Nearly half (45%) of banks and insurers have a negative outlook for the UK’s economy for the fourth quarter in a row, according to the results of the Confederation of British Industry’s (CBI) latest quarterly survey of 103 firms.
The latest data reveals that 45% of firms are less optimistic than the previous quarter, 10% are more positive, and 45% have no change of opinion. It’s the longest period of pessimism since 2008.
Other figures of interest are that 19% of firms said that business volumes were up compared to 17% reporting that they were down. 29% of firms meanwhile expect business volumes to rise in the next quarter, but 22% expect them to fall. And in no surprise to anybody, Brexit ranks as the number one challenge for companies in the financial services sector, with macroeconomic uncertainty and regulatory compliance coming in second and third, respectively.
In more positive news, employment numbers have increased, with 18% of firms saying they had increased employment versus 10% giving the opposite answer.
Andrew Kail, head of financial services at PwC, which carries out the survey in partnership with the CBI, says: “Financial services companies face many challenges to their business models from competition, regulation, technology and Brexit and, as a consequence, are having to take some big decisions about their future strategy.
“While companies are relatively positive about short term business volumes and profitability, they continue to need to make significant investments to protect their future. The first quarter of 2017 and beyond will see many start to fine tune and activate their Brexit contingency plans as the reality of life outside the single market and the EU begins to dawn.”
Rain Newton-Smith, CBI chief economist adds: “As we head into the New Year, a mixed picture emerges from financial services firms about their hopes and fears. Whilst Brexit is a particular challenge for banks, and broader economic uncertainty is also a concern for many, firms are also looking to future opportunities.”