Optimism in the UK financial services industry fell for the third consecutive quarter in 2017. The period ending three months to December 2017 represents the longest period of falling sentiment since the 2008 financial meltdown, according to the CBI/PwC Financial Services Survey.
The study found only 13% of the firms to be more optimistic about the overall business situation in the quarter to December 2017 compared with the previous quarter, while 35% said they are less optimistic.
Investment managers, finance houses, and life insurers were found to be more positive, while banks, building societies and general insurers were less positive compared to the last quarter.
Business volumes of 19% of the firms increased during the period but 12% registered a decline. The business volumes are expected to improve over the next quarter, with 17% of firms expecting them to increase and 3% expecting otherwise.
Overall profitability improved as 25% of the firms reported increase while 10% registered a fall.
In the three months to December, 27% of the firms increased headcount but 32% said that their headcount dropped.
The study also found firms expecting to increase investment on IT and marketing over the next 12 months. Level of demand, regulation, and competition were highlighted as the biggest impediments to growth over the coming year.
Notably, 91% of firms cited Brexit uncertainty as the most serious threat to UK’s` status as a leading global financial centre.
Firms said that they want to see steps to attract fintech talent, acceleration in the digitisation of services, and greater investment in the UK’s broader technology infrastructure to make the nation a leading fintech and innovation centre.
CBI chief economist Rain Newton-Smith said: “With overall business levels seen as broadly typical, and demand and profitability continuing to expand, the financial services sector ended last year on a stable footing.
“Scratch the surface, however, and a different story is revealed. Optimism in parts of the sector has been falling for the last two years, whilst firms are nearly unanimous in voicing their concern about the damaging impact of Brexit uncertainty and the need for the UK to remain a vibrant centre of FinTech and innovation. To restore some confidence, financial services firms absolutely must – no ifs, no buts – get as much certainty as possible on what the UK is aiming for in the Brexit negotiations, the opportunities of success and the consequences of failure.”