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Brexit latest: Optimism among UK financial services hits global financial crisis low

Report shows it is the sector's longest period of falling sentiment since 2009

Zlata Rodionova

Monday 26 September 2016 08:06 BST

Britain’s financial services firms are becoming more pessimistic about their prospects, following UK’s vote to leave the EU, an industry survey has found.

The quarterly survey of 115 financial firms by the Confederation of British Industry (CBI) and PricewaterhouseCoopers (PwC) is the first since the EU referendum in June.

It found that optimism dropped for the third consecutive quarter in the three months to September, marking the longest decline since the financial crisis in 2009.

Over half of all financial firms surveyed said the general impact of UK’s vote to leave the EU was negative, with only one in ten firms seeing any upside.

The sharp deterioration in sentiments was among finance houses, building societies and investment managers. The report attributed this to lower interest rates and the uncertainty caused by the Brexit vote.

“With firms voicing strong concerns about the impact of Brexit, especially the risks to the wider economy in the years ahead, the government must allay their unease with clear plans for negotiations to leave the EU,” Rain Newton-Smith, CBI's chief economist, said in a statement.

She called on the chancellor Philip Hammond adding that an “ambitious” Autumn Statement would set clear direction for growth and prosperity.

Prior to the referendum, the CBI campaigned for Britain to remain in the EU.

Despite the drop in confidence, business and profits picked up with almost 40 per cent of the firms surveyed reporting healthy profits in the last quarter.

“As firms get back into the swing of things after the summer and continue to digest the implications of the EU Referendum, it’s good to see that demand in the financial services sector has held up,” Ms Newton-Smith said.

“But the challenges facing the sector have not gone away – they’ve actually grown. Add the uncertainty caused by Brexit to low interest rates, technological change and strong competition, and it’s plain to see why optimism is falling and pressure on margins remains intense,” she added.

Earlier this month the Bank of England’s Monetary Policy Committee (MPC) decided to keep interest rates unchanged at the historic low of 0.25 per cent, which is in line with analysts' expectations but the MPC stuck to its view that they could be cut again later in the year.

What experts have said about Brexit

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What experts have said about Brexit

Chancellor of the Exchequer Philip Hammond

The Chancellor claims London can still be a world financial hub despite Brexit “One of Britain’s great strengths is the ability to offer and aggregate all of the services the global financial services industry needs” “This has not changed as a result of the EU referendum and I will do everything I can to ensure the City of London retains its position as the world’s leading international financial centre.”

Reuters

What experts have said about Brexit

Yanis Varoufakis

Greece's former finance minister compared the UK relations with the EU bloc with a well-known song by the Eagles: “You can check out any time you like, as the Hotel California song says, but you can't really leave. The proof is Theresa May has not even dared to trigger Article 50. It's like Harrison Ford going into Indiana Jones' castle and the path behind him fragmenting. You can get in, but getting out is not at all clear”

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What experts have said about Brexit

Michael O’Leary

Ryanair boss says UK will be ‘screwed’ by EU in Brexit trade deals: “I have no faith in the politicians in London going on about how ‘the world will want to trade with us’. The world will want to screw you – that's what happens in trade talks,” he said. “They have no interest in giving the UK a deal on trade”

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What experts have said about Brexit

Tim Martin

JD Wetherspoon's chairman has said claims that the UK would see serious economic consequences from a Brexit vote were "lurid" and wrong: “We were told it would be Armageddon from the OECD, from the IMF, David Cameron, the chancellor and President Obama who were predicting locusts in the fields and tidal waves in the North Sea"

PA

What experts have said about Brexit

Mark Carney

Governor of Bank of England is 'serene' about Bank of England's Brexit stance: “I am absolutely serene about the … judgments made both by the MPC and the FPC”

Reuters

What experts have said about Brexit

Christine Lagarde

IMF chief urges quick Brexit to reduce economic uncertainty: “We want to see clarity sooner rather than later because we think that a lack of clarity feeds uncertainty, which itself undermines investment appetites and decision making”

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What experts have said about Brexit

Inga Beale

Lloyd’s chief executive says Brexit is a major issue: "Clearly the UK's referendum on its EU membership is a major issue for us to deal with and we are now focusing our attention on having in place the plans that will ensure Lloyd's continues trading across Europe”

EPA

What experts have said about Brexit

Colm Kelleher

President of US bank Morgan Stanley says City of London ‘will suffer’ as result of the EU referendum: “I do believe, and I said prior to the referendum, that the City of London will suffer as result of Brexit. The issue is how much”

What experts have said about Brexit

Richard Branson

Virgin founder believes we've lost a THIRD of our value because of Brexit and cancelled a deal worth 3,000 jobs: We're not any worse than anybody else, but I suspect we've lost a third of our value which is dreadful for people in the workplace.' He continued: "We were about to do a very big deal, we cancelled that deal, that would have involved 3,000 jobs, and that’s happening all over the country"

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What experts have said about Brexit

Barack Obama

US President believes Britain was wrong to vote to leave the EU: "It is absolutely true that I believed pre-Brexit vote and continue to believe post-Brexit vote that the world benefited enormously from the United Kingdom's participation in the EU. We are fully supportive of a process that is as little disruptive as possible so that people around the world can continue to benefit from economic growth"

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What experts have said about Brexit

Kristin Forbes

American economist and an external member of the Monetary Policy Committee of the Bank of England argues that the economy had been “less stormy than many expected” following the shock referendum result: “For now…the economy is experiencing some chop, but no tsunami. The adverse winds could quickly pick up – and merit a stronger policy response. But recently they have shifted to a more favourable direction”

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The Bank of England's announcement came after recent data has suggested the economy has so far held up well in the wake of the EU referendum.

The latest data released by the Office for National Statistics (ONS) showed retail sales fell less than expected in August.

The rate of annual consumer price inflation was also left unchanged compared to the previous month, undershooting City analysts’ expectations of a pick-up in the wake of the Brexit vote and the plunge in the value of the pound

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