UK Financial Sector’s Business Confidence Declines Sharply
A recent survey reveals that optimism in the UK’s financial sector is at its lowest since 2011.
The dip in confidence reflects concerns on the slowdown in the global economy and the uncertainty arising from the upcoming referendum on Britain exiting the European Union (EU). The Financial Services Survey by CBI and PwC is conducted on a quarterly basis and covers ten major segments of the UK’s financial services sector.
In a statement, Rain Newton-Smith, the director for economics, CBI said,
Concerns over China and a volatile start to the year for markets, alongside uncertainty about a possible Brexit, have created a perfect storm to dampen optimism in financial services
According to the latest survey, banking and investment management were the sub-sectors with the lowest levels of optimism while building societies and insurance companies showed highest levels of confidence.
The survey which covered 104 companies revealed that the top three challenges facing the UK economy are volatility in financial markets, competition levels with the sector and uncertainty in the macroeconomic scenario. It has however said that the volume of business in the sector continued to grow strongly with profitability also growing, though the growth was slowest in two years.
According to Newton-Smith, the uncertainty around Brexit has taken a toll with a few companies putting their investment decisions on hold. The EU referendum has been described as a reason for the deterioration in business confidence in other surveys as well and the Bank of England has blamed the falling pound on it.
UK Chancellor George Osborne has admitted earlier this month that the UK was growing at a rate slower than anticipated and citied global concerns as the reason. However the government’s independent forecaster, the Office for Budget Responsibility stated that weak economic outlook within UK was the prime reason for the slow growth.
The survey results show that 14 percent of financial services companies were more positive in their outlook as compared to the previous survey conducted three months earlier while 35 percent were less optimistic, resulting in a negative balance of 21 percent. The banking sector with a balance of -48 percent was the most pessimistic, displaying the highest loss of confidence since the financial crisis in 2008-09.
Employment within the sector increased in the last quarter but is expected to remain unchanged overall in the forthcoming quarter as the increase anticipated in building society and insurance sectors will be neutralized by the decline in banking.
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