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UK Regulators Offer Guidance on AI Innovation

UK Regulators Offer Guidance on AI Innovation

by Starling Insights

Starling Insights Editorial Board

Jun 04, 2025

Observations

In a blog post published earlier this week, UK Financial Conduct Authority (FCA) CEO Nikhil Rathi and UK Information Commissioner John Edwards highlight how the FCA and the Information Commissioner's Office (ICO) are collaborating to help firms "innovate confidently."

Their joint message is clear: when it comes to AI, regulation should serve "as a bridge, not a barrier" — offering clarity, coordination, and confidence to experiment responsibly. Through initiatives like the Digital Regulation Cooperation Forum (DRCF), UK regulators are coordinating guidance on such issues as fraud prevention, digital ID, and generative AI. Firms entering the FCA's AI Lab or the ICO's Regulatory Sandbox "can have confidence that they are getting joined-up regulatory positions," the blog notes.

But regulation alone isn't enough. While a joint FCA–Bank of England survey found that 85% of financial firms are already using or planning to use AI, many hesitate not due to hard regulatory barriers, but due to uncertainty. "[F]irms understand the broad rules, but many — especially smaller ones — want clearer examples of 'what good looks like' in practice and more opportunities for engagement to build confidence in trying new technologies," Rathi and Edwards write. To address this, the ICO is developing a statutory code of practice for AI, while the FCA is engaging directly with firms to clarify expectations and reduce perceived risk.

"[T]his isn't something regulators can do alone," they conclude. "We need firms and trade bodies to keep talking to us — not just when there's a problem, real or perceived, but earlier in the innovation journey. We can help firms do things differently. But we need their insight to do things better. With regulatory agility and confidence to innovate and invest in new technologies, businesses will provide the UK with the fuel to power economic growth."

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