One in three banks suffer a fall in business for the first time in five years as Brexit uncertainty, regulation and market volatility bites.
The latest CBI/PwC Financial Services Survey showed the financial services sector had a difficult end to 2018, with just 24% of firms reporting a rise in business volumes in the three months to December, compared with 32% having experienced a decline. The resulting balance of -7 percentage points marks – a reversal from +12 in the previous quarter – is the first contraction in demand since September 2013.
The decline is expected to continue, with 20% of firms predicting a further drop in business volumes over the coming quarter, versus 12% forecasting a rise, a balance of -9. That is the weakest outlook since December 2009.
The report said the pessimistic outlook was in line with “subdued prospects for the wider UK economy”, given weak wage growth and the impact that Brexit uncertainty has had on investment.
“A combination of macroeconomic and Brexit uncertainty, regulatory compliance and global market volatility are taking a toll on the UK’s financial services sector,” the CBI’s chief economist, Rain Newton-Smith, said.
Newton-Smith said the survey results should serve as a warning shot about the UK economy. “Financial services are a bellwether for the wider economy. The persistent weakness in optimism and the deterioration in expectations sound a warning for the outlook,” she said.
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