HM Treasury has hosted a meeting of major banking stakeholders to discuss imminent changes to the country’s securities markets, though unfortunate timing saw the event coincide with UK inflation rising to 3%.
Rachel Reeves, Chancellor of the Exchequer, held the meeting with the ‘top brass’ from JP Morgan, Blackrock, Abrdn, Morgan Stanley, Goldman Sachs, Citi, Fidelity, and Schroders at No11 Downing Street, her official residence, this morning.
Britain joins the T+1 charge
The biggest announcement following the meeting is the confirmation that UK markets will move to the T+1 settlement by 11 October 2027. The move means that settlement of securities trades will occur one day after execution as opposed to two.
This is a major development for the British securities markets, and falls in line with the government’s stated ambition to secure economic growth through financial services, among other means.
“Shortening the UK securities settlement cycle to T+1 will bring important financial stability benefits from reduced counterparty credit risk in financial markets,” said Andrew Bailey, Governor of the Bank of England (BofE), which alongside the Financial Conduct Authority (FCA), has been encouraging the transition to T+1.
“It is important that firms and settlement infrastructures have robust plans for an orderly transition in October 2027. As part of this effort, the Bank looks forward to continuing dialogue with regulators in other markets which are pursuing similar changes.”
More and more major economies have been moving from the T+2 settlement cycle to T+1. So far, the US, Canada, Mexico and Argentina have all gone live with T+1, while Peru, Colombia and Chile are looking to do so this year.
The UK confirming that it will move to T+1 while its EU neighbours continue to assess the move suggests that the country may be concerned about being left behind, particularly as its fellow G7 economies of the US and Canada have done so.
It could also suggest, as stated above, that the government is keen to see the country’s financial services sector make an even greater contribution to growth, with the industry already accounting for around one-tenth of British GDP.
The government has been sponsoring a number of bills centring around financial services while trying to encourage overseas financial businesses and investors to set up shop in the UK.
The FCA has also been working to make UK public listings easier, perhaps having taken note of major companies, such as gambling firm Flutter Entertainment and BNPL provider Klarna, opt for US listings instead of UK ones.
On the T+1 transition confirmation, FCA CEO Nikhil Rathi said: “We highlighted how the move to T+1 will make our markets more efficient and support growth in our recent letter to the Prime Minister. We will support industry as they move to T+1 and expect firms to engage and plan early.”
How will T+1 fit into UK growth ambitions?
Economic growth has been placed front-and-centre for the British government. This is not exactly a ground breaking attitude, as economic growth has been a focal point for almost every government in modern history, regardless of economic circumstances.
It is of paramount importance for PM Keir Starmer and Reeves, however, as the UK economy has been stagnant and outwardly declining for many years. Low growth, costs of living, and inflation have been a recurring issue for the past few years, putting a lot of pressure on the average consumer.
In a shock for the government today, the UK inflation rate rose to 3% for the first time in 10 months, having enjoyed easing rates for much of the past year under both the new Labour administration and its Conservative predecessor.
“Getting more money in people’s pockets is my number one mission,” Reeves commented on the inflation increase. “Since the election we’ve seen year-on-year wages after inflation growing at their fastest rate – worth an extra £1,000 a year on average – but I know that millions of families are still struggling to make ends meet.
“That’s why we’re going further and faster to deliver economic growth. By taking on the blockers to get Britain building again, investing to rebuild our roads, rail and energy infrastructure and ripping up unnecessary regulation, we will kickstart growth, secure well paid jobs and get more pounds in pockets.”
So what role can financial services play in this? As stated above, the sector accounts for over 10% of the UK’s GDP, and the country is home to some of the world’s largest banks like HSBC and Barclays, while major overseas players like Citigroup and JP Morgan also have a significant presence.
By embracing T+1, HM Treasury hopes that faster settlement of securities trading will place the UK “at the forefront of modernised, highly efficient and automated capital markets”, reduce costs for investors by limiting risks when trading, make its capital markets more competitive, and bring the country in line with the global economic powerhouse of the US.
To lay down some foundations for the 2027 transition, the government states that it has accepted the recommendations of the Accelerated Settlement Technical Group. This government working group was established to develop an implementation plan for the first day of T+1 settlement trading, now confirmed as 11 October 2027.
The industry taskforce will continue to work with the Treasury, FCA and BofE, with the latter three acting as observers, as it oversees and manages implementation of recommendations, the Treasury states. It adds that Chairs from the EU and Switzerland have also been invited to observe the taskforce, in order to “encourage alignment across Europe”.
“I am determined to go further and faster to drive growth and put more money into people’s pockets through our Plan for Change,” said Reeves. “Speeding up the settlement of trades makes our financial markets more efficient and internationally competitive.”
