Financial services outlook drops at fastest since crash
Optimism in the financial services sector has fallen at the quickest rate in six years, a study suggests.
Research by the CBI and PwC indicated that optimism in firms has been flat or falling for the past three years.
A survey of 84 companies showed falling business volumes and employment, with a sharp decline in banking jobs.
Despite the fall in optimism, profits in the sector grew and the trend is expected to continue.
Rain Newton-Smith, the CBI’s chief economist, said: “The alarm bells ringing at the state of optimism in the financial services sector have now reached a deafening level.
“Not only has it plummeted at the fastest rate since the depths of the financial crisis, it has been falling or flat since the EU referendum.
“Additionally, business volumes and employment have fallen over the last quarter.
“Brexit is now a national emergency. No deal has to be clearly ruled out, then MPs must finally compromise and deliver a solution that protects jobs, livelihoods and communities across the UK.
“It is in absolutely nobody’s interest for the uncertainty to drag on, and continually chip away at our economy and financial services sector.”
Andrew Kail, head of financial services at PwC, said the findings presented obvious cause for concern but that the wider message was one of resilience.
“Three strong themes stand out in the survey: Brexit, people, and future investment. Despite the continuing uncertainty, these businesses are embracing disruption and reinventing themselves to be ready for growth in a post-Brexit environment including developing leaner, more specialised workforces,” he said.
“They are ramping up spending on training, technology and marketing, which suggests among other things, more workforce automation.
“However, it remains to be seen whether our FS businesses will retain their current global footprint as political negotiations play out.
Looking to the year ahead, financial services firms continue to plan higher spending on IT and marketing, but expect to cut back in other areas of capital spending. Investment is largely motivated by the desire to provide new services, with concerns about inadequate net returns on investment the predominant brake on spending. Meanwhile, the share of firms looking to invest to increase efficiency fell to a record low.
“Clarity, certainty and communication are vital if the UK is to protect its position as the leading financial centre,” Mr Kail added.