UK Set to Make T+1 Switch in 2027 in Tandem With Europe

(Bloomberg) — The taskforce spearheading the UK’s shift to a faster trading regime is recommending the same transition date as the European Union, teeing up a coordinated move favored by the finance industry. 

The UK should switch to a one-day settlement cycle known as T+1 on Oct. 11 2027, according to Andrew Douglas, chair of the government-appointed team advising on the transition. That’s the same date that the European Securities and Markets Authority has recommended, though formal political approval is still required in both jurisdictions. 

In Britain as well as the EU, most securities trades take two days to complete. Halving the settlement cycle to one day — a switch the US made last year — is designed to stamp out risks such as the possibility of a financial institution defaulting in the time between a transaction being agreed and settled. 

With Switzerland already on board, the risk of Europe’s markets settling at different paces — which industry voices warned would increase trading costs — should be averted. That said, the region’s fragmented financial infrastructure could make the shift more challenging than in North America. 

“What I’m encouraging people to do is get on with it now, not wait until 2027,” Douglas, chair of the UK Accelerated Settlement Taskforce, said in an interview. “We can learn from the US experience and avoid some of the pressure points they experienced.”

The US switch to T+1 required banks, brokers and asset managers to complete trades within a much tighter time frame. The changeover, which affected multiple divisions including funding, FX and securities lending, forced many financial institutions to overhaul global workflows, including by relocating staff and adjusting shifts.

Automation Push

Even if the EU and UK achieve the coordinated transition requested by industry bodies, the region’s markets will remain out of step with those in North America for years. Such misalignment can create funding gaps for investors whose portfolios span multiple jurisdictions if they need to settle a purchase of securities before receiving the corresponding cash.

Douglas said, however, the later transition can offer a “second-mover advantage” to the UK financial industry by enabling it to prepare better. His taskforce is due to release its recommendations next month, and will emphasize the benefits of greater automation.

A Citigroup Inc. poll published in September found that 33% of projects related to the North American T+1 shift, mainly those involving further automation and additional hiring, were yet to be undertaken. Large volumes of manual processing have significantly impacted headcount, according to just over half the banks and brokers that responded to the survey.

“If you need to automate, get that work done now rather than starting six months before the go-live date,” Douglas said. “I am convinced if you don’t automate these processes it will be a threat to your business model.”

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