UK market participants are preparing for a planned move to next-business-day settlement in October 2027, with Bank of England minutes pointing to unresolved lending and tax processes that could complicate the change.
In a record released Oct. 22, the Bank of England summarized a Sept. 15 discussion by its Securities Lending Committee. Participants described preparations as advancing across the sector, though firms were at different stages. HM Treasury plans to make T+1 the UK standard for covered securities transactions from Oct. 11, 2027. Under the rule, trades must settle by the next business day after trading.
The UK has required most securities trades to settle on a T+2 basis since 2014, according to a Treasury policy note. The government says a shorter cycle could reduce counterparty risk, encourage automation and bring UK markets closer to jurisdictions that have adopted or are considering T+1. It also lists potential investor savings and more efficient back-office processes as possible benefits.
The committee discussed the extra coordination required to return lent securities, find collateral and arrange funding within a shorter window. It also reviewed settlement schedules, incomplete deliveries and whether agent lenders can support the faster pace. Members linked firms’ ability to compete to how quickly they can adjust collateral and automate work that needs to happen in real time or on settlement day.
Tax rules add another source of friction. Holding-period and record-date requirements under national tax regimes already create processing challenges in securities lending, the minutes said; without adaptation, T+1 could make those difficulties worse. The committee called for closer coordination of tax rules and monitoring of risks across jurisdictions.
Members also considered central clearing, ways to use collateral more efficiently, tokenization and digital collateral systems. The minutes said practical use cases remain a key challenge. Committee members said AI use was mainly aimed at efficiency, including administrative work, information retrieval, data aggregation and recall processing, rather than fully autonomous decisions. They also raised concerns about governance, resilience, vendor oversight and data security.
A Nov. 2025 HM Treasury policy note said draft regulations would exempt securities and commodities lending from the T+1 requirement. It said the final statutory instrument was intended to be laid before the Oct. 11, 2027, start date, subject to technical feedback and parliamentary time.
