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Why the financial services sector is still booming in the UK

It is expected that the UK will continue to have a strong position in the financial sector

The financial services sector in the UK is still performing well, according to a report of 94 companies by the Confederation of British Industry and PricewaterhouseCoopers (PwC).

The report reveals that the UK enjoyed robust growth for a third consecutive quarter thanks to an increase in business from UK households.

The report revealed that there was growth in business volume, profits and hiring in the last quarter, despite fears surrounding Brexit, with many believing the UK will retain its position as a leading financial centre. In the three months to the end of June, 47% of the companies surveyed had seen an increase in business volume, with 41% seeing an increase in profits. Just 6% of the companies saw their profits fall in the last quarter.

In addition to volume and profit, 46% of businesses had recruited more staff, compared with 17% that had made redundancies. Insurance brokers and investment managers were also positive about their future.

UK households made a significant contribution to the growth. Building societies reported an increase in housing market activity, recording the highest profit in 17 years due to falling costs and rises in income. Customers were also starting to save and repay more debt, with private individuals generating more business for banks.

While these areas of business reported growth, other areas were concerned about the future in relation to uncertainty over Brexit – falling optimism about the future was a prominent theme. 25% of companies were pessimistic about their future, compared with 15% that were positive about their position. Banks and life insurers were concerned about their future business.

A report from EY indicated that 59 of the 222 large financial firms are planning to move their employees or are considering doing so because of Brexit uncertainty and access to the single market. This is an increase from the 53 recorded in March.

Many companies are considering shifting operations for access to the single market. Dublin is a popular destination, with 19 of the companies surveyed considering increasing their presence in the city. Frankfurt in Germany was favoured by 18 companies, while Luxemburg was favoured by 11.

A divorce from Europe is problematic for UK firms, as many international banks, insurers and asset managers have their European base in London. A financial expert from EY has indicated that companies are looking to other locations to ensure they can trade with Europe while retaining a stronghold in the UK.

It is expected that the UK will continue to have a strong position in the financial sector; however, it is unavoidable that political uncertainty over Brexit will cast doubt over performance in a wider economy, according to Andrew Kail of PwC.

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