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Optimism about the trading environment for the UK’s financial sector slipped for a fourth straight quarter in the three months to December, the lengthiest decline in sentiment in eight years and largely a result of Brexit-related concerns, a new survey shows.
According to the quarterly survey of 103 financial services firms, compiled by professional services firm PwC and the Confederation of British Industry, a more pessimistic mood was particularly prevalent among banks, with general insurers and finance houses also less optimistic than in previous quarters.
The survey also showed, however, that investment managers, life insurers and insurance brokers were more optimistic than they had been three months earlier.
Asked about the main challenges for financial services firms in 2017, 90 per cent of banks questioned said that preparing for the impact of Brexit was their top challenge.
Building societies were most concerned about macroeconomic uncertainty, while the level of competition topped the list of concerns for the insurance sectors.
Firms in all sectors said that they see a need to intensify their dialogue with regulators in response to uncertainty surrounding Brexit.
“Ruling out membership of the Single Market has reduced options for maintaining a barrier-free trading relationship between the UK and the EU,” said Rain Newton-Smith, chief economist at CBI. She added, however, that “businesses will welcome the greater clarity and the ambition to create a more prosperous, open and global Britain, with the freest possible trade between the UK and the EU.”
In December, the CBI, an organisation which speaks for 190,000 companies and businesses in the UK, said that that the government would need to take a “whole economy” approach to avoid leaving sectors behind after Brexit.
Andrew Kail, Head of Financial Services at PwC echoed Ms Rain’s comments, saying that “the clarity on the UK position from the Prime Minister's speech is welcome, not least the commitment to a period of phased implementation.”
Brexit Concerns
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Theresa May in a much-anticipated speech last week signalled that she is willing to drag Britain through the hardest of Brexits, risking the loss of billions of pounds and plummeting GDP, if both Brussels and the UK’s Parliament fail to give her what she wants.
In an act of brinkmanship, the Prime Minister warned she will walk away from EU withdrawal talks without a future trade agreement if other countries try to impose a “bad deal”.
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