Optimism among financial services firms fell for a third consecutive quarter in the three months to September, in the face of lower interest rates and the uncertainty caused by Britain’s vote to quit the European Union, according to a survey by CBI/PwC Financial Services.
The quarterly survey of 115 firms revealed that the decline marks the longest period of declining sentiment since the financial crisis in early 2009. Optimism fell most sharply among finance houses, building societies and investment managers, was broadly stable in the life and general insurance sectors, and declined slightly among banks.
However, 15% of firms said that they were more optimistic about the overall business situation compared to three months back, while 28% said that they were less optimistic.
Going ahead, 25% of firms said that they expect volumes to rise next quarter, while 10% expect a decline.
In terms of employment, 24% of firms said that they had increased employment, while 24% said that it had decreased, and 20% said that they expected headcount to increase next quarter.
Firms are also expected to increase IT and marketing capital spending at a faster pace in the the year ahead, revealed the study.
Further, 53% of financial services firms said that that Brexit had a negative general impact on their organisation, while 12% reported a positive general impact.
According to these financial services firms, the top three risks over the medium-term were the impact on the economy, changes in access to EU markets and lower base rate/yields.
The top three opportunities over the medium term were changes to UK financial services regulation, acceleration of transformational change, and the stimulation of new innovation and FinTech.
PwC UK financial services leader Andrew Kail said: “Life was busy for UK financial services firms before the Brexit vote – it just got a whole lot busier as they digest the implications for their businesses. The survey shows business performance holding up in the short term which is positive. However, the continuing fall in optimism is a cause for concern. 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 continues apace and now Brexit has added an additional ingredient to the mixture.”