UK to Move to T+1 Settlement by October 2027
A recent press release from HM Treasury, dated February 19, 2025, announces significant changes aimed at modernising the UK’s financial markets to drive economic growth. Here are the key points:
1. Accelerating Securities Settlement
- Objective: The UK government, in collaboration with the Financial Conduct Authority (FCA) and the Bank of England, plans to move to a T+1 settlement cycle for securities trades by October 11, 2027.
- Current Standard: The current settlement cycle is T+2.
- Benefits: This change will align the UK with leading international markets like the US, enhance market efficiency, reduce costs for investors, and strengthen the UK’s capital market competitiveness.
2. Government and Industry Collaboration
- Meeting: The Chancellor hosted a meeting with senior representatives from major investment banks and asset management firms, including JP Morgan, Blackrock, Abrdn, Morgan Stanley, Goldman Sachs, Citi, Fidelity, and Schroders.
- Strategy: This meeting is part of the ongoing efforts to refine the Financial Services Growth and Competitiveness Strategy, which is a key component of the government’s Modern Industrial Strategy.
3. Implementation Plan
- Taskforce: The Accelerated Settlement Technical Group has developed a detailed implementation plan to ensure a smooth transition to T+1.
- Legislation: The government will introduce legislation to support this transition, including setting the official date for the move to T+1.
- Industry Engagement: Firms are encouraged to start planning and engaging with the recommendations immediately to ensure readiness by the 2027 deadline.
4. Statements from Key Figures
- Chancellor Rachel Reeves: Emphasised the importance of going ‘further and faster’ to drive growth and improve market efficiency.
- FCA CEO Nikhil Rathi: Highlighted the benefits of T+1 for market efficiency and growth, and mentioned the FCA’s intention to support the industry as the UK transitions to T+1.
- Bank of England Governor Andrew Bailey: Noted the financial stability benefits of reduced counterparty credit risk and the importance of robust planning for the transition.
5. International Coordination
- Alignment with EU and Switzerland: Industry chairs from the EU and Switzerland have been invited to observe the UK taskforce to encourage alignment across Europe.
- Global Dialogue: The Bank of England will continue discussions with regulators in other markets pursuing similar changes to ensure a coordinated approach.
6. Industry Support
- Stakeholder Commentary: Leaders from Citi, JP Morgan, and Morgan Stanley expressed support for the move to T+1, highlighting the importance of coordinated market reforms for the UK’s competitiveness.
Conclusion
The press release underscores the UK government’s commitment to modernising financial markets, enhancing competitiveness, and driving economic growth through faster securities settlement. The move to T+1 is a significant step in aligning the UK with global best practices and ensuring the country’s financial markets remain at the forefront of efficiency and innovation.
- UK to Fast-Track Market Growth with Transition to T+1 Settlement
- Chancellor Rachel Reeves: Accelerating Market Efficiency is Key
- FCA CEO Nikhil Rathi Backs T+1 for Enhanced Market Efficiency
- Bank of England Governor Highlights Financial Stability with T+1
- Global Coordination Crucial as UK Aligns with EU and Switzerland on T+1
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