Brexit takes toll on Bri­tain’s fi­nan­cial sec­tor; out­look weak

Business World - - World Business -

LON­DON — Un­cer­tainty over Brexit and the econ­omy have led de­mand for Bri­tain’s fi­nan­cial ser­vices to shrink for the first time in five years, with no im­me­di­ate sign of an im­prove­ment, a sur­vey by busi­ness group CBI and PwC showed.

And prof­itabil­ity in the sec­tor which raises most tax in Bri­tain was flat for the third quar­ter in a row in the three months to De­cem­ber 2018, the sur­vey re­leased on Mon­day said.

The sur­vey of 84 firms said de­mand is ex­pected to con­tinue fall­ing dur­ing the quar­ter to March, with prof­itabil­ity also ex­pected to drop for the first time in three years.

“A com­bi­na­tion of macroe­co­nomic and Brexit un­cer­tainty, reg­u­la­tory com­pli­ance and global mar­ket volatil­ity are tak­ing a toll on the UK’s fi­nan­cial ser­vices sec­tor,” CBI Chief Econ­o­mist Rain New­ton-Smith said.

“The per­sis­tent weak­ness in op­ti­mism and the de­te­ri­o­ra­tion in ex­pec­ta­tions sound a warn­ing for the out­look.”

Bri­tain’s par­lia­ment is ex­pected to vote on Tues­day to re­ject the di­vorce set­tle­ment with the Euro­pean Union (EU), an out­come that would pro­long un­cer­tainty for the fi­nan­cial sec­tor.

But many banks, in­sur­ers and as­set man­agers who use Bri­tain as their EU base are open­ing hubs in the bloc to avoid be­ing locked out of the con­ti­nent if Bri­tain crashes out of the EU in March with­out a deal.

The sur­vey painted a mixed pic­ture for the sec­tor, with busi­ness hold­ing up among in­sur­ers, while vol­umes were flat or eas­ing at banks, build­ing so­ci­eties and spe­cial­ist lenders.

The sur­vey found a “strik­ing loss of mo­men­tum” at in­vest­ment man­agers, who re­ported the steep­est fall in ac­tiv­ity since the fi­nan­cial cri­sis a decade ago.

A large ma­jor­ity of in­vest­ment man­age­ment firms sur­veyed were less op­ti­mistic about their prospects in com­ing months, with busi­ness from overseas cus­tomers tak­ing a hit.

It marks a re­ver­sal for in­vest­ment man­age­ment, which has grown well since the fi­nan­cial cri­sis as risk-averse banks draw in their horns. It now faces volatile as­set prices and weaker de­mand, the sur­vey showed.

De­spite an over­all gloomy tone, head­count in the fi­nan­cial sec­tor is ex­pected to rise in the cur­rent quar­ter and in­vest­ment in­ten­tions re­main broadly sta­ble, the sur­vey said. —

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