This article first appeared in the Telegraph.

A fear of risk-taking is undermining Rachel Reeves’s attempt to boost the UK economy, City chiefs have warned.

A culture of “safety-ism” among financial regulators and the fear of losing money is stifling growth and starving the British economy of cash, think tank New Capital Consensus (NCC) warned on Thursday.

In a report, NCC said Britain’s financial regulation was no longer fit for purpose and was doing more harm than good.

The think tank called for the “fragmented and over-complex regulatory system” to be redesigned from the bottom up to focus on the benefits of investing, rather than the risks.

Dan Hedley, who helped write the report, said a surge in red tape since the financial crisis meant City businesses were facing “death by 1,000 cuts”.

He singled out an “unhealthy fixation” on investors’ ability to immediately cash out. Mr Hedley said: “The system is obsessed with daily liquidity and it’s difficult to point at a piece of regulation that requires that. That has just emerged as market practice.”

Mr Hedley said a focus on liquidity – the speed at which an investment can be redeemed – needed to be replaced with a focus on the returns that more fixed investments can generate.

NCC, which is part of Chatham House, demanded a radical reshaping of the UK financial system and called for bolder action from Ms Reeves to help grow the economy.

The Chancellor has made slashing red tape and forcing regulators to be more pro-growth a key part of her attempt to boost Britain’s sluggish economy.

Mr Hedley said: “We think that [the Government’s agenda] is roughly hitting the right notes [but] there needs to be more ambition.”

NCC, which is chaired by City grandee Sir Keith Skeoch, said a raft of reforms were needed to “rebuild a sustainable growth economy to the benefit of all”.

In particular, the think tank urged the Chancellor to loosen the rules around investments made by the pension industry to allow companies to take greater risks.

Ashok Gupta, the NCC founder, said: “The Government has rightly placed UK sustainable economic growth at the top of its agenda. UK savings and investment are key drivers of this growth. However, the system needs reform to fulfil its potential.

“We urge the Government to seize the opportunity of recognising its more fundamental function as a critical financial intermediator, channelling money from the UK savings and investment stock to UK firms in need of growth capital.

“The end result could see a growing economy providing better, more productive jobs and a reduction in regional and intergenerational inequalities.”

Photograph: Kirsty O’Connor / Treasury, CC BY-NC-ND 2.0