Optimism in the UK’s financial services sector descended into gloom over the past quarter amid concerns about the economy, Brexit, regulation and advances in technology
Optimism in the UK’s financial services sector descended into gloom over the past quarter as concerns about the economy, Brexit, regulation and advances in technology began to bite.
The latest CBI/PwC Financial Services Survey of 100 firms found that sentiment across the UK’s finance industry fell sharply in the three months to September, marking the tenth quarter of decline in the past 11 quarters.
In a sign that many in the industry feel fortunes could soon change, the banking and investment management sectors showed little optimism about the months ahead.
For the first time since 2009, there was also no expectation of improvement in overall business volumes for the coming quarter.
However, finance and lending houses bucked the trend by expressing improved optimism.
Building societies, finance houses and insurers reported rising demand for their services, while volumes were stable in banking and fell in investment management.
Chief economist at the Confederation of British Industry, Rain Newton-Smith said that while it’s good to see that demand for financial services is holding up, with business volumes edging higher last quarter, it’s simply impossible to ignore the dangerous signs of strain on the sector arising from the combined challenges of a subdued economy, Brexit, regulation and rapid advances in technology.
Head of financial services at PwC, Andrew Kail said there are understandable concerns around the shockwaves created by Brexit alongside dealing with the impacts of regulation and technology. Addressing how these issues manifest themselves must be at the heart of firms’ contingency plans over the next six months.
The CBI/PwC research coincided with a survey from the British Chambers of Commerce (BCC) that found 21 per cent of businesses will cut investment if there is a ‘no deal’ Brexit outcome, one in five will move part or all of their businesses to the EU, and 18 per cent will cut recruitment.
Director-general of the BCC, Adam Marshall said the government’s top priority needs to be reaching a deal with the EU that provides certainty to UK businesses. He said their evidence is clear. Failure to reach a political agreement would have real-world consequences, with significant decreases in both investment and recruitment.
Responding to the CBI/PwC survey findings, a spokesperson for UK Finance, the trade association for the finance and banking industry, said the UK remains a world-leading financial centre and it is important it works hard to maintain this position post-Brexit. The spokesperson said the UK is and should always seek to be the safest, most transparent and best regulated place for banking and other financial service providers to do business.
It is also crucial to provide firms with certainty over future financial services trade between the UK and EU, and to maintain access to the best talent from Europe and around the world.