Understanding the true costs of compliance

Growing Compliance Burdens

Our research demonstrates that firms feel there has been a significant increase in compliance costs, with 84% of surveyed firms experiencing either an increase (53%) or a significant increase (31%) over the past five years. Furthermore, many firms operating internationally highlighted that UK compliance costs are notably higher compared to other jurisdictions. This additional cost has impacted the UK’s ability to attract new business and investment, underscoring the need for urgent reform.

Key findings include:

• The true cost of compliance is significantly underestimated by most firms: While the directly attributable costs of compliance (such as Compliance function fines and regulation-related expenditures) are often measured, they only account for a fraction of the total burden. The current directly attributable cost of regulatory compliance is measured at 2.6% of operating costs per annum, but end-to-end costs, which are often not systematically measured, can be over four times higher.
• The impact of compliance on innovation: The heavy compliance load threatens to divert resources away from innovation and new product development.
• Clear appetite to simplify UK regulatory regime: Despite the complexity, the strength of the UK’s strong regulatory framework is respected globally. However, industry leaders are calling for a simplified approach that will retain its core principles.

Three key recommendations to help financial services firms reduce the cost of compliance:

• Adopt a holistic approach to compliance cost optimisation: Address cost drivers across all three lines of defence using an integrated framework that promotes simplification, digitisation, better data, and stronger first-line ownership of risk.
• Embed a business case mindset and measure tangible change: Treat compliance transformation as an enablement strategy, focusing on long-term efficiency, cultural improvement, and decision-making agility, not just cost reduction. Define quantitative and qualitative KPIs to measure and track success against objectives, as part of a pragmatic and prioritised roadmap for change.
• Leverage AI and technology strategically: Develop a digitisation strategy focused on enterprise-wide adoption of AI and develop a codified compliance and risk capability to manage AI agents effectively. The compliance function has the opportunity to be a pioneer for driving AI adoption and digitisation through use cases with unstructured data that do not drive high risk exposure to customer data.

A call for action

We are calling on both regulators and the industry to adopt a strategic mindset towards compliance that supports cost optimisation and drives action at pace. Looking to a single connected compliance approach that is data-driven and AI-enabled can alleviate the cost burden and free up people, resources and investment to focus on core strategy.

Explore the full report

Our comprehensive report offers actionable recommendations for streamlining compliance costs while maintaining robust regulatory standards. For further insights or to discuss how we can help you re-design your compliance operating model, please reach out to us.

PwC’s approach combines people, AI and technology to deliver a seamless compliance programme across functions and locations, elevating compliance from a process to a strategic outcome.