Hiring has picked up for the second consecutive quarter.
Optimism in the UK financial services sector stabilised in the second quarter of 2018 following sharp falls over the previous two quarters, according to a recent survey.
With the broader economic backdrop at best uncertain in recent years, financial services has seen an ongoing period of negative sentiment attached to it as the industry faces the threats of less benign economic conditions, Brexit as well as the rapidly increasing threat of digital disruption.
The latest CBI/PwC Financial Services Survey, which polls 100 large financial firms, has seen optimism about the overall business situation in the financial services sector fall in all but one quarter since the beginning of 2016. The exception was the first quarter of 2017, when sentiment was flat.
Due to “demand uncertainty” falling, it said the share of firms investing to provide new services, particularly digital, was at the highest in three years.
It noted that overall business volumes were unchanged in banking, and grew at a fairly muted level in general insurance and investment management but said overall business volumes are expected to pick up marginally over the coming three months.
Employment across the financial services sector as a whole increased for a second consecutive quarter, at the fastest pace for a year although building societies, reflecting weaker activity and profitability, excluding building societies who are continuing to cut headcount.
Nearly a third of firms - 29 per cent - of financial services firms said they had increased employment while just 5 per cent saying it had fell.
“Overall employment is expected to rise further over the coming quarter. Investment intentions for the year ahead improved, with marketing budgets increasing, and investment in IT anticipated to rise at the fastest pace in over three years, motivated by a mixture of new service provision, efficiency improvements and regulatory compliance,” the report said.
Rain Newton-Smith, CBI Chief Economist, said: “Despite fairly subdued growth last quarter, it’s good to see financial firms stepping up hiring and investment, with digital technologies and new services seen as the best way to grow in a fiercely competitive environment.
“The UK’s financial services is the jewel in the crown of the British economy, and is an engine for growth in other parts of the economy across the country. Yet it’s impossible to ignore the fact that three years have now passed since we’ve seen any significant improvement in overall sentiment in financial services."
The June 2018 Financial Services Survey was conducted between 15th May and 8th June. 100 firms replied.