Sentiment in the UK’s financial services sector is continuing to fall as firms face the challenges of the country leaving the European Union, it was reported on Monday.
More than half of all financial services firms questioned for the latest CBI/PwC Financial Services Survey said that the impact of the referendum decision was negative, while only around one in ten saw a positive impact. Market volatility was the main cause for concern, cited by just under three quarters of firms.
The quarterly survey of 115 firms found that optimism about the overall business situation fell for the third consecutive quarter – the longest period of declining sentiment since the depths of the financial crisis in early 2009.
Optimism was broadly stable in the life and general insurance sectors and fell only slightly among banks, but it deteriorated sharply among finance houses, building societies and investment managers.
Firms reported healthy growth in overall business volumes in the three months to September, with only finance houses reporting a drop in activity. And although growth is expected to slow in the coming quarter, it is likely to remain “decent” from a long-term perspective, the CBI said.
Profit growth also picked up in the quarter to September, having slowed over the previous year, but is expected to ease back again over the next quarter.
The top three risks facing financial services firms following the Brexit vote were said to be: the impact on the economy; changes in access to EU markets; and the prospect of lower yields.
Rain Newton-Smith, chief economist at the CBI, commented:
“As firms get back into the swing of things after the summer, and continue to digest the implications of the EU referendum, it’s good to see that demand in the financial services sector has held up.
“But the challenges facing the sector have not gone away — they’ve actually grown. 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.
“With firms voicing strong concerns about the impact of Brexit, especially the risks to the wider economy in the years ahead, the Government must allay their unease with clear plans for negotiations to leave the EU. An ambitious Autumn Statement would also set a clear direction for growth and prosperity.”