Optimism among financial services continues descent
● Longest period of falling sentiment since financial crisis as Brexit looms large
There has been a further fall in optimism among UK financial services firms, with the vast majority seeing Brexit as the most serious threat to the sector’s global status, according to data unveiled today.
The quarterly survey of 92 firms by the CBI found that optimism in the sector dipped in the final quarter of 2017, rounding off two years of continuous flat or worsening sentiment.
A balance of -22 per cent of firms said they were more optimistic about the overall business situation compared with three months ago, with the figure -6 per cent in the prior period.
Growth in business volumes slowed for a second consecutive quarter, with a balance of +7 per cent saying they were up, down from +13 per cent in the quarter to September.
However, volumes are expected to pick up in the next few months, with a balance of +14 per cent of companies expecting them to rise next quarter, although the picture was mixed across sectors.
Overall profitability improved slightly in the three months to December, with a balance of +15 per cent, but the figure lagged far behind expectations of +42 per cent.
CBI chief economist Rain Newton-smith said: “With overall business levels seen as broadly typical, and demand and profitability continuing to expand, the financial services sector ended last year on a stable footing.
“Scratch the surface, however, and a different story is revealed. Optimism in parts of the sector has been falling for the last two years, whilst firms are nearly unanimous in voicing their concern about the damaging impact of Brexit uncertainty and the need for the UK to remain a vibrant centre of Fintech and innovation.”
Indeed, nine out of ten firms cited Brexit as the most serious challenge to the UK’S position as a leading global financial centre, while nearly half of respondents ranked the UK’S digital infrastructure as among their top three concerns. A total of 54 per cent would like to see steps to attract entrepreneurial, digital and financial talent to the UK’S Fintech sector.
Newton-smith added: “To restore some confidence, financial services firms absolutely must get as much certainty as possible on what the UK is aiming for in the Brexit negotiations, the opportunities of success and the consequences of failure.”
Andrew Kail, head of financial services at PWC, also commented: “The UK is set to leave the EU exactly 14 months from today. A transition period is likely, but ultimately the financial services sector - a critical part of the economy - must prepare itself to operate without membership of this key trading market.”
However,headdedthatbrexit is just one of many issues the UK financial services sector faces, such as preserving profitability in light of falling margins. “How the industry deals with this myriad of challenges will be pivotal to future success,” Kail stated.