Optimism down in the financial services sector post-Brexit
INVESTMENT managers, finance houses and banks are feeling less optimistic about the future, due to lower interest rates and post-Brexit uncertainty.
The latest CBI/PwC Financial Services Survey, released today, found that optimism in the financial services sector fell for the third consecutive quarter in the three months leading up the September, the longest period of negative sentiment since the financial crisis.
“The challenges facing the sector have not gone away – they’ve actually grown,” said Rain Newton-Smith, CBI’s chief economist. “Add the uncertainty caused by Brexit to low interest rates, technological change and strong competition, and it’s plain to see why optimism is falling and pressure on margins remains intense.”
Only 12 per cent of the respondents said that they felt positive about the business environment post-Brexit, although when asked to name the opportunities that could come from the referendum, 16 per cent said that it may stimulate new innovation and fintech.
“The continuing fall in optimism is a cause for concern,” said Andrew Kail, UK financial services leader at PwC. “Trading conditions and the ‘lower for longer’ interest rate environment continue to be challenging.
“The big picture agenda of transforming business models to respond to customer, regulatory and technological changes continue apace and now Brexit has added an additional ingredient to the mixture.”
Despite the lack of optimism, overall profitability grew across the financial services industry, with 37 per cent of firms reporting a profit increase. Business volumes were also up across the board, with the exception of finance houses, where volumes fell slightly.
Overall, finance houses, building societies, banks and investment managers were the least likely to be optimistic about the future of their business, while insurers reported higher optimism than their peers.