Economic growth is expected to improve over the next 12 months, according to a recent survey by Lloyds Bank’s which interviewed over 100 senior decision-makers at UK financial institutions, including re/insurers, banks, asset managers and others.
The survey revealed a significant increase in positive sentiment compared to 12 months ago, mainly led by easing inflation and an expectation of rate reductions in the latter half of the year (62%).
Nearly half (48%) of financial institutions believe economic growth will improve, an increase from 21% in 2023 and 7% in 2022, marking a two-year high according to analysts.
Similarly, 43% of respondents expect growth in the financial sector, up from 27% in 2023 and 12% in 2022.
Moreover, over two-thirds of financial institutions (68%) are also optimistic about the UK economy beyond 2025, and nearly two-thirds (62%) share a similar optimism for growth in the financial services sector specifically.
This growing confidence has led to UK financial institutions increasing investment and accelerating expansion plans, with over half (59%) of institutions being more optimistic about their growth over the next year.
According to the survey, 63% of institutions are planning to support their growing ambitions by expanding in existing markets, 50% plan to do it by entering new markets, while half (50%) are planning to launch new products and services.
Lisa Francis, Head of Institutional Coverage, Lloyds Bank Corporate & Institutional Banking, said: “This year’s survey has revealed a significant shift towards optimism in both the UK economy and the financial services sector.
“This is in line with what we are hearing and seeing directly from our clients. Deal activity is ahead of last year and there’s positive momentum as this renewed optimism is fuelling our clients growth ambitions, whether by expanding into new and existing markets or launching new products and services.
“Overall, this paints an exciting picture for the UK’s financial services industry, which is crucial to the UK’s economy and our position on the global stage.”
The survey also revealed that respondents are more confident in London’s position to retain its status as a leading global financial hub. At 63% the figure compares to 50% in 2023.
Additionally, 43% of UK financial institutions believe that initiatives to encourage foreign direct investment into the UK would help further enhance London’s status.
Despite the optimism and growing confidence, financial institutions remain cautious about the number of barriers to expansion, the survey concluded.
At 62%, geopolitical uncertainty is one of the main factors for respondents feeling apprehensive, a figure that saw a significant increase compared to the 22% seen in 2023.
Global trade barriers are also seen as another key obstacle to economic performance over the next year, with 34% of respondents sharing this view. While 41% acknowledged the productivity challenges facing the UK.
