Financial services optimism holds up after poor 2016

Sentiment in the financial services sector pulled out of the dive in the first three months of 2017 having deteriorated throughout 2016 on both sides of the Brexit vote, a new survey highlights today.

The CBI/PwC survey found a third of finance firms were more optimistic than three months ago. Picture: Odd Andersen/AFP/Getty Images

The sector, accounting for 10 per cent of UK economic output, was buoyed in the latest quarter by a continuing resilient economy, says the latest research from the CBI employers group in conjunction with business advisory giant PwC.

It came amid additional good news from the Scottish construction industry, with a report also out today saying that confidence has “remained steady” for a third consecutive quarter.

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The latest CBI/PwC financial services survey found that optimism in the sector was “broadly stable following four consecutive quarters of declining sentiment, the longest period of falling sentiment since the global financial crisis of 2008”.

A total of 33 per cent of firms in the industry, ranging from banks and insurers to building societies and fund managers, were more optimistic about the overall business situation compared with three months back. By contrast, a total of 29 per cent were less optimistic, giving a balance of +4 per cent. This compared with -35 per cent in the quarter to December.

A total of 34 per cent of firms said that volumes were up in the first quarter of this year, while 17 per cent said they were down, giving a rounded balance of +18 per cent. This compared with an appreciably lower +2 per cent in December.

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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, amid renewed nerves after the triggering of Article 50 by Theresa May this week to start the formal Brexit negotiations, Newton-Smith added that growth was likely to slow as the year goes on, also given rising inflation.

The survey said that in the quarter to June business volumes in financial services, where banking alone is about five times the size of the UK economy, was expected to slow, with a reduced positive optimistic balance of +9 per cent compared with the past three months.

Meanwhile, the Scottish Construction Monitor carried out by the Scottish Building Federation trade body said a survey of 56 construction firms showed a positive balance of +2 points in the latest quarter, continuing the marginally positive trend in the previous two quarters.

The monitor slumped to -19 points at the end of June in the immediate aftermath of the vote for the UK to quit the European Union.

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