UK financial services face pressure to modernise infrastructure

By Aarav Garg

The UK financial services sector faces growing competitive pressures and will require greater focus on technology, lending and digital infrastructure to strengthen long-term growth, according to a new report published by BCG.

The report said the sector has experienced slower productivity growth over recent years despite the UK maintaining a significant position in global financial services exports. BCG noted that the country remains one of the world’s largest financial services exporters and continues to hold a strong position in FinTech innovation and investment activity.

However, the report also highlighted several structural challenges affecting the industry, including slower business lending growth, reduced investment activity and lower levels of technology modernisation compared with some international markets. According to the analysis, lending to businesses as a share of GDP has declined over the past decade, while investment in software and digital infrastructure has remained relatively modest across parts of the sector.

BCG said emerging technologies including artificial intelligence and digital assets could play a larger role in future sector growth if supported by clearer regulation, stronger investment and broader adoption across financial institutions. The report suggested that financial firms are increasingly moving beyond experimentation with AI toward operational deployment across customer service, compliance and financial operations.

The report also pointed to growing interest in digital asset infrastructure and tokenisation initiatives across global financial markets. BCG said future growth will likely depend on collaboration between regulators, financial institutions and technology providers as the UK seeks to maintain its position as a global financial and FinTech hub.

Jakob Pethick, CCO at YouLend, commented, “The latest BCG bank lending report makes for stark reading. UK bank lending to businesses has fallen to its lowest level in almost three decades. Bank of England data also shows that SME loans have almost halved over the past 15 years, falling from 12% of GDP in 2011 to 6.5% in 2026. UK small and medium-sized enterprises (SMEs) have been disproportionately affected, and the drag on UK productivity and economic growth is measurable. And despite real commitments from banks, the data consistently shows that capital is still not reaching companies at the level required, particularly underserved SME communities and micro businesses.”