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53% of HR professionals have a high level of concern over increased legal and regulatory risks under Leeds Reforms.
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Despite this, over half (55%) anticipate that lighter regulation will have a positive impact on operations and processes.
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61% of HR professionals increased compliance spending in the last 12 months.
More than half of HR professionals report high concern over the legal liability and regulatory risks posed by lighter regulation under the government’s Leeds Reforms, according to new research.
The findings were revealed in the ‘Red Tape Trade-Off Study’ by compliance training provider Skillcast, which surveyed 500 full-time employees, one-fifth of whom work in HR, to examine organisational readiness for lighter-touch regulation.
Announced earlier this year by Chancellor Rachel Reeves to position the UK as a global hub for financial services by 2035, the first phase of the Leeds Reforms comes into effect from April 2026.
The reforms aim to reduce administrative red tape and the cost of compliance, giving financial services companies greater operational freedom while transferring greater responsibility for legal, financial, and reputational risk onto firms themselves.
The study revealed that nearly nine in ten professionals reported some level of concern about increased legal liability or reputational exposure under a lighter regulatory environment, with over half (53%) expressing high concern.
Although 19% of professionals expect negative consequences, and a further 26% remain unsure, 55% of professionals anticipate positive impacts from reduced red tape, suggesting cautious optimism balanced with heightened vigilance.
The increase in compliance investment over the last 12 months by 61% for HR professionals also indicates a heightened awareness of risk, particularly as over one in six increased investment by more than 20%.
This comes despite HR professionals ranking reputational damage, financial loss, and operational disruption as their top threats, highlighting a main concern aroundinternal operations and brand trust rather than specific regulatory penalties.
Top three perceived risks under lighter regulation:
- Reputational damage
- Financial loss
- Operational disruption
Secondary concerns:
- Regulatory penalties
- Legal liability
- Data or privacy breaches
- Fraud or financial crime exposure
- Employee or HR challenges
Off the back of these concerns, almost two-thirds (63% of respondents) identified regular compliance training as the most important safeguard to maintain compliance under lighter regulation.
This was followed by access to compliance tools and technology and clear internal policies and procedures, showing that firms see a combination of human capability and structured frameworks as key to maintaining standards.
Top factors HR professionals are prioritising to maintain compliance:
- Regular compliance training for employees (63% of respondents)
- Access to compliance tools and technology (48%)
- Clear internal policies and procedures (44%)
However, only one in four HR respondents (26%) viewed having a dedicated internal compliance team as a top factor, suggesting that many organisations may be relying on HR-led training and technology rather than specialised oversight, which could leave firms exposed if roles and accountability are not clearly defined.
This comes as the Employment Rights Bill - set to become law in autumn 2025 - promises a major overhaul of employment law, with compliance already cited as the second most common concern among HR professionals (33%).
Resultingly, the lack of priority given to dedicated internal compliance teams could leave HR departments vulnerable to incoming regulatory changes.
Vivek Dodd, CEO at Skillcast, said:
“The Leeds Reforms aim to reduce administrative red tape, move away from detailed rules, and give firms greater operational freedom, supporting the UK’s goal to become a more competitive destination for financial services. But lighter regulation does not mean lighter risk.
“Accountability now sits squarely with firms, which must manage the full weight of legal, financial, and reputational consequences.
“Our ‘Red Tape Trade-Off Study’ shows that while HR professionals are cautiously optimistic, almost nine in ten HR professionals remain concerned about their exposure under the new framework.
“While the majority of professionals reported increased compliance investment, areas such as dedicated internal compliance teams and ongoing monitoring remain under-prioritised.
“The findings underline that greater regulatory freedom is not a green light to scale back on governance, but a call for smarter, more strategic oversight. To align, firms must embed risk management into their culture, strengthen internal controls, and ensure compliance training and monitoring are continuous. Without this, the risks may outweigh any benefits of lighter-touch oversight.”
