FCA presses pause on plans for diversity data reporting

Proposals put forward earlier in the year by the financial services regulators for firms to collect and report on diversity data have been paused. This decision was announced by Nikhil Rathi, Chief Executive of the FCA on 8 May 2024 whilst he gave oral evidence to the Treasury Committee. He confirmed that the FCA would focus on prioritising its proposals on non-financial misconduct instead.  

This will come as a welcome relief for many firms who were concerned about the proposals which had themselves received a mixed response when they were first put forward.  

Had they gone ahead, these diversity data proposals would have meant that financial services firms with 251+ employees would have needed to: 

• introduce a new system internally to gather diversity and inclusion data from all of its employees on an annual basis 

• report its diversity data findings to the regulator 

• publicly disclose the firm’s diversity data. 

Firms would have had to gather data on sex or gender, ethnicity, disability, sexuality and faith, not just for the board and senior leadership team but for all employees. They would also have been required to annually ask employees six specific questions and publish the responses publicly.  

Many however were critical of the proposals. In particular, Kemi Badenoch, Business and Trade Secretary and Minister for Women and Equalities, heavily criticised the FCA’s plans, warning that forcing firms to publish data about their staff could raise costs and stifle growth. Kemi accused the FCA of “overreach” and voiced concerns that the FCA should not be adding regulatory burdens which go well beyond the Equality Act legislative framework. Her view was that the evidence that diversity helps to boost growth is “very limited”. 

This criticism came shortly after the House of Commons Treasury Committee’s Sexism in the City inquiry accused the FCA’s proposals as being another ‘tick box’ compliance exercise and recommended that the proposals for data reporting and target setting were dropped.  

Looking ahead 

This announcement doesn’t mean that the FCA’s diversity data proposals have been dropped completely, but simply that the FCA needs more time to consider them. 

This pause is perhaps unsurprising given the backlash and the political context with the UK General Election looming on 4 July 2024, particularly as if Labour comes into power their future UK diversity plans may conflict with what the FCA have proposed. However, equality, diversity and inclusion still remain high on the political agenda. Labour has announced its intention to extend the rights to claim equal pay beyond just sex to include the protected characteristics of race and disability. They have also proposed introducing compulsory ethnicity and disability pay gap reporting.  

Firms may therefore wish to pause and await the outcome of the UK General Election before proceeding with plans to introduce their own diversity data and targets proposals. Any work already done in this area by firms will not be wasted – it is clear the regulators intend to continue with an increased focus on diversity and this area is always changing rapidly. Firms might still want to gather data and set targets themselves to better understand workplace inclusivity being mindful of the new duty on employers to protect their workers against sexual harassment. 

If you would like to speak to one of our specialist financial services employment team about the FCA’s proposals or what your firm should be doing to prepare for upcoming legislative changes, please contact Lara Small or Olivia Toulson.