Reducing the cost of compliance: delivering on a common goal

A year on, the cost of compliance remains a key point of focus. The Government has committed to a 25% reduction in the cost of regulation across the economy and removing regulatory burdens is an important component of the Financial Services Growth and Competitiveness strategy and elements of the Financial Services and Markets Bill currently proceeding through Parliament. 

FCA CEO Nikhil Rathi has also made the point that removing regulatory burdens will only pay dividends if firms move away from ‘tick box’ compliance. Rathi has also called for a reassessment of how the three lines of defence model operates². PRA CEO Katharine Braddick has similarly set out plans to further develop the PRA’s framework for its secondary competitiveness and growth objective, including to “ensure our regime remains relevant, effective, and proportionate”³. 

These developments are consistent with the key themes of our report; the need for concerted and coordinated effort from the Government, regulators and industry to remove unnecessary regulatory burdens and drive greater efficiency and effectiveness through transformation of the approach firms take to compliance. 

With the Government and the regulators continuing to pursue a more proportionate regulatory framework, and advancements in technology continuing to provide significant scope for transformation, the window of opportunity to reduce the cost of compliance remains open. In this blog we assess the progress that has been made and what more can be done by firms and the regulators to grasp this opportunity. 

The regulatory agenda: building on strong progress

Our report called for a more accessible and proportionate regulatory framework, smarter and more supportive supervision, and greater use of technology and data analytics by the regulators. In many areas highlighted in our report the regulators have made progress. In particular:

• The PRA and FCA are proposing significant changes to the Senior Managers and Certification Regime (SM&CR) including removing the Certification regime and requirements to get many Senior Managers pre-approved by the regulators⁴. These reforms would place greater weight on firms’ own governance, controls and judgement.  Firms will need to decide which processes can stop and which remain necessary to make accountability work in practice.
• The FCA has undertaken a series of targeted simplification exercises: removing/clarifying redundant Handbook material, retiring large volumes of old supervisory material and simplifying particular regimes.
• The supervisory relationship is also changing. From March⁵, the PRA reduced the frequency of Periodic Summary Meeting cycle for the largest firms from annual to two-yearly. The FCA has also reiterated its commitment to less intensive supervision for firms clearly trying to “do the right thing”. 
• In August, the FCA launched a Handbook API, making data available in structured, machine-readable form. This provides structured content that firms can integrate into regulatory change and compliance tools.

The opportunity now is to build on this momentum and ensure individual reforms translate into a sustained reduction in the overall complexity and cost of compliance.

One area where there is scope to go further is systematically reviewing the existing stock of regulation. Regulators have taken welcome steps to simplify individual regimes and remove outdated requirements, but a more regular and structured review could help identify duplication and requirements that are no longer proportionate.

Alongside this, greater consideration of the cumulative impact of regulation would provide a better picture of the overall burden firms face. For example, in its September letter to the Treasury Select Committee⁶, the FCA acknowledged that its annual aggregate cost measure does not capture the entire stock of regulation or interactions between requirements. Measuring the costs associated with new requirements is important, but ultimately the test is whether the accumulated stock of regulation is becoming simpler and less costly to comply with.

There is also an opportunity to ensure commitments to smarter and more proportionate supervision are reflected in firms’ day-to-day experience. Better coordination of FCA and PRA information requests, greater reuse of information firms have already provided, and continued investment in supervisory expertise and continuity could reduce unnecessary effort while maintaining effective oversight.

Technology should also be central to the next phase of reforms. Extending machine-readable regulation, developing common data standards and exploring shared industry solutions could reduce duplication and make compliance more efficient. Ultimately, the next phase should be about demonstrating that reform is delivering a genuine reduction in unnecessary complexity and cost, while maintaining the UK’s strong regulatory standards and outcomes.

The increasing case for transformation

The three recommendations for firms in the report were connected: take an enterprise-wide view of compliance costs, build a measurable case for change, and use AI and technology strategically. A year on, the case for wider transformation of the compliance operating model is stronger than ever.

Our enterprise-wide recommendation was more than tactical cost reduction. Stronger first-line ownership, simpler processes and better data can deliver benefits across the operating model. Firms should consider where activities are best performed, rationalise overlapping processes and assurance, and strengthen ownership of regulatory risk within the business. A clearer mandate for compliance should also protect capacity for earlier involvement in business decisions, when regulatory insight can help shape the approach rather than identify problems after key decisions have been made. Greater influence should not, however, mean taking ownership of business decisions or compromising independent challenge.

The recommendation to use technology strategically also remains highly relevant. In the past year we have seen a growing number of firms seeking to embed AI into their compliance model. The Bank of England and FCA’s 2026 AI survey⁷ also found evidence of this trend: 51% of respondents reported using at least one GenAI system in Risk and Compliance, while the survey also found that AI use was expected to increase most in operations and processing and in compliance and regulatory activities.

However, last year, 71% of respondents to our survey who had invested in compliance technology said costs had not reduced. This does not mean those investments failed, but it illustrates why implementation and outcomes should be treated differently. Separately, recent PwC research points in the same direction: the 2026 Global AI Performance Study found that leading companies were twice as likely to redesign workflows to incorporate AI rather than simply add AI tools⁸. Although cross-sector rather than compliance-specific, the lesson is relevant: firms need to redesign the work, not simply add technology to the existing process.

For compliance this mean better connection of regulatory obligations, policies, controls and monitoring to improve traceability and regulatory change assessment. Better data and greater automation can support more timely monitoring and reduce reliance on periodic reviews. Done well, this should reduce rework and allow compliance professionals to spend more time applying judgement, advising the business and focusing on areas of greatest risk.

AI also brings two distinct responsibilities into focus: how compliance uses it in its own work, and how it assesses AI-related risks within its mandate. Neither makes compliance the owner of the firm’s entire AI risk. As firms adopt AI, clear accountability, effective governance and proportionate human oversight will be important. Compliance can help pioneer responsible adoption while retaining its independent role in challenging how technology is used across the business.

The business case for transformation should therefore measure more than implementation milestones or headline cost savings. Investment should be judged by what it enables as well as what it saves: better risk coverage, earlier identification of issues, more informed decision-making and capacity redirected towards higher-value work. Quantitative and qualitative measures should demonstrate whether those benefits are actually being realised, rather than simply whether a new system has gone live.

Finally, technology will not deliver these benefits without the right people, governance and culture. Regulatory expertise remains the foundation, but increasingly needs to be complemented by data literacy, technology understanding and the ability to work across disciplines. Developing these capabilities should be part of the transformation from the outset. Ultimately, the opportunity is not simply to make today’s compliance model cheaper, but to build a simpler, more technology-enabled and more risk-based model that delivers better outcomes at lower cost.

Delivering on a common goal

The objectives of regulators and regulated firms in the UK are arguably more closely aligned than they have been for many years: both want a regulatory system that delivers strong outcomes while being proportionate, efficient, supportive of innovation and internationally competitive. Regulators can build on the progress already made by continuing to simplify the framework, make supervision more proportionate and harness technology to reduce unnecessary burden. Firms, in turn, need to look beyond short-term cost reduction and redesign how compliance operates across the enterprise, strengthening first-line ownership, simplifying processes, improving data and making better use of technology.  

Government, regulators and industry each have a role to play, and none can deliver the full opportunity alone. With everyone pulling in the same direction, the period ahead provides a real opportunity to move from individual reforms to more fundamental change: maintaining the UK’s high regulatory standards while making compliance simpler, smarter and more effective.