The financial services sector is more optimistic about the future for the first time since 2017, according to a new survey, with optimism rising at its fastest rate since mid-2015.
The Confederation of British Industry (CBI) and PwC said on Monday a quarterly survey of 94 leading finance firms found companies expect business conditions to improve — the first time finance has been optimistic about the future in three years. Optimism also rose at its fastest rate since 2015.
The survey was done prior to the December general election but expectations of a Tory victory and progress on Brexit may have helped.
“The stirrings of optimism represent a significant turnaround given the flat and falling optimism that has beset the past four years,” Andrew Kail, head of financial services at PwC, said in a statement. “An uptick in hiring, investment in systems, and better profit expectations for the first three months of the new year are driving the positivity in the sector.”
Rising optimism came despite slumping business activity. Financial services companies reported the sharpest drop in business volumes since September 2012 in the fourth quarter of 2019. Profits also fell as the fastest pace since June 2009 and profits across the sector have now been flat for a full 12 months.
“It’s great that optimism has risen following four-and-a-half years of dire sentiment, with financial services firms also suggesting that an end to falling business volumes and profitability may be in sight,” said Rain Newton-Smith, the CBI’s chief economist.
“However, the sector isn’t quite out of the woods yet. Against the backdrop of another fall in business and profits, Brexit uncertainty continues to drag on investment plans, and concerns over labour shortages have spiked.”
A separate PwC report, released last week, found financial services firms paid £75.5bn in tax last year, roughly 10.5% of all tax paid in the UK.