Optimism for finance sector after years of 'dire' sentiment

Volumes in financial services are expected to return to growth next quarter, but the government must help foster this key sector as it is not “out of the woods” yet, according to a study published today.

Rain Newton-Smith said the sector is one of the UKs most competitive globally. PIcture: Getty Images.

The latest quarterly study from the CBI/PwC, conducted before the 2019 general election, found that optimism about the overall business situation in the industry rose for the first time in 12 quarters, and at the fastest pace since June 2015.

Sentiment was mixed by sector, with the headline improvement (a balance of +8 per cent) driven by investment management, for example, but flat in banks and building societies.

That said, the overall conditions in the three months to December remained “tough”. Business volumes fell further (-18 per cent) at the fastest pace since September 2012, marking a full year in which they have not risen – and dragged in part by the banking sector.

Newton-Smith welcomed the uptick in optimism - but urged action from the UK government. Picture: contributed.

However, overall business volumes are expected to return to growth (+14 per cent), representing the strongest expectations since March 2018 – and overall profitability is forecast to stabilise in the three months to March.

CBI chief economist Rain Newton-Smith welcomed an uptick in optimism following four and a half years of “dire” sentiment.

“However, the sector isn’t quite out of the woods yet,” she added, saying the UK government “must do everything it can to support and stimulate one of the UK’s most globally competitive sectors, so that expectations of an upturn can come to pass – both over the next quarter and beyond”.