward Lloyd moved his coffee house to Lombard Street, where there was a very particular clientele.  

Even then, London was a great centre for international trade, and Lloyd found himself serving merchants and shipowners waiting anxiously for news of their vessels.  

A safe return could mean untold riches. But a boat lost to storms or pirates? Could mean ruin. 

Lubricated, no doubt, by their oat milk lattes and matcha macchiatos, Lloyd’s customers got talking and, deal by deal, coffee by coffee, agreed to share risk. 'Half of your ship for half of mine'.

Bilateral deals grew to syndicates and before long, the merchants were able to sleep easier at night. Perhaps surprising given their caffeine consumption.

They still took risks in their trade, but could do so with confidence because they were better harnessed.  

They could scale up and take more of the risk they wanted.

Risk is the point

Thankfully pirates are no longer a pressing concern on Lombard Street. 

But the spirit of risk-taking lives on, and at the FCA, we want to play our part in making sure it flourishes. 

Depending where you get your news, it may sound strange to hear a regulator extol the virtues of risk.  

So let me say it loud and clear: Risk is good. In much of financial markets, risk is the point.

It drives innovation. It finances infrastructure. It supports employment.

And ultimately, through your decisions, it improves lives for the people you invest for.  

These things, driven by risk-taking, are also the key to growth.

As the host of a global wholesale market, growth has always been one of our success measures. It tightens spreads and supports capital formation. 

But now we have put it right at the heart of the FCA’s 5-year strategy[2]. 

Last Christmas Eve, the Prime Minister sent us a letter; challenging us to go further than ever in supporting growth.  

We responded[3] with a list of nearly 50 actions that we will deliver before the end of the year.  

Some of these are anticipating markets of the future, some are about getting the FCA fighting fit.

But many more of them are about shifting the balance of risk in the system.  

And in doing so, we are clear: the spirit of smart, deliberate risk-taking is not at odds with our mission as a regulator. It advances it.  

Deep, vibrant and competitive markets support market integrity.  

And financial services – exposure to the right risks – are critical in helping UK households achieve their financial goals.  

Rebalancing risk and supporting growth

So the FCA is fully committed to backing growth: not just in letters, but in practice. 

Our reforms in wholesale markets are underpinned by a clear philosophy: a rebalancing of the role of pre-emptive gates and checks, towards a world of action and disclosures. 

Giving firms more freedom to act, while ensuring investors have the transparency they need to make informed decisions. 

Take our changes to the listing regime.[4] 

We have made the rules simpler, more agile, and better suited to the world companies operate in today.  

Meaning more flexibility for firms, and making it easier for founders and cornerstone investors – like many of you – to keep steering the companies you’ve helped build. 

It’s already having an impact: in the ten months since the rules took effect, there have been 23 significant transactions that no longer required shareholder approval. 

Next up, we’re changing prospectus rules[5]. 

Under proposals we intend to finalise next month, companies would only need a prospectus on raises exceeding 75% of existing share capital, up from today’s 20% threshold.  

That is a bold shift – one designed to reduce friction, lower costs, and make it easier for the companies you invest in to raise capital and grow. 

And it’s not just listed markets that we want to give an espresso shot to; we’re looking right along the funding continuum. 

Fuelled by our world-class universities, the UK has a rich history of invention and entrepreneurship. Home to some of the world’s most exciting start-ups, spanning life sciences to fintech, AI to wind power. 

Many of you here are already part of the ecosystem that helps these companies grow.  

Now we want to bring in more capital, from more corners of the market; and give investors more confidence in taking those early-stage risks.  

That is why this morning we’ve confirmed the final rules for a new type of trading venue.  

It carries a name that would resonate with our seafaring, coffee-drinking ancestors – ‘PISCES’[6].   

PISCES venues will bring together buyers and sellers of shares in private companies, creating access and opportunity to get into exciting new businesses.  

Giving early backers and employees a chance to realise value and, more importantly, to invest again and perpetuate that virtuous cycle.  

Again, the design is bold and puts the company in the driving seat. They will control how and when their shares trade, building from private market standards rather than tweaking public market standards down. 

PISCES will initially operate through one of the FCA’s innovative sandboxes, and I’m delighted to announce that the sandbox is now open for applicants. We look forward to the first shares being traded this year.

Innovative, bold designs

Let me be crystal clear about something else.  

These policy initiatives come with some risks. We have been very open about that.  

Investors in PISCES firms will need to do their due diligence. To make the market work well and let employees and insiders participate without overheads, we have disapplied normal insider dealing rules. These are not ‘tweaks’. 

Furthermore, some capital raises will go ahead that wouldn’t have cleared a shareholder vote under old rules, and a percentage of those deals will be duds.  

With other reforms, retail investors will experience the lows as well as the highs of investment.  

But that’s an inherent part of vibrant markets. And importantly, we are not making these decisions in a vacuum.  

We’ve spoken at length with investors, regulated firms and companies, running consultations both open and specific. Listening carefully to opinions, weighing trade-offs, and drinking quite a lot of coffee together in the process.

A steady consensus is building around the principle that what matters is not eliminating risk altogether, but being honest about it.  

Clear-eyed on trade-offs up front and making informed choices.  

That’s how we move forward with confidence, and how we will stay the course together come stormy weather. 

It might be that some of the things we consult on need to be changed, or that pilots don’t work. That’s ok. That’s how innovation happens. 

But we are also clear that markets can’t stand still. After all, did you pass Lloyd’s coffee house on your way down Lombard Street this morning? It’s now a Sainsbury’s.

So we won’t delay necessary change waiting for perfect agreement. When it’s time to decide, we will.   

Faster, nimbler, more confident regulation.

Championing market integrity

Of course, all this – risk-taking, investment, growth – requires something else. Trust. 

This Guildhall was built by merchants themselves to set regulation and settle disputes, so that trade could flourish on a foundation of trusted standards.  

We take the same view.  

Strong standards and sensible regulation should not be a drag on business – they’re what make it work over the long term.  Giving confidence to turn cash into capital. 

You are stewards of trust – acting on behalf of pensioners, citizens, and future generations.  

You think in decades and need partners who do the same. That is what you will find in the UK.  

The FCA is thinking long-term. Not just chasing a short-term triple espresso high, but sustained energy and resilience. 

We’re generally talking about deals between sophisticated parties when the Consumer Duty[7] is not relevant. You can make your own choices. 

But for trust to thrive, you need to know conflicts of interest are managed and disclosures are accurate. Market integrity is a non-negotiable foundation. There is no tension with growth; it lowers costs and enables deals.  

So we will continue to hold a mirror up to the industry on your behalf.  

Where we see shortcomings, we will act to ensure lessons are learned. And where we see good practice, we will highlight it so that others can learn from the example. 

In the past few months: we’ve reviewed valuations in private markets[8], so you can have confidence in the numbers provided by asset managers. 

We’ve used the rich data sets on transactions and positions to analyse volatile markets; looking for pockets of concentration or strain.

And soon we’ll publish our work on share buybacks and best execution, testing that investment banks deliver the good outcomes your investors deserve.  

In every case, we’re working with industry to ensure standards are met, innovation spreads, and that the UK market continues to earn your trust.  

And that applies to us as a regulator too.  

You’ll see us evolving how we work, so we can deliver beneficial change faster.  

Exposing trade-offs up front… 

Explaining what we are doing, when, and why…  

Embracing technology to improve our processes and become smarter… 

And being predictable, purposeful and proportionate.   

A second home for international capital

Just before I close, let me stress one thing that definitely won’t change: our global outlook. 

The UK is a rare full-service financial centre.  

Offering banking, insurance, asset management. Home to world-leading expertise in transforming risk, from fixed income to commodities to foreign exchange. A true one-stop shop for investor needs. 

We’ve always known and valued the fact that this is an international market, right back to its roots.  

And like the organisers of Wimbledon – now a month away, for my fellow tennis fans – we are proud to play host to the very best in the world.  

But although we all cheer a British winner, naturally, that has no bearing on our decisions from the umpire’s seat.  

The FCA wants to continue London’s tradition as the ‘world’s market’. 

Building on our track record, working with Government and industry, to help make the UK the best place in the world to fund ideas, scale companies and take risks. 

So for the first time, we’re establishing an overseas presence[9] – in Washington, and with a senior representative in Asia-Pacific to follow next month. 

All to boost understanding of local investors’ needs, helping them to enter the UK market, and navigate UK regulation.

Conclusion

So while UK coffee might not be world-beating, our determination to be the most open, innovative and trusted financial centre anywhere in the world definitely is. 

Today I’ve shared a flavour of the FCA’s work to support that effort.  

Removing friction, supporting responsible risk-taking, and helping capital to form and to flow where it can make the biggest difference.  

There’s plenty more brewing: 

• More in the spirit of trust in disclosures; from short selling to securitisation, bonds to public offers in smaller firms.
• With government, a concerted effort to unlock demand from UK investors and pension funds[10].
• More measures to make it easier to operate financial firms here – looking at SMCR, prudential and remuneration.

We are establishing momentum and a track record, and changing the mood music on risk.  

But we’re also realistic that we’re only one part of the picture.  

Regulation cannot manufacture trust or growth on its own. We need innovation, investment and productivity. You want stability, access to talent and opportunities to invest in.

And you – through the decisions you make, the risks you take – are essential to what comes next.

Maybe you want to invest more here? Maybe you feel some of our rules are still standing in your way? Perhaps there is a structure or a service the industry is yet to provide? 

Whatever your aims, we want to hear your ideas, your problems and your partnership.  

Our door is always open. And yes, there will be coffee.