Optimism in financial services rises

Michael Lloyd

January 13, 2020

Optimism in financial services rose for the first time in 12 months and at the fastest pace since June 2015, the latest CBI/PwC Financial Services Survey has found.

Nearly a fifth (19%) of firms said they were more optimistic about the overall business situation compared with three months ago, whilst 11% were less optimistic.

Sentiment was mixed by sector, with the headline improvement driven partly by insurance broking and general insurance.

Optimism was flat in banks and building societies and fell in houses and life insurance.

Rain Newton-Smith, chief economist at CBI, said: “It’s great that optimism has risen following four-and-a-half years of dire sentiment, with financial services firms also suggesting that an end to falling business volumes and profitability may be in sight.

“However, the sector isn’t quite out of the woods yet.

“Against the backdrop of another fall in business and profits, Brexit uncertainty continues to drag on investment plans, and concerns over labour shortages have spiked.

“As the UK begins a new future outside the European Union, the government must do everything it can to support and stimulate one of the UK’s most globally competitive sectors, so that expectations of an upturn can come to pass – both over the next quarter and beyond.”

Some 10% of firms said that business volumes were up, while 28% said they were down.

Andrew Kail, head of financial services at PwC, added: “The stirrings of optimism represent a significant turnaround given the flat and falling optimism that has beset the past four years.

“An uptick in hiring, investment in systems, and better profit expectations for the first three months of the new year are driving positivity in the sector, following the General Election.

“However, this year in particular, firms will need 20/20 vision in order to maximise performance.

“Not least as there is still work needed to bring clarity on Brexit transitional arrangements.

“Encouragingly, PwC has already observed firms responding to the current environment of long-term low interest rates, intense competition and continuing regulation by resetting strategy, changing their business models and investing in technology and their people.”

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