Financial services gloomier in current economy than during credit crunch
Optimism in the sector fell for the fourth consecutive quarter
Financial services firms are more pessimistic about the current UK economy than they were during the credit crunch, new survey findings have suggested.
The latest CBI/PwC Financial Services Survey found that optimism in the sector fell for the fourth consecutive quarter at the start of 2018 meaning confidence has now been flat or falling for nine quarters.
That, said the report, is even worse than the gloom which enveloped the sector during the financial crisis.
It found that sentiment in banking had continued to deteriorate, in line with recent quarters, while the mood among investment managers also fell for the first time in over a year.
Overall business volumes expanded in the three months to March, with the pace of growth picking up from the previous quarter. They are expected to rise again over the coming three months.
Insurance and banking did particularly well but finance houses saw a sharp drop in volumes. Building societies saw flat volumes while growth stalled in investment management.
There was good news for jobs across the sector as employment rose with firms planning to increase headcount further in the three months to June.
“Financial services firms have performed well over the last three months, with business volumes and employment on the up and beating expectations. But there is no escaping the rather large elephant in the room. Optimism has been flat or falling for over two years now,” said Rain Newton-Smith, CBI Chief Economist.
“The Brexit transition that has been agreed between the UK and the EU will give financial services firms more reason to pause contingency plans, and to invest in the UK, but the Government must push energetically for the protection, maintenance and development of our world-beating financial services sector.
Newton-Smith added: “Looking to the longer-term, it’s clear that the sector needs to work hard to ensure the workforce has the digital skills necessary for maintaining the UK’s competitive edge, as well as to attract a younger, more diverse group of people and the very best international talent.”
Andrew Kail, head of financial services at PwC, added: “We are seeing a contradiction between a consistent trend of strong financial performance and weak levels of confidence about the future. Brexit, with its transition timeframe now agreed, is just one of many factors financial services organisations are having to deal with.
“Add to Brexit the high levels of competition, changing consumer preferences and behaviours, rapidly developing technological changes, the need to aggressively manage costs, and new regulation, collectively, it is denting confidence about the future.”
Despite the gloom, are British investors about to splash their cash on small UK businesses?
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