Confidence high among financial services firms, but many wary of economic turbulence as general election approaches
According to a recent study by Davies involving more than 500 senior decision-makers in UK financial services businesses:
- 89% of financial services firms rated their performance as ‘good’ over the past 12 months.
- Similarly, 89% expressed confidence in their business’s performance for the next 12 months.
- Despite these positive assessments, economic turbulence emerged as the predominant challenge, with 44% of firms citing it.
- Additionally, 67% of respondents noted significant impacts from interest rate hikes, while 66% reported similar effects from the cost-of-living crisis.
Overall, while the majority of UK financial services firms reported strong performance and optimism for the future, they also acknowledged economic turbulence as a significant ongoing challenge, according to the latest findings from Davies.
Consulting at Davies, the specialist financial services consultancy division, conducted an independent survey of 501 senior decision-makers within UK-based financial services companies. The survey revealed that 89% of businesses rated their performance over the last 12 months as either ‘good’ (50%) or ‘very good’ (39%).
Looking forward, the same percentage (89%) expressed confidence in their business’s performance over the next 12 months.
However, Consulting at Davies’ research highlighted that economic turbulence remains a significant concern. In response to a question about the biggest challenges currently facing their businesses (where respondents could select up to three options), 44% identified economic turbulence as a primary concern. This ranked it ahead of regulatory compliance (43%) and cybersecurity threats (38%).
As the UK general election approaches on 4 July, the anticipation of increased economic turbulence suggests that this challenge will likely intensify in the coming months.
Additionally, two-thirds (67%) of UK financial services firms reported that interest rate hikes have had a “significant impact” on their operations since the beginning of 2022. Similarly, 66% expressed that the cost-of-living crisis has also had a notable effect on their business operations.
Pino Vallejo, CEO of Consulting at Davies, said: “Given the challenging economic climate that has defined the past three years, it is positive to see that the UK’s financial services sector is full of confidence. Fuelled by strong performances over the past year, the research clearly highlights that most businesses are striving for more growth in the next 12 months. But there is also evidence of some caution, not least in navigating further economic challenges, with the general election likely to prompt more turbulence over the summer months that businesses will have to navigate carefully.”
Ashley Sheen, Consulting at Davies’ Chief Strategy Officer, added: “The past three years has seen us move from a persistent, near-zero rate environment to one with the prospect of meaningful interest rates prevailing for at least the medium term. This has forced financial services businesses to adapt. While it is reassuring to see many optimistic about the year ahead, further innovation will be required to remain competitive. Customers continue to demand solutions that reflect the prevailing economic climate and embrace emerging technology. This is certainly not a time for complacency.”
