Financial Services in 2025 and Beyond: Exploring the Legal, Political, and Regulatory Landscape

The financial services sector is poised for significant transformation as we move further into 2025. We recently hosted a lunch that featured insights from Tracey Groves, Head of Sustainable Business and ESG Advisory Practice, and Robbie Constance, Head of Financial Services Regulatory at DWF. They delved into the evolving legal, political, and regulatory landscape that financial institutions must navigate. In this article, we will be highlighting the key themes and insights, and providing a comprehensive overview of the challenges and opportunities ahead.

The Politicisation of Regulation

One of the primary themes discussed was the increasing politicisation of financial regulation. Robbie highlighted the Financial Conduct Authority's (FCA) perspective on current regulatory trends. He noted specific cases that illustrate the growing influence of political agendas on regulatory bodies. 

This trend is not confined to the UK; similar movements are observed across the Atlantic, where there is a push towards deregulation and a shift to the right, impacting business integrity and corporate governance.

Backlash Against Diversity, Equity, and Inclusion (DEI) Initiatives

Tracey Groves brought attention to the recent backlash against DEI initiatives, particularly in the corporate sector. Several major companies, including Amazon, Meta, Deloitte, Pepsi and Goldman Sachs, to name a few, have reversed their DEI policies in response to political announcements and Executive orders.

This shift raises concerns about the commitment of these organisations to advancing inclusive and equitable workplaces. The discussion underscored the importance of maintaining DEI efforts despite external pressures, as these initiatives are crucial for corporate integrity and ethical business practices. Many corporates are signatories of, and have publicly committed to, the OECD Guidelines for Responsible Business Conduct and the UN Sustainable Development Goals, both of which embrace equity, diversity and inclusion as core principles.  The inherent tension and paradox of signing up to these good practice frameworks and standards, whilst simultaneously rolling back on the commitment to fostering a safe and fair workplace environment free from discrimination and harm, was noted in the discussion. ‘Was there ever a concrete commitment to start with?’, was a question asked. And ‘could this indicate there are other existing committed areas of corporate responsibility and governance which are also vulnerable to withdrawal?’

From a UK perspective, the focus of the financial regulator on DEI appears to be constant for now and remains critical to a firm’s culture and governance framework, although the culture of the FCA itself is under scrutiny with November 2024 APPG Investment Fraud and Fairer report noting “FCA’s deep-rooted cultural problems” and that its Transformation Programme “has been a failure”.

The Role of Leadership in Corporate Governance

The conversation also emphasised the critical role of leadership in setting the tone for corporate governance. Tracey argued that while regulators like the FCA play a significant role, it is ultimately the leadership within organisations that dictates standards of behaviour.

Responsible leadership is essential for promoting a culture of integrity, transparency, and accountability. Tracey referred to the new Code of Conduct from the Institute of Directors (IOD) which,  outlines principles such as leading by example and acting with integrity as a valuable tool and guidance for directors to help them make better decisions. Principle 5 in the IOD Code of Conduct, Fairness, focuses on treating people equitably, with no discrimination or bias. It states this “involves you being inclusive and treating everyone with respect, dignity and consideration. Fairness is essential for nurturing a culture where diversity is welcomed, and all individuals have the chance to excel and realise their potential."

Workplace Productivity and the Future of Work

Another key theme was the evolving dynamics of workplace productivity and the future of work. The debate around remote work versus office work remains contentious. Some leaders advocate for a return to the office, citing the benefits of in-person collaboration, while others argue that productivity should be the primary focus, regardless of the work location.

The discussion highlighted the need for flexible work arrangements that prioritise productivity and employee well-being.

It feels like companies aren’t just mandating a return to the office; they’re turning it into an employee loyalty test. This test is now being used as a performance metric. The reality is that many employees may not be resisting the office as such. What they are actually doing is challenging outmoded mandates that mistake visibility for value and productivity. Does being in the office directly deliver increased productivity and impact? Sometimes yes, sometimes no. One size does not fit all. The ability to flex and adapt requires transparency and a high level of trust, fairness, and integrity in employee commitment.

Arguably, high-performing companies don’t need ‘in the office’ policies to force collaboration, optimise productivity, and deliver value creation. They create workplaces where people want to show up because the time spent together is purposeful, not performative, and has meaning both personally and professionally. The discussion highlighted how the workforce and workplace of today have changed. Employees are questioning whether this is about enabling them to perform at their best or a compliance exercise that requires a box to be ticked. The risk of such a move is that people will vote with their feet. This part of the discussion ended with the point that the real question we should be asking ourselves is not about whether to enforce office presence mandates. It’s about how we can reframe our workplaces in a way that values trust and integrity over merely being seen.

Regulatory Developments and Corporate Sustainability

The event also explored recent regulatory developments, including the new duty to prevent sexual harassment at work in the UK, which came into force in October 2024. This legislation requires employers to take reasonable steps to prevent sexual harassment of their workers, including by third parties. This reflects a broader trend towards enhancing workplace protections as seen in the Employment Rights Bill which contains significant reforms on employment rights. Additionally, the EU Corporate Sustainability Reporting Directive (CSRD) and the EU Corporate Sustainability Due Diligence Directive (CSDDD), which mandates companies to address human rights and environmental impacts of their operations and the supply chain, was mentioned as driving forces behind maintaining responsible business conduct.

As we look towards 2025 and beyond, the financial services sector must navigate a complex and evolving landscape. The insights from the discussion underscore the importance of proactive leadership, robust regulatory frameworks, and a steadfast commitment to ethical business practices. By embracing these principles, financial institutions can not only meet regulatory expectations but also drive sustainable growth and build trust with stakeholders.