Return to growth
Optimism in financial services at highest since mid-2015
Investment management is growing (pic: Terry Murden)
Financial services firms are at their most optimistic for more than four years, in spite of uncertainty around the UK’s imminent withdrawal from the EU.
Volumes in the sector are expected to return to growth next quarter, marking the strongest expectations since March 2018, with profits set to stabilise as a result, according to the latest CBI/PwC Financial Services Survey.
The quarterly survey of 94 firms, conducted before the 2019 General Election, found that optimism about the overall business situation in financial services rose for the first time in twelve quarters, and at the fastest pace since June 2015, a year before the EU referendum.
Sentiment was mixed by sector, with the headline improvement driven by investment management, insurance broking and general insurance.
Optimism was flat in banks and building societies, and fell in finance houses and life insurance,
However, the overall conditions in the three months to December remained tough. Business volumes fell further, at the fastest pace since September 2012, marking a full year in which volumes have not risen.
Meanwhile, employment growth in financial services remained solid and far above the long-run average, with general insurance the only sub-sector that reduced headcount last quarter. Employment growth is expected to pick up over the next quarter.
Rain Newton-Smith, CBI chief economist, 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.”