UK Government and FCA progress the Provisional Licence Regime

December 11, 2025

The UK government is moving forward with plans to introduce a provisional licence regime for financial services firms, designed to lower barriers to entry for start-ups and early-stage firms while maintaining strong regulatory oversight.

The initiative, first announced in the Regulation Action Plan in March 2025 took a step forward on 5 December 2025, when HM Treasury published a policy paper outlining how the regime will operate once established.

In December 2024, the Prime Minister, Chancellor, and Secretary of State for Business and Trade urged regulators to prioritise growth and investment. Responding to this the CEO of the Financial Conduct Authority (FCA) recognised that many start-ups and early-stage firms struggle to meet the FCA’s strict threshold conditions immediately and proposed a framework that would allow firms to conduct limited regulated activities under streamlined conditions. The government then committed to working with the FCA to establish the regime.

Currently, the FCA can only grant authorisation if a firm meets the FCA’s minimum standards. These minimum standards cover matters including financial resources, governance, and the suitability of key individuals. These conditions must be met both at authorisation and on an ongoing basis. For early-stage firms meeting these standards upfront can be challenging.

The provisional licence regime aims to:

  • Provide time-limited permissions so firms can get “up and running” in a controlled environment.
  • Allow firms to prove their business model and attract funding while building capacity.
  • Support firms in reaching full FCA authorisation by the end of the licence period.

The HM Treasury paper sets out how it sees provisional licences functioning, with the FCA responsible for detailed implementation. Key features include:

Eligibility:
  • This regime would be for firms not yet authorised under the FSMA. This would allow those firms to seek permission for activities already within the FCA’s perimeter.
  • This means it would exclude firms already authorised, those applying for newly regulated activities, and dual-regulated firms.
Assessment:
  • FCA’s evaluation would be tailored to the firm’s stage of development and the time-limited nature of the licence.
  • Firms would have to demonstrate they can meet threshold conditions for the duration of the licence, while showing they can build up their resources over the duration of the licence to demonstrate that they would be able to meet the threshold conditions on an ongoing basis, as is required for full authorisation.
  • Firms would have to demonstrate that they will be able to wind down smoothly if needed at the end of the licence to avoid disruption or consumer detriment.
Duration & Restrictions:
  • Licences would last up to 18 months, with extensions possible in limited circumstances.
  • FCA would be able to impose restrictions on the type and volume of business conducted. For example, they may not allow activities which will carry on beyond the licence period, such as advice in relation to pensions.
Requirements:
  • Firms would have to comply with relevant rules and continue to meet threshold conditions during the licence period.
  • Enhanced monitoring and oversight from the FCA would apply.
Exit:
  • The regime would be designed to help firms transition to full authorisation.
  • Permissions would expire if full authorisation is not achieved, requiring firms to wind down regulated activities.

The Introduction of the regime requires primary legislation to be passed before it can take effect, which the government will bring forward when parliamentary time allows. In the meantime the FCA will consult with industry to refine the design, ensuring it is workable for firms while safeguarding consumers and market integrity.

To find about more about the provisional licence regime or applying for full authorisation to the FCA, please contact us.

Mark Chapman
Partner, Commercial
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This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

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