Financial services bosses are optimistic about their first-quarter results but say economic and regulatory pressures threaten Britain’s competitiveness, according to a survey of 160 senior executives shared with City A.M., as London struggles with a dealmaking slump.
An Opinium poll commissioned by KPMG found 87 per cent of leaders were “confident” about business growth in the first quarter of 2024, with 83 per cent having a positive outlook on profitability.
Executives in banking, asset and wealth management were the most optimistic about growth (89 per cent), followed by insurance (79 per cent). The latter sector continues to struggle with reinsurance capacity and supply chain inflation.
Some 61 per cent had a mostly positive outlook for the UK economy in 2024, although more than half (56 per cent) said inflationary pressures would remain among the biggest challenges for their business in the first quarter.
A further 46 per cent cited interest rates as a pressing challenge, while more than a third (37 per cent) flagged cost pressures.
“It’s great to see financial services leaders go into the new year feeling confident despite ongoing economic turbulence, which is set to continue to challenge the sector in the first quarter,” said Karim Haji, global and UK head of financial services at KPMG.
“With interest rates set to stay high in a bid to tackle persistent inflation, combined with the added uncertainty of looming elections in the UK and USA, it will be interesting to see what impact this has on sector confidence beyond the first quarter.”
Some 73 per cent of executives were confident the UK could maintain its status as a global financial centre over the next three years, including 84 per cent of banking bosses.
However, more than half (53 per cent) of insurance executives did not have confidence, as well as 37 per cent of executives in asset and wealth management.
Bosses highlighted a need to reduce regulatory pressures, tackle inflation and overhaul the tax system to help the UK maintain its position.
On top of a drop-off in M&A activity, London is suffering from a dearth of stock market listings.
Just 23 firms floated on the London Stock Exchange in the first nine months of 2023, down from 45 in 2022, which itself was a 62 per cent drop on the record 119 listings in 2021.
“While the Treasury Committee has highlighted that change is not happening quickly enough, part of the attractiveness of the UK is that our regulatory system is relatively stable,” Haji noted.
“This, together with a plan for enhanced competitiveness, will safeguard the UK’s future position on the global stage and boost long-term growth.”
KPMG also noted signs of “potential over-confidence” in the sector’s progress on diversity and inclusion, with 55 per cent feeling they were ahead of other companies and 38 per cent believing they were on par with peers.
The Financial Conduct Authority is expected to confirm new rules to boost representation and stamp out harassment in early 2024.
“Whilst there seems to be strong support for the need for progress, there are some questions being raised by industry leaders on the need for mandatory disclosures,” Haji added.
