CBI and PwC warning about a ‘Perfect storm’ in the UK financial services
Research carried out by the Confederation of British Industry (CBI) and PwC has revealed that the financial services sector is one of the most at risk from a Brexit from the EU. Additional factors such as the global economy and the market volatility have contributed to shared fear of the future outlook of banks and investment firms. Only 14% of the 104 banking, insurance, fund management and securities dealing companies participating in the survey have expressed high hopes about the state of their business in 2016, compared to last year when 35% said they were pessimistic about their future. This is the sharpest plummet in confidence and optimism among companies in the sector since 2011.
CBI’s economics director, Rain Newton-Smith said: ’Concerns over China and a volatile start to the year for markets, alongside uncertainty about a possible Brexit, have created a perfect storm to dampen optimism in financial services.’
“Now that the referendum date has been set, some investment decisions have been put on hold by some firms, though this is not widespread,” she added.
PwC’s UK financial services leader, Kevin Burrowes however said that in contrast to the overall pessimistic vibes, it is a good sign that many financial services organisations are ‘planning to up their game around talent attraction and diversity’.
The independent consultancy Oxford Economics has estimated that in the case of Brexit, the financial services sector would be 2.2% smaller in 2030.
In addition to these predictions, the survey findings show that business volumes have continued to expand continuously, while profitability has shown improvement. Although anticipated to remain flat in the next quarter, employment in financial services has also seen growth in the past three months. Competition is expected to be the main factor constraining business over the next twelve months – 98% of the firms expect competition coming from their own financial services sectors (up from 87% from the last quarter); and 53 % see competition coming from different sectors of financial services (up from 44% last quarter).