UK financial firms are struggling under the current regulatory environment, accountants BDO have revealed in a survey of investment banks, retail banks and money managers.

UK financial firms are struggling under the current regulatory environment, accountancy firm BDO has revealed in a survey of investment banks, retail banks and money managers.

It comes nearly two years after the formation of the FCA and PRA and shows a seismic shift in attitude towards new regulation since the body was founded. Back in 2012, 79 per cent of firms said the new regulatory model would help promote the UK as a global financial hub but now 79 per cent say regulation is hampering their ability to compete in the market. A further 47 per cent stated that regulatory bodies do not understand enough about the commercial aspects of the market in which they operate.

More than half of respondents, 64 per cent, went as far as to say they are considering moving overseas because of heightened regulatory scrutiny. The fear is that, overall, the UK’s regulatory environment is damaging its position as a leading financial centre.

"There have always been tensions between the regulator and the regulated. However, the UK thrives on its reputation as a global financial centre and these results are concerning. We are  in a relationship and this is the honeymoon period coming to an end. The responsibility for all now is to keep up a clear, honest dialogue and work to ensure the UK remains attractive in a sustainable way. The 'belt and braces' approach could end up cutting off the industry’s circulation.” said Alex Ellerton, BDO’s head of financial services.

The EU is also a major concern for those fearing London may lose its economic credibility. Almost three-quarters of respondents believe UK regulators have only a marginal influence over the writing of EU regulation, while just one in three firms believe that more time should be spent lobbying the EU for regulation favourable to UK financial services business.

"The tensions between UK financial services and its regulators, and the wider debate with the EU, have  a worrying double impact. It is clear the industry is pulling in different directions and it will be interesting to see how the appointment of Jonathan Hill as EU Financial Services Commissioner helps to ease these tensions. At present we would surmise that financial services companies are not pushing for stronger ties with Europe. Our belief is that, of the 64 per cent of firms looking to move abroad, Europe would not be their first port of call,” Ellerton added.