Britain's financial regulator has unveiled sweeping reforms to boost economic growth but warned the new approach is likely to result in more companies failing and increased risks for consumers.

In a letter to the Labour government, the Financial Conduct Authority (FCA) acknowledged it would need to take a more relaxed approach to oversight as part of plans to cut red tape and stimulate investment in the City of London.

The proposals include making it easier for people to get mortgages, removing the £100 limit on contactless payments, and reducing checks on smaller financial transactions.

"We need to accept there will be failures," FCA chief executive officer Nikhil Rathi told prime minister Keir Starmer and finance minister Rachel Reeves in a letter outlining the changes. He said the watchdog would have to make "risk-based choices" about which cases to investigate.

The shift in strategy follows pressure from Reeves who has called on regulators to focus less on managing risks and more on promoting growth. The reform package comes amid speculation that Donald Trump's expected return to the White House could trigger a wave of deregulation in the United States.

However, some senior financial figures have urged caution about rolling back oversight too far. Bank of England deputy governor Sam Woods warned against joining "a race to the bottom" on regulation.

The FCA's proposals represent one of the biggest shake-ups of financial regulation since Labour took power. Beyond the changes to mortgage rules and payment limits, the watchdog plans to streamline requirements for asset managers and reduce reporting burdens for thousands of financial firms.

To boost London's international appeal, the regulator will open new offices in Asia, adding to its planned US presence. It also wants to accelerate the adoption of digital technology in financial markets and create a new framework for cryptocurrency assets.

The reforms mark a delicate balancing act for the regulator, which insists it can maintain consumer protection while embracing a higher-risk approach to drive economic growth. Industry experts say the success of the strategy will depend on how well the FCA manages this trade-off in practice.

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