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Financial services sector pessimism rises as growth falls

UK financial services have suffered another quarter of falling business volumes, with growth in the investment management sector declining faster than at any point since the end of 2008.

28 MARCH 2019 | CHRIS SEEKINGS
Financial sector confidence hits new lows ©Shutterstock
Financial sector confidence hits new lows ©Shutterstock


That is according to an industry-wide survey of 84 firms, which found that most sectors experienced flat or modest growth over the last three months amid ongoing Brexit uncertainty.

Insurance brokers were the exception after enjoying “robust” business volumes, but growth expectations for the industry as a whole are now at the weakest point since the financial crash.

And employment growth was the worst recorded for four years, particularly in the banking sector, although this is expected to recover over the next quarter.

“The alarm bells ringing at the state of optimism in the financial services sector have now reached a deafening level,” said Rain Newton-Smith, chief economist at the Confederation of British Industry (CBI), which co-produced the research with PricewaterhouseCoopers (PwC).

“Brexit is now a national emergency. It is in absolutely nobody’s interest for the uncertainty to drag on, and continually chip away at our economy and financial services sector.”

The survey found that business volumes in financial services declined for the second consecutive quarter between January and March, falling at the fastest pace since September 2012.

Just 10% of firms said they were more optimistic about the overall business situation compared with three months ago, while 53% were less optimistic.

However, there were some positive signs, with cost pressures easing and profits growing faster than at any point in the 12 months, driven by the insurance and banking sector.

And profitability is expected to pick-up further over the next quarter, even as many businesses and households hold back on their spending.

PwC head of financial services, Andrew Kail, said: “It remains to be seen whether our financial services retain their current global footprint as political negotiations play out.

“Clarity, certainty and communication are vital if the UK is to protect its position as the leading financial centre.”


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