As part of its commitment to advance our understanding of the role of UK financial services in driving economic growth, the Financial Conduct Authority (FCA) launched a research competition to fund 3-month-long innovative projects exploring growth, competitiveness, and regulation in the sector. Six projects were awarded funding of up to £30,000 in January 2025 to produce fresh insights into some of the most pressing challenges and opportunities facing the industry today.
The LSE Growth Lab, led by Professor Richard Davies at the School of Public Policy, was awarded £30,000 for their proproject on improving the measurement of productivity in UK financial services.
On 18 June 2025, the LSE Growth Lab and the Economics Observatory co-hosted the FCA for its inaugural economic growth research competition, Insight and Ideas Showcase.
"The UK has been a place of financial innovation for centuries — home to the first emerging-market sovereign bonds, and the first joint-stock banks. That history echoes today, with the UK home to an ecosystem of world-leading financial firms. Regulation has always been important, and remains so today. Understanding how financial regulation enables growth and competitiveness while ensuring stability is a vital area of research. I am delighted that we hosted this Insights and Ideas Showcase in conjunction with the Economics Observatory. Bringing together leading researchers and policymakers to discuss this topic is an important way to develop policies that deliver sustainable growth," Professor Richard Davies commented.
The team's completed report explores how the UK economy has struggled with low productivity growth since the global financial crisis (GFC), significantly lagging peer countries. Financial services, once of the UK’s most productive sectors, have seen a notable decline in productivity growth since the GFC, exacerbated by Brexit-related relocations and regulatory shifts. Since 2008, the UK’s financial sector has underperformed its counterparts in Canada, Germany, and France.
Accurately measuring productivity in financial services is a complex task. This report examines the measurement challenges associated with financial sector productivity, drawing on insights from our broader research on productivity and regulation. Additionally, the report emphasises the need for a proactive and adaptive regulatory framework that goes beyond measurement alone. The integration of micro and macro-prudential policies, along with efficient capital allocation enhancing market efficiency, play a critical role in managing financial risks to support financial sector productivity.
Achieving sustainable productivity growth in the financial sector requires a nuanced, evidence-based policy approach. By refining productivity measurement frameworks, fostering innovation and ensuring a balanced regulatory environment, the UK can enhance financial sector efficiency, support long-term economic resilience, and maintain its global competitiveness.
The LSE Growth Lab was proud to present their final report and findings to the broader academic and policy community. Join us in congratulating our researchers Professor Richard Davies, Andrea Correa-Jimenez, Rahat Siddique, Louis Flamencourt, Carlos Gonzales-Berrocal and Sachin Iyer for their work!
From left to rigth: David Stallibrass (FCA Co-Deputy Chief Economist), Professor Richard Davies (LSE Growth Lab Director), Rahat Siddique (LSE Growth Lab Policy Manager), and Kate Collyer (FCA Chief Economist).
Read the LSE Growth Lab's full report here.
Discover the FCA's six competition winners.