Increasing favor for less government control
In the first half of 2025, the British banking sector has shown resilience amidst the ongoing economic slowdown, with the glass being optimistically half full. This optimism stems from the recent deregulation of the financial sector, a bold initiative by the Labour government, led by Chancellor Rachel Reeves.
The deregulation, which began in 2025, aims to boost growth and position the UK as a global leader in financial services by 2035. The reforms include easing some post-2008 crisis rules, such as the ring-fencing regulations, and reducing regulatory burdens on banks and financial institutions.
However, it's important to note that the effects of these deregulation efforts are still unfolding, and any measurable impacts on bank financial performance are likely limited or not yet fully visible. The announcements and policy shifts are recent, and the full suite of legislative proposals and regulatory changes are still being finalised or implemented throughout the year.
The policy intention is to stimulate the sector’s growth, but there is ongoing debate about the risks of eroding post-crisis protections that have governed bank conduct and risk management for over a decade. Some government officials argue that reducing regulatory constraints will spur lending, improve mortgage access, and enhance the competitiveness of the UK financial sector, which could support bank profitability and economic growth.
On the other hand, critics and some financial experts express concern that loosening rules too aggressively could increase systemic risk and expose taxpayers to banking crises similar to the 2008 crash, given the UK’s large financial sector relative to GDP. The Bank of England governor has stressed the importance of ring-fencing and cautious oversight to avoid repeating past mistakes.
As we look at the quarterly figures for British banks, they serve as a benchmark for assessing the impact of the deregulation of the financial sector. While the benefits from the deregulation are yet to be fully realised, there are early indications that the sector is poised for improvement.
Despite the economic slowdown, the state of British banks after the first half of the year remains resilient. The performance of British banks has not significantly been affected by the economic slowdown so far. This resilience is associated with the cliché that deregulation brings more profit for banks, although it's too early to definitively attribute this to the recent deregulation measures.
In conclusion, the benefits from the deregulation of the financial sector are yet to be fully realised, as indicated by the quarterly figures. However, the glass is half full for British banks, with optimism surrounding the potential positive impact of the deregulation on the sector's business figures. The government has set a clear deregulatory agenda with ambitious reform targets, and close monitoring will be needed to assess whether deregulation boosts bank performance sustainably or inflates risk that could affect the sector adversely in the near future.
The government's deregulation agenda, initiated in 2025, targets to boost growth and position the UK as a global leader in financial services by 2035, with reforms aimed at easing post-2008 crisis rules and reducing regulatory burdens on banks and financial institutions (finance). Some government officials believe that this deregulation could spur lending, improve mortgage access, and bolster bank profitability, potentially stimulating the UK's economic growth (business).
However, as the effects of these deregulation efforts are still unfolding, it's crucial to monitor the sector closely to determine whether the deregulation leads to sustainable growth or exposes banks to potential risks that could impact them adversely in the near future (business). The performance of British banks in the first half of 2025 has remained resilient, providing early indications of the sector's potential improvement, but it's too early to definitively attribute this to the recent deregulation measures (finance).
