Kemi Badenoch, the leader of the UK opposition Conservative Party, on Monday called on the City of London to adopt a more risk-tolerant regulatory approach, seeking to reset the party’s relationship with financial markets after the turmoil triggered by former prime minister Liz Truss in 2022.
Speaking at an event hosted by the City of London Corporation, Badenoch argued that excessive caution in financial regulation was holding back growth and innovation. “We cannot afford to be a country that prizes safety above all else, especially when our competitors are racing ahead,” she told an audience of bankers, asset managers, and regulators.
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The speech marks the first major economic policy intervention by Badenoch since she became opposition leader in November 2024. It comes as the Conservative Party tries to rebuild credibility on fiscal and economic matters following the bond market crisis that erupted under Truss’s mini-budget in September 2022, which sent gilt yields soaring and forced the Bank of England to intervene.
Risk appetite as a growth strategy
Badenoch did not offer specific policy proposals but outlined a broad philosophy: that the UK’s post-2008 regulatory framework had become too defensive, stifling the very risk-taking that drives financial sector growth. She cited the Prudential Regulation Authority and the Financial Conduct Authority as bodies that should be tasked with “pro-competition, pro-growth” mandates, rather than focusing primarily on stability and consumer protection.
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“The pendulum has swung too far toward risk aversion,” she said. “We need regulators who understand that some failures are the price of success, not evidence of systemic weakness.”
The remarks drew a mixed response from attendees. Some welcomed the rhetorical shift, noting that post-Brexit reforms like the Edinburgh Reforms and the Financial Services and Markets Act 2023 had already begun loosening certain rules. Others cautioned that any move to reduce regulatory oversight must be carefully calibrated to avoid repeating the 2022 crisis.
A delicate reset after Truss
Badenoch’s overture to the City is a calculated one. The Truss administration’s unfunded tax cuts and lack of independent fiscal oversight led to a sharp loss of confidence in UK economic management, with the pound falling to a record low against the US dollar in September 2022. Since then, the Conservative Party has struggled to regain the trust of international investors and domestic financial institutions.
“There is still a hangover from that period,” said a senior asset manager who attended the speech and spoke on condition of anonymity. “Any politician talking about deregulation or risk-taking triggers an immediate comparison. Badenoch is trying to frame it differently — as targeted, growth-oriented reform — but the market memory is long.”
The Labour government, which holds a commanding majority in parliament, has pursued its own financial services agenda, including a focus on sustainable finance and the expansion of the UK’s green bond market. Badenoch’s speech positions the Conservatives as the party of deregulation and market dynamism, a contrast she hopes will resonate with both business leaders and voters ahead of the next general election, expected by 2029.
What the City wants to hear
For many in the City, the key question is not whether regulation should be loosened, but how and where. The financial sector has consistently called for post-Brexit rule tailoring that allows UK firms to compete with New York, Singapore, and Dubai. Areas of particular interest include:
- Solvency II reforms to free up insurance capital for infrastructure investment
- Streamlined listing rules to attract more tech and biotech IPOs to London
- Greater flexibility in the ring-fencing regime for retail banks
Badenoch did not address any of these in detail, but her broader endorsement of risk-taking was seen as a signal that a future Conservative government would pursue a more aggressive deregulatory agenda than the current Labour administration.
“The devil is in the detail,” said Catherine McGuinness, former policy chair at the City of London Corporation. “But the direction of travel she set out is one that many in the Square Mile will welcome, provided it comes with credible fiscal discipline attached.”
Badenoch’s speech also touched on the need for the UK to remain a global leader in fintech and digital assets, though she offered no specifics on crypto regulation or central bank digital currency policy.
The opposition leader is expected to follow up with more detailed economic policy papers later this year, as the party begins to formulate its platform for the next election.
