The Autumn Statement published on 22 November 2023 includes a section specifically highlighting key measures relating to financial services entitled ‘Supporting the growth of the UK’s world-leading financial services sector’. The measures aim to build on the strengths of the financial services sector which HM Treasury highlights as a vital source of UK growth making up an estimated 12% of the economy, contributing around £100 billion a year in tax receipts and employing 2.5 million people.  HM Treasury sets out that it is looking to maintain the UK’s success as the “global capital for capital” by introducing reforms designed to grow the sector and the economy.

Supporting the growth of the UK’s world leading financial services sector

The key measures set out below summarise next steps and upcoming publications for financial services resulting from the Autumn Statement.

Smarter Regulatory Framework programme

Following the passage of the Financial Services and Markets Act 2023 in June 2023, the  government is pressing ahead with work to ensure the UK maintains its world-leading financial services regulatory environment. The government will deliver its commitment to make significant progress in repealing retained EU law (REUL) and building the Smarter Regulatory Framework, tailored to the UK. Before the end of the year, the government has said that it will lay legislation to replace the current Prospectus, Securitisation and Data Reporting Services Regulation regimes.

Replacing the Securitisation Regulation

The government will lay a statutory instrument that will replace the retained EU law Securitisation Regulation with a new securitisation framework tailored to the UK. This will take forward certain reforms identified in the government’s 2021 Review of the Securitisation Regulation.

Replacing the Short Selling Regulation

The government has published a draft statutory instrument setting out how it will replace the retained EU law Short Selling Regulation (SSR), including aspects on sovereign debt, with a new framework tailored to the UK. As announced earlier this year, in the Mansion House Reforms, the government will also shortly legislate to double the SSR reporting threshold.

Replacing the Data Reporting Services Regulation

Delivering on the Edinburgh Reforms commitment to have a regulatory framework for a consolidated tape in place by 2024, the government will also shortly lay a statutory instrument that will replace REUL in relation to Data Reporting Services Providers (DRSPs) with a new framework tailored to the UK.

Investment Research Review

The government and the FCA are engaging with industry stakeholders to take forward the recommendations of Hogan Lovells partner Rachel Kent’s Investment Research Review. This will inform formal consultations in 2024.

UK Retail Disclosure Framework

The government has published a draft statutory instrument setting out how it will replace the retained Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation with a new framework tailored to the UK. The accompanying policy note confirms the scope of the new framework, including its application to overseas funds, and sets out the government’s intention to fully resolve legislative issues with cost disclosure.  This follows on from the government’s consultation response published on 11 July 2023. The government welcomes any technical comments on the draft statutory instrument by 10 January 2024.

Prospectus reform

The government will shortly lay a statutory instrument to replace the retained Prospectus Regime with a new framework tailored to the UK. The government intends that this will create a more agile and simplified listing regime, helping to widen participation in the ownership of public companies, simplifying the capital-raising process for companies on UK markets, and making the UK a more attractive listing destination.

Future of Payments Review

The government welcomes the publication of Joe Garner’s Future of Payments Review on 22 November 2023. A call for input on this closed on 1 September 2023. The government intends to repeal prescriptive EU-derived payments authentication rules and will also legislate to unlock the full potential of Open Banking-enabled payments. Next year, the government will publish a National Payments Vision.

Digital Securities Sandbox

The government has published a response to the July 2023 consultation on the Digital Securities Sandbox (DSS) which will help to facilitate the adoption of digital assets across financial markets. The government will also lay a statutory instrument to implement the DSS, delivering on the Edinburgh Reforms announcement to implement a Financial Market Infrastructure Sandbox in 2023.

Growth market exemption for Stamp Duty and Stamp Duty Reserve Tax

This measure widens access to the growth market exemption from Stamp Duty and Stamp Duty Reserve Tax. The exemption has been expanded to allow FCA regulated multilateral trading facilities (MTFs) to access the exemption. The requirements for the exemption are also being updated, so that the majority of companies on markets accessing the exemption must have market capitalisations of less than £450 million, up from the current cap of £170 million.

Consultation on introducing a UK regime for captive insurance companies

The government will consult on the design of a new framework for encouraging the establishment and growth of captive insurance companies in the UK. The consultation will launch in Spring 2024.  

Mortgage Guarantee Scheme extension

The Mortgage Guarantee Scheme supports the availability of 95% Loan-to-Value mortgage products. While the scheme was due to close to new accounts on 31 December 2023, the government will extend the scheme for an additional 18 months until the end of June 2025 to continue helping prospective borrowers with smaller deposits buy a home.

NatWest shareholding

The government intends to fully exit its shareholding in NatWest Group by 2025-26, subject to supportive market conditions and sales representing value for money. As part of this process, the government will explore options to launch a share sale to retail investors in the next 12 months, subject to supportive market conditions and achieving value for money.

UK Asset Resolution (UKAR) Pension Schemes Transfer 

Continuing progress towards winding down the UKAR interventions, the government expects the transfer of the former Northern Rock Asset Management and Bradford & Bingley pension schemes to central government to occur in 2025-26.

Corporate Governance Reform  

The government has written to the Financial Reporting Council (FRC) to update its remit, emphasising the role the FRC should play in promoting growth and competitiveness. The government welcomes the Capital Markets Industry Taskforce work to reset culture through an “investor covenant” and the commitment from industry to provide additional funding to the Investor Forum.

ISA reforms

In relation to personal tax and savings and the ISA regime, the Autumn Statement sets out the following headline proposals. We expect to see a consultation on this shortly but it has not been published yet.  

• Allowing multiple ISA subscriptions – The government will allow multiple subscriptions to ISAs of the same type every year from April 2024. 

• Allowing partial transfers between providers – The government will allow partial transfers of ISA funds in-year between providers from April 2024.

• Removing the requirement to reapply for an existing ISA annually – The government will remove the requirement to reapply for an existing dormant ISA from April 2024. 

• Expanding the Innovative Finance ISA to include Long-Term Asset Funds – The government will allow Long-Term Asset Funds (LTAFs) to be permitted investments in the Innovative Finance ISA from April 2024. 

• Expanding the Innovative Finance ISA to include open-ended property funds with extended notice periods – The government will allow open-ended property funds with extended notice periods to be permitted investments in the Innovative Finance ISA from April 2024. 

• Allowing certain fractional shares contracts as a permitted investment – The government intends to permit certain fractional shares contracts as eligible ISA investments and will engage with stakeholders on implementation. 

• Digitalise the ISA reporting system – The government is announcing the digitalisation of the ISA reporting system to enable the development of digital tools to support investors. 

• Harmonise ISAs to those over 18 years of age – The government will harmonise the account opening age for any adult ISAs to 18 from April 2024.

• ISA, JISA, LISA & CTF Annual Limits – The government is freezing the Individual Savings Account (£20,000), Junior Individual Savings Account (£9,000), Lifetime Individual Savings Account (£4,000 excluding government bonus) and Child Trust Fund (£9,000) limits at their current levels for 2024-25.

The reform in relation to fractional shares is particularly interesting given the issues that a number of providers have had in relation to this topic. As recently as 17 October 2023,  HMRC reaffirmed its position that fractional shares are not qualifying investments that may be held in an ISA, so the above is a clear statement of intent from HMT that, at least from a policy perspective, that is not a position it agrees with and it is going to do something about it.

The other changes are also likely to require relatively significant changes to operational processes currently implemented by ISA managers, as well as additional systems and controls. It is likely to be harder for ISA managers to guard against investors breaching the annual subscription limits than it is today, if investors are allowed to invest across multiple ISAs of the same type in a single tax year. That in turn increases the risk of invalid subscriptions / void ISAs requiring repair.

Next steps

The government has set out an ambitious package of reforms in the Autumn Statement building on the current Edinburgh Reforms, Mansion House Reforms and the Smarter Regulatory Framework set out in the Financial Services and Markets Act 2023.  We are following the developments closely so please get in touch if you would like to discuss any of the announcements and how they impact your firm.

Authored by Melanie Johnson and Mark Orton.