Financial sector still uneasy over Brexit

While optimism has increased for growth in 2020, there are continued concerns in the financial sector over Brexit and a labour shortage.

Financial sector still uneasy over Brexit.
The uncertainties over post-Brexit arrangements between the UK's financial services and the European Union are continuing to lead to postponements in the sectors investment plans, according to a survey published on Monday.Despite the fact that the sector is expected to return to growth in 2020 after a lacklustre performance in 2019, the survey by the Confederation of British Industry (CBI) and consultant PwC found fears over Brexit and the possibility of a shortage of labour from the EU27 remain.

Increased optimism, but Brexit uncertainty stalls investment plans

In a survey of almost 100 companies, researchers found that, immediately before December 2019's general election, optimism in many parts of the financial industry rose at its fastest pace since the summer of 2015.A majority felt that growth during the coming year would see profits stabilise, with the most optimism being recorded by investment management, insurance broking and general insurance, although it was flat among banks and building societies.
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Rain Newton-Smith, chief economist at the CBI, says, "It's great that optimism has risen following four-and-a-half years of dire sentiment, with financial services firms also suggesting that an end to falling business volumes and profitability may be in sight."However, the sector isn't quite out of the woods yet. Against the backdrop of another fall in business and profits, Brexit uncertainty continues to drag on investment plans, and concerns over labour shortages have spiked."As the UK begins a new future outside the EU, the 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."

2020: a year of change

Andrew Kail, head of financial services at PwC, adds, "The stirrings of optimism represent a significant turnaround given the flat and falling optimism that has beset the past four years."An uptick in hiring, investment in systems and better profit expectations for the first three months of the new year are driving the positivity in the sector, following the general election."However, this year in particular, firms will need 20/20 vision in order to maximise performance. Not least as there is still work needed to bring clarity on Brexit transitional arrangements."

Read more news and views from David Sapsted

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