The UK, EU and Switzerland will transition to a T+1 settlement cycle on 11 October 2027. In this article, Andrew Douglas, Chair of the UK Accelerated Settlement Taskforce, warns that accelerated settlement will eliminate more than 80 per cent of the time to correct post-trade errors, making process automation essential to keeping up with new efficiency demands.
The T+1 Implementation Plan, published by the UK Accelerated Settlement Taskforce (AST) last year, outlined a list of essential behaviours to be adopted by UK firms for a successful transition to next-day settlement.
First and foremost was the need to automate.
While the need for this was apparent at the time, it has become even more obvious as we approach the October 2027 deadline.
The key driver for automation is that the move to T+1 compresses, quite dramatically, the time available for firms to complete all post-trade processes on which settlement relies. Data management, trade confirmation, allocation, matching, funding, stock loan recalls, and corporate actions are all still required but must be completed within a one-day window.
While this seems like a 50 per cent reduction in timelines, it actually creates more like an 80 per cent reduction. In real terms, it means you have to do everything you do today but in 20 per cent of the time that is available. The consensus of the AST members was that such compression of activity can only be realistically addressed through automation.
From our second mover advantage, we also have empirical evidence from the US migration to T+1 that failing to automate can create very real and very expensive problems. We do not need to hypothesise; we can measure the real impact of not automating by looking at US implementation experience surveys. In September that year, a post-implementation survey identified an increase of up to 18 per cent in staffing costs, most harshly felt by smaller firms where automation was either not planned or late in delivery.
The lesson was very clear: if you didn’t automate, your costs would go up, principally because you need to ‘body shop’ a workaround such as taking on additional staff to cope. An 18 per cent increase in staffing costs cannot be considered a satisfactory long-term solution. In an industry where a 50-150 basis point increase in ‘alpha’ through astute investment would be considered a good result, an operational expense rise of 1800 basis points is not sustainable.
So we could already see this by the end of 2024 as we constructed the UK T+1 Implementation Plan.
Since then, the digital revolution has begun to gain pace in the world of finance. We hear more talk of 24-hour trading up to seven days a week, of instantaneous settlement, of tokenisation and fractionalisation of assets. Support for these activities will demand the ability to potentially deal seamlessly and in a cost-effective manner with trades in new instruments, spikes in value and volume, 24-hour activity and more cross-border investment. All this is best served by a digital back office. As a Head of Ops said to me only last week, my ‘digital staff’ can service business whilst I am asleep.
Keeping up with peers
Firms that rely heavily on manual intervention will likely experience higher fail rates, increased liquidity strain, and rising operational costs. Bigger teams working longer hours will be required to meet compressed deadlines. This will not only erode margins but potentially increase rates too.
Automated firms, by contrast, can process higher volumes with greater accuracy and predictability, positioning themselves to operate more efficiently in a T+1 world. Critically, automation is not just about speed; it offers better control and transparency. Automated workflows rely on structured data, generate audit trails and provide real-time visibility into settlement status, enabling firms to identify bottlenecks early and make better intraday funding decisions. We are already seeing a desire by some automated firms to identify counterparties with similar levels of automation for precisely these efficiency and accuracy reasons. This is creating momentum towards automation and signalling to firms who have not yet started that they should do so, and soon. Don’t be left behind.
Cost and complexity frequently pop up as barriers to automation, particularly for smaller firms, but the cost of inaction is higher. Settlement failures could lead to regulatory scrutiny, reputational damage, and emergency remediation efforts, which are much more costly in the long run.
Do I need to automate?
I get asked this a lot. The beauty of a principles rather than rules-driven environment that has prevailed in The City is that there are options.
Firms don’t necessarily need a wholesale system replacement in order to automate. Yes, good data is crucial, but targeted improvements such as automated confirmation, standardised messaging, and real-time reconciliation can deliver meaningful gains without destabilising existing operations.
And automation comes in many forms. You can build your own solution, you can import a solution from a service provider, or you can outsource to an automated back office provider, an increasingly popular option, leaving the asset manager to focus on what they do best, investing! There are counterparties and service suppliers out there that will welcome the opportunity to work with you. But all of these options have one thing in common: they take time to design, negotiate, agree and implement. This takes us to our second recommended behaviour that forms a key foundation of the UK T+1 Implementation Plan.
The time for action is now
‘Action this day’ was the second key behaviour in the Implementation Plan. In essence, this is a call for firms to take action now without delay. Time is moving fast. Firms must take immediate action on their chosen strategies. Inaction will only lead to a string of higher costs down the line.
Automation ultimately comes down to making sure your data is in the right place at the right time. This is the essential truth that enables participants to settle accurately, on time, and at the lowest marginal cost. As the majority of firms operate in a more digital world, automating also lays the groundwork for the future evolution of the market.
Preparing well for T+1 will make your firm more efficient, resilient, cost-effective, profitable and future-proofed. Starting now will only benefit your business.
