Financial services still growing despite fading confidence

Britain’s vast financial services division benefited from healthy profits and expanding employment last quarter even though certainty about the future was shadowed with Brexit rising on the horizon, according to a new survey.

The newest CBI/PwC financial services study of 94 businesses found that majority of them had growing business volumes, earnings and hiring in the three months to the end of June.

At the same point, however, banks and life insurance companies stated that they were feeling less confident, the fifth quarter out of the last six that scored a drop and signalling that big firms are anxious their fortunes could soon shift. Still, while overall the sector was increasingly inclined to a discouraging grow, insurance brokers, investment managers and other finance houses announced that they were more positive about their prospects.

“Currently the financial services sector is performing well in both business volume terms and underlying profitability,” said Andrew Kail, PwC’s head of financial services.

“However, another quarter of falling optimism points to an industry harbouring concerns about the future. The UK will continue to be a leading financial centre, but political uncertainty and the ongoing wait for an agreed Brexit blueprint are fuelling more questions about companies’ futures and the performance of the wider economy,” he added.

Some 47 percent of the firms polled published an improvement in business volumes while 41 percent said earnings increased, compared with just 6 percent that had experienced a decline. The study also uncovered that 46 percent of respondents had raised their headcount, compared with a 17 percent that had an employee cut.

On the other hand, 25 percent of businesses stated they were more cynical about the future compared with 15 percent that sees a brighter future.

It came as EY announced that Brexit had advised 59 of the 222 big financial firms it watches to declare either that they had begun to move workers and operations out of the nation, or were studying their domicile. This was an increase from 53 firms in March.

The UK’s approaching divorce from the EU acts as a challenge to London, which many foreign banks, insurers and asset administrators use as the basis for their European services.

A number of firms are worried they will lose the privilege to the EU’s broad single market, have begun to execute contingency programs by moving operations out of the City to other European towns.

EY announced that Dublin was showing to be the most popular destination, with 19 of the 222  financial groups saying that they are thinking if they will size up their presence in Ireland. Frankfurt in Germany is being considered by 18 companies, while Luxembourg is favoured by 11, EY said.

Omar Ali, EY’s UK financial services leader, said, “Financial services companies are looking to make sure they can continue to conduct business across the EU, whilst retaining a strong base in London, and they are now starting to select potential European locations.”