andyjalil@aol.com
Optimism within the UK financial services sector has increased at the fastest rate in eight years as the economy begins to reopen from months of lockdown, a new survey has shown.
Sentiment among finance firms rose 52 per cent in the three months to March, according to the Confederation of British Industry (CBI) and PwC’s latest industry survey.
It comes despite the sector noting a three per cent drop in business volumes for the quarter, following a massive spike in the three months to December. While the majority of sub-sectors reported growth in volumes, this was offset by a decline in banking.
Business volumes are set to return to growth over the next quarter, alongside the Prime Minister’s roadmap for reopening the economy over the next few months.
“It’s encouraging that financial services firms are feeling optimistic about the months ahead, likely warmed by the prospect of a phased reopening of the economy,” said CBI chief economist Rain Newton-Smith.
“Firms also have their eye on the future. Covid is continuing to accelerate business transformation, with the role of the office space evolving to facilitate greater hybrid and flexible working.”
More than two-thirds of financial services firms are looking at reconfiguring their existing office space as employees return to work, the report found. Meanwhile, nearly 60 per cent said they intend to slim down office space altogether.
Employment within the financial services sector continued to fall in the quarter to March, albeit at a slower pace. Employment fell 12 per cent during the period covered by the survey, compared to a 20 per cent decline in the previous three months.
Headcount was mixed across sectors, with falls in banking and general insurance outweighing growth in finance houses, insurance broking, investment management and life insurance.
The survey found that changes in regulation and customer behaviours look set to become the biggest drivers of disruption for financial services businesses over the year ahead.
Head of financial services at PwC UK, Isabelle Jenkins said: “Regulation is rising back up the agenda for firms, reflecting the significant changes in areas ranging from pricing to sustainability and financial reporting.”
She added: “Firms should continue to maintain the kind of consistency we’ve seen throughout the pandemic to ensure that they can withstand the headwinds on the horizon.”
The new post-Brexit financial services agreement will ensure regulators from the UK and European Union meet twice a year, but will stop well short of implementing any new access arrangements.
Officials from the Treasury have been speaking with Brussels about a financial services Memorandum of Understanding over the past three months, after there were no provisions on services in the UK-EU Brexit trade deal. The pact was set to be a bare-bones agreement, which would not see increased EU access for City of London firms post-Brexit.
Reuters reports that a leaked copy of the pact, agreed in March but yet to be formally released, says both sides will “jointly endeavour to pursue a robust and ambitious bilateral regulatory cooperation” by meeting twice a year.
“Forum activities may include dialogue on the participants’ autonomous decisions to adopt, suspend or withdraw equivalence relevant to one or the other side,” the pact reads.
The only way the City of London can regain some of its pre-Brexit access to the EU is if Brussels grants regulatory equivalence, however, Brussels believes the UK is destined to diverge from its financial services regulations and has withheld the designation.
Granting equivalence will instead remain entirely in the remit of the European Union as widely expected. (The writer is our foreign correspondent based in the UK)
Oman Observer is now on the WhatsApp channel. Click here
