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UK’s regulatory regime is hindering financial services sector

Organisations are considering relocating to Hong Kong or New York

31 January 2012

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By Manju Manglani, Editor (@ManjuManglani)

A lack of cohesion between UK, EU and US regulatory requirements is detrimentally affecting business activity in the London financial services sector, according to an Eversheds survey. The results reveal a significant degree of frustration with the UK regulatory regime.

Sixty-one per cent of respondents said that uncertainty around legislative compliance has led to their organisations delaying business activity. A third believe that the volume of legislation often means that complying with one leads to contravening another.

Sixty-three per cent of respondents feel that the UK’s interpretation of EU law is more concerned with legal certainty than with upholding the original spirit of the law.

More than half also believe that EU policy is damaging London’s economic position, and that simpler regulation would make London a more attractive place to do business.

Half of those surveyed are concerned that London-based businesses will move to other financial centres in an attempt to avoid the regulatory pressures.

Both Hong Kong and New York are seen as leading the way in the international financial services sector. Consequently, 44 per cent think that businesses will relocate to Hong Kong, while 37 per cent favour New York.

Despite the frustrations, respondents acknowledged that tight regulatory controls are required in the UK. Eighty per cent favour a compulsory, rules-based system, while seven per cent believe it should be a voluntary, principles-based regime. Just one per cent believe that no changes are needed to the current system.

“Businesses are keen to see the future course of banking regulation resolved as soon as possible, so that the banks can get back to business with a clear view of the ground rules under which they will operate,” says Michael Wainwright, a partner at Eversheds.

Published in Regulation in the City, the findings are based on a survey of 200 senior executives in London’s financial services sector.

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