We published 6 reports commissioned through our economic research competition on growth, competitiveness and regulation in the UK financial services sector.
As part of our commitment to advance our understanding of the role of UK financial services in driving economic growth, we launched a research competition to fund 3-month-long innovative projects exploring growth, competitiveness, and regulation in the sector. Six researchers were awarded up to £30,000 to produce fresh insights into some of the most pressing challenges and opportunities facing the industry today. A summary of each research paper is provided below with links to the full report.
What factors affect the demand for finance and longevity of newly listed firms?
University of Birmingham
This study investigates the financial needs and survival prospects of newly listed firms, with a focus on the Alternative Investment Market (AIM). It finds that broader UK economic performance significantly influences IPO activity and firm longevity, with this effect being more pronounced for AIM firms than for those on the main market. This suggests that AIM firms, often younger and less capitalised, are more sensitive to macroeconomic conditions due to their limited investor base and weaker access to funding.
Tail risk and consumer protection: implications for growth
University College London (UCL)
This paper explores the consequences of fintech firm failures. It shows that such events are not uncommon and can have significant negative effects on UK economic growth and household financial stability. The study suggests that distress in fintech firms may increase household indebtedness, highlighting the importance of robust consumer protection.
Improving productivity measurement in the UK financial services sector
London School of Economics (LSE)
This study provides a detailed examination of productivity trends in UK financial services, identifying persistent challenges in measurement and performance. It highlights low investment levels relative to peer economies and points to several structural barriers to productivity, including high compliance costs, resistance to technological change, and outdated infrastructure. Echoing the insights of other reports, it suggests that regulatory and operational inefficiencies may be constraining the sector’s ability to innovate and grow.
Measuring transmission risk in UK financial services
Fathom Consulting
Fathom introduces a systems-based methodology for monitoring systemic risk in the UK financial sector. This approach not only quantifies contagion risk but also identifies which firms act as transmitters or receivers of financial shocks and maps their interconnections, including exposure to external shocks such as those from crypto or tech sectors.
International competitiveness in the UK financial services sector
University of Edinburgh
This study tracks the UK financial sector’s export competitiveness over the past three decades. It finds strong performance pre-2012, followed by a sharp decline that accelerated after the 2016 EU Referendum. The research provides insights into how firms have responded, through increased equity stakes, acquisitions, and greenfield investments in the EU, to maintain market access.
UK financial services – a data-driven overview for the FCA
Beauhurst
This report offers a data-driven overview of the UK financial services sector, focusing on firm-level growth dynamics. It finds that capital is increasingly being channelled towards smaller, high-growth firms, indicating effective investment targeting. However, it also notes a plateau in overall growth and a decline in firm numbers in some subsectors, such as banking. Their findings reinforce concerns raised in the other studies about the unintended consequences of regulation on sector dynamism and productivity.
Next steps
The competition was launched to:
- Support our growth objective by expanding and strengthening our evidence base on growth and competitiveness.
- Introducing fresh and innovative thinking to tackle the challenges of driving growth.
- Providing actionable insights to inform future policy and strategy development.
Our new 5-year strategy[8] has now launched, and the outputs of the competition will support the vital role regulation in UK financial services plays in driving economic growth – one of our key priorities.
Why we launched the competition
Growth is central to our mission. Last year, Parliament set us a new secondary objective[9] to support growth and competitiveness over the medium to long term.
The objective of this competition is to:
- Widen and deepen our evidence base on growth and competitiveness.
- Introduce fresh and innovative thinking to the challenge of growth.
- Provide actionable insights to inform future policy and strategy development.
Research themes for the competition
On 17 October, we published a summary of the literature[10] on growth, competitiveness and regulation in financial services.
The literature review highlighted several important gaps in its evidence and knowledge, which are important to fill. These gaps are summarised into the following 3 research themes:
Contact us
Please send any questions to [email protected].
