The UK is carrying out financial reforms as part of its 20-year plan to become the next Silicon Valley

The UK government has announced sweeping reforms to the regulation of the financial services industry, which it hopes will open up future growth prospects.

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LONDON – Far-reaching reforms to Britain’s financial services sector should mark the first phase of a 20-year plan to make Britain the next Silicon Valley, Chancellor of the Exchequer Jeremy Hunt said on Friday.

Speaking shortly after the regulatory overhaul was announced, Hunt said the plans would improve the country’s global competitiveness, attract investment and further the government’s vision of Britain as an innovation hub.

“We need to have a 20-year plan to become the next Silicon Valley of the world,” Hunt said via video call at a conference hosted by the Financial Times.

Strengthening Britain’s financial services industry, as well as strengthening its world-class universities, technology and life sciences sectors, was one of three pillars outlined by Hunt to achieve this goal.

“The main purpose of this is to make the UK one of the most competitive places in Europe, the most competitive places in the whole world,” he said.

Stability is and remains the most important thing.

Jeremy Hunt

British Chancellor of the Exchequer

The finance minister was speaking from Edinburgh, Scotland, where he unveiled a sweeping overhaul of Britain’s financial regulatory system on Friday.

The package of 30 measures, called the Edinburgh Reforms, includes a relaxation of the rule requiring banks to separate their retail operations from their investment arms. The measure, first introduced after the 2008 Financial Crisis, will not apply to retail banks.

The government has also confirmed it will review rules on the accountability of senior financial managers – another post-2008 regulation. The Chief Executives Regime, introduced in 2016, means that individuals in regulated firms can face penalties for bad behaviour, workplace culture or decision-making.

Hunt said it was important not to “learn the lessons of 2008” but to recognize that banks are in a “stronger” position today.

Critics of the reforms have expressed deep concerns.

Fran Boait, chief executive of campaign group Positive Money, said: “Behind the spin, today’s announcements are sweeping deregulation that threatens to destabilize an increasingly fragile financial sector with huge risks and few benefits for the public.”

“With new goals for regulators to promote the ‘international competitiveness’ and growth of the financial services sector, we are likely to see only the beginning of a race to the bottom on standards,” Boait said.

A post-Brexit overhaul

The reforms have been hailed by the government as a “growth-stifling” overhaul of EU law after Brexit.

However, Hunt admitted to FT political editor George Parker that some reforms could have been made within the union.

They come as the UK has failed to catch up with its EU neighbors and OECD countries more broadly in returning to pre-pandemic growth rates.

“Between these reforms, there’s a lot we can do anyway,” Hunt said. “But of course the freedoms of Brexit mean we have more opportunities.”

Hunt said there were parts of the EU regulation that the UK could keep, while other parts would be scrapped entirely to allow the UK to support “growth industries”.

Britain needs to have a “20-year plan” to become the world’s next Silicon Valley, British Chancellor of the Exchequer Jeremy Hunt has said.

Dan Kitwood | Getty Images News | Getty Images

In a nod to the Bank of England, whose swift intervention after his predecessor Kwasi Kwarteng’s disastrous mini-budget helped boost the economy, Hunt also praised UK regulators and their independence.

“I’m a big, big fan of our regulatory structures,” Hunt said. “The independence of the Bank of England and other regulators … has stood us in good stead.”

He added that independence helps give confidence to the UK’s position as an investment hub.

“It gives people confidence that the UK is a safe place to invest,” he said. “And stability is and remains the most important thing.”

— CNBC’s Jenny Reid contributed to this report.

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