Optimism among financial services companies is falling at its fastest rate since the height of the financial crisis amid a Brexit “national emergency”, according to a survey published on Monday.
The Confederation of British Industry (CBI) and PwC surveyed 84 financial services and found their optimism about UK business conditions declined by 45% in the first quarter of 2019. That was the worst reading since 2008. The survey’s authors blamed the confidence slump on ongoing Brexit uncertainty.
“The alarm bells ringing at the state of optimism in the financial services sector have now reached a deafening level,” Rain Newton-Smith, the CBI’s chief economist, said in a statement.
“Not only has it plummeted at the fastest rate since the depths of the Financial Crisis, it has been falling or flat since the EU referendum. Additionally, business volumes and employment have fallen over the last quarter. Brexit is now a national emergency.”
A sharp decline in head counts at banks meant employment in financial services fell at the fastest rate in four years. Business activity fell for the second quarter in a row and at the fastest rate since 2012. Business volumes in the investment management sector declined at the fastest rate since December 2008.
The declining optimism, activity, and headcount within financial services comes as banks, asset managers, and other financial firms take steps to protect themselves against the effects of a possible no-deal Brexit. This includes setting up subsidiaries in the EU and moving jobs and assets overseas. Consultancy EY estimated this month that firms have already committed to move £1tn out of the UK.
Andrew Kail, head of financial services at PwC, said: “It remains to be seen whether our [financial services] businesses will retain their current global footprint as political negotiations play out. Clarity, certainty, and communication are vital if the UK is to protect its position as the leading financial centre.”
However, Kail highlighted some bright spots in the quarterly survey. Across the industry, financial service firms said they were planning to increase investment in IT and marketing. Profitability also improved, thanks to easing cost pressures.
“Despite the continuing uncertainty, these businesses are embracing disruption and reinventing themselves to be ready for growth in a post-Brexit environment including developing leaner, more specialised workforces,” he said in a statement.
Last week CBI chief Carolyn Fairbairn took the unusual step of partnering with Trades Union Congress (TUC) leader Francis O’Grady to write an open letter calling for UK prime minister Theresa May to come up with a “Plan B” on Brexit.
Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.