That is according to the findings of a joint survey by the Confederation of British Industry and PricewaterhouseCoopers (PwC), which reveal that pessimism is particularly prevalent among banks.
General insurers and finance houses are also less optimistic, with the impact of Brexit, macroeconomic uncertainty, and the level of competition, all cited as key challenges for financial services firms this year.
PwC financial services head, Andrew Kail, said: “Uncertainty has contributed to the low levels of optimism reported by many financial services companies, particularly by the banks.
“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.
“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.”
Despite financial services feeling less optimistic as a whole, life insurers, general insurers and brokers all see opportunities for growth, regardless of ongoing margin pressures.
It was found that firms in all three sectors intend to streamline processes by investing heavily in technologies such as blockchain, and that they expect staff costs to reduce – suggesting a continued move towards automation.
PwC UK insurance leader, Jim Bichard, said: “The UK insurance market should feel optimistic as it is a successful and resilient market and technological development brings many opportunities for growth. Nonetheless, many challenges remain.
“General insurers will have to adapt to the Ogden rate changes coming into force this week but technology provides them with a great opportunity to get closer to their customers.
“Life insurers need to continue working to identify their future role in a mature but changing long-term savings market and bring truly innovative products to market in what is an increasingly crowded space.
“The broking community has so far done a good job of maintaining margins in a tough rating environment. However, the fear of fee commissions and premium incomes declining could show that brokers are beginning to question how long this can be sustained for.”
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