Home Business NewsBusiness Financial firms boosted by strong economy

Financial firms boosted by strong economy

by LLB Reporter
27th Mar 17 8:24 am

New CBI study shows

Buoyed by a broadly resilient economy, sentiment in the financial services sector stabilised in the three months to March, having deteriorated throughout 2016, according to the latest CBI/PwC Financial Services Survey.

The quarterly survey of 98 firms found that optimism about the overall business situation continued to vary across sectors. Sentiment was unchanged in the banking sector, but this followed four consecutive quarters of decline. Building societies, life insurers, insurance brokers and investment managers all felt more optimistic than in the previous quarter, while finance houses and general insurers felt less optimistic.

Business volumes saw healthy growth in the first quarter of 2017, expanding at a faster pace than expected in the previous survey. Building societies and investment managers in particular reported a solid expansion of activity. However, growth in overall business volumes is expected to slow over the coming three months, suggesting firms remain cautious over the outlook.

The rise in business volumes drove robust growth in profits, in line with expectations, although profitability is expected to improve more moderately in the quarter ahead.

Combatting the threat of cyber-crime is a growing imperative for financial services firms, with over four fifths planning to invest in preventative technology and IT systems, and to test their defence and response mechanisms over the year ahead. Turning to the pressing issue of diversity, more than two thirds of businesses already have formal succession plans and leadership programmes and over half have appointed a senior executive responsible for diversity and inclusion.

Rain Newton-Smith, CBI chief economist, said: “It’s great that financial services firms have begun the year with a spring in their step – notwithstanding Brexit uncertainty – with volumes expanding at a robust pace, profitability improving and hiring on the up.

“Underlying business in the sector is holding up well, and optimism about global markets, along with stronger global growth, is having a positive knock on effect. However, whilst demand in the wider UK economy has proven resilient, growth is likely to slow as the year goes on, amid broader uncertainty and higher inflation.

“Firms continue to keep a close eye on the challenges ahead, from concerns over labour shortages and the impact of regulation costs on business expansion. It’s reassuring to see them taking meaningful steps to address cyber-crime, as it rises up the risk register. A deeper understanding of the need for greater diversity and concrete plans to improve it will also enable better business decisions to be made.”

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