The United Kingdom’s path forward in a post-Brexit world received further clarity Dec. 9 when Chancellor of the Exchequer Jeremy Hunt set out his proposals to make the country’s financial services more competitive by cutting “hundreds of pages of burdensome” European Union regulations.

Hunt’s “Edinburgh Reforms” aim to establish a smarter regulatory framework for the United Kingdom that is agile; less costly; and more responsive to emerging trends, such as harnessing investment in crypto assets.

The plans include a commitment to repealing and replacing Solvency II—the rules governing insurers balance sheets—and changing existing compliance requirements around consumer credit, overhauling the U.K. prospectus regime to make it more attractive for firms to list and raise capital, and improving companies’ access to capital before they publicly list.

The government intends to shed some of the rules put in place to protect depositors following the 2008 financial crisis. The Financial Conduct Authority’s (FCA) Senior Managers and Certification Regime—the regulator’s cornerstone policy to hold executives and key individuals to account—is also earmarked for reform following a review next year.

Oversight will be ramped up in some areas; for example, environmental, social, and governance (ESG) ratings providers will come under FCA scrutiny, while plans to implement a financial market infrastructure sandbox will be unveiled next year.

By the end of 2023, the government intends to make changes to EU regulations in industry sectors connected to digital technology, life sciences, green industries, and advanced manufacturing.

“One of the most regularly recurring words in the Edinburgh Reforms is ‘consultation.’ Firms therefore need to identify which of the reforms are relevant to them and keep abreast of the changes, engaging properly with the consultation processes.”

Daniel Meyer, Associate, Freeths

U.K. business has largely welcomed the government’s drive to cut regulations, though many observers remain curious about how the proposals will work and what the impact of regulatory divergence with the European Union might mean.

Hari Bhambra, global head of compliance solutions at financial services provider Apex Group, said financial services firms “will need to remain abreast of the staggered consultation we expect to see across 2023 to consider the implications for different businesses and senior management responsibilities.”

“Until we see the final regulations, there will of course be a period of uncertainty,” she added.

Flora Hamilton, director of financial services at the Confederation of British Industry, the country’s leading business lobby group, welcomed the government’s willingness to engage with industry to tailor regulation.

“The chancellor’s decision to bring industry experts together to determine the opportunities and risks associated with divergence represents a sensible approach to the post-Brexit regulatory environment in financial services,” she said in a statement.

Jenny Steven, general counsel of fintech consumer lender Fluro, said the government’s announcement might give the United Kingdom the opportunity to “pick and choose” parts of future EU legislation it makes sense to adopt while allowing it to shape regulations to satisfy domestic needs. For example, she said, parts of the EU’s proposed changes to the Consumer Credit Directive, which harmonizes credit and payment services and protection, might also be incorporated into the U.K.’s planned changes.

Daniel Meyer, financial services lawyer at law firm Freeths, believes the United Kingdom is aiming for divergence rather than equivalence with the European Union. The detail—much of which is yet to be announced—will be important, he said, as clients that operate in both the United Kingdom and European Union will need to weigh up the cost of having to comply with two regulatory regimes.

“Looking at the substance of the Edinburgh Reforms, they are not a ‘bonfire of regulation,’ so the key message to senior managers in regulated firms is it should be business as usual for now when approaching U.K. regulation,” he said. “In many areas, the approach is deregulation and reregulation—it is certainly not a return to a pre-financial crash style (or lack of) regulation.”

Meyer said the reforms “are not one big shift of regulatory principles but a series of disparate regulatory tweaks that affect different parts of the sector. One of the most regularly recurring words in the Edinburgh Reforms is ‘consultation.’ Firms therefore need to identify which of the reforms are relevant to them and keep abreast of the changes, engaging properly with the consultation processes.”