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[...] The report shows that firms across the sector are concerned about prospects for the UK economy over the coming year, in particular when compared to the outlook for other G7 nations, although on balance most firms expect the economy to remain resilient overall.
Almost three quarters (70%) of firms across the sector say they worry that UK economic growth will be weaker this year than in any of the other G7 nations – a dramatic worsening of sentiment compared to 2017 when just under a quarter of respondents (23%) held that view.
Half of the firms surveyed (48%) say they expect UK growth to stay at 2017 levels, while a third (29%) expect it to worsen and a fifth (23%) believe growth will improve.
Robina Barker Bennett, Managing Director, Head of Financial Institutions, Lloyds Bank Commercial Banking, said: “As the biggest industry in the UK, the financial services sector is a crucial bellwether for the nation’s economic prospects. Fears about Brexit are looming large as the final countdown begins to March 2019, but our survey suggests that the UK economy will prove to be resilient and that it will come through the challenges of the next few months relatively unscathed. There is, however, a real risk that our growth will be slower this year than in all other advanced nations; and that we will fall to the back of the G7 pack.”
Risks for the year ahead – the Brexit Effect
The risk weighing most heavily on the minds of financial services firms is Brexit. More than half the firms surveyed (55%) say that they are worried about the effects of leaving the EU, with a quarter (28%) stating it is the most significant risk they are facing over the coming year. A quarter (24%) say they are now less optimistic about Brexit than they were 12 months ago, while two thirds (62%) say their opinion has not changed.
The issue that appears to be the biggest worry for the sector in relation to Brexit is cross border access. Almost half the respondents* (48%) say this is the aspect of the UK’s exit from the EU that would cause them the most concern if not agreed during 2018; while a quarter (25%) highlight regulation and regulatory equivalence, and one in ten (10%) mention worries about a UK-EU trade deal. [...]
UK’s future as a financial services hub – sector wants to stay put
Despite clear worries about the risks of Brexit, the survey shows that the vast majority of global financial services firms (88%) believe the UK will remain the most prominent hub for financial services, once the UK leaves the EU.
Most firms (54%) say they are not thinking about moving any of their operations, but a quarter (26%) are considering a move - an increase from 18% in 2017 and 13% in 2016. Nevertheless most of the firms that plan to relocate (57%) do not intend to shift more than 10% of their operations. One fifth (20%) remain undecided. [...]