Brexit uncertainty hits growth expectations for financial services
Optimism in the financial services industry has fallen due to the uncertainty generated by the Brexit negotiations with the European Union, a major survey of the sector has found.
The lack of a secured deal and the ambiguity of the operating environment after the divorce has caused 100 firms surveyed by CBI and PwC to admit their optimism about the overall business situation in the financial services sector to fall in all but one quarter since the start of 2016.
According to the survey, overall business volumes increased slightly in the three months to September. Many sectors saw business volumes rise, banking volumes were stable for a second consecutive quarter and investment managers said volumes contracted.
For the next three months, overall business volumes are expected to be unchanged, the weakest growth expectations since 2009.
Regarding recruitment and skills, two fifths of firms said they had found it more difficult to find and retain workers over the past year. This could also be attributed to Brexit uncertainty and the ambiguity concerning the status of EU workers in the UK post-Brexit.
Around three quarters of firms expect to find it more difficult to recruit IT workers in the year ahead after the divorce.
Rain Newton-Smith, CBI Chief Economist, said: “While it’s good to see that demand for financial services is holding up, with business volumes edging higher last quarter, it’s simply impossible to ignore the dangerous signs of strain on the sector arising from the combined challenges of a subdued economy, Brexit, regulation and rapid advances in technology.
“For the sector to continue to be one of the UK’s most attractive economic assets, it is fundamental that a Withdrawal Agreement with the EU is agreed. This will provide temporary but essential relief for financial services firms of all sizes. Then attention can turn to the vital task of finalising our future economic relationship with the EU, in which services need to play a pivotal part.”
Andrew Kail, head of financial services at PwC, said: “As the Brexit negotiations continue companies across the sector – who are providing vital services to customers, corporates and governments – have the chance to galvanise themselves and their clients against any potential fallout. This must be underpinned with prudent planning and skilful execution of their plans.”