Reducing the cost of regulatory compliance should be the new Conservative government’s priority for financial services, according to the latest CBI/PwC financial services survey.
The latest CBI/PwC financial services survey for the three months to June reveals that in addition to the cost of regulatory compliance being a concern for firms within financial services, tax stability was also ranked highly and was the number one concern for general insurers and investment managers.
Business volumes and optimism in the sector continued to grow at an above average pace but more slowly than in the previous quarter. Weaker overall growth mainly reflected a fall in volumes among building societies and stable volumes in the banking sector.
Trends in financial services incomes varied, with the value of fees, commissions and premiums falling from the previous quarter, weighed down by poor results among banks and building societies. However, net interest, investment and trading income continued to grow at a healthy pace.Key findings include:
- When asked to rank their top priorities for the new Government firms said it should be:
- Reducing the cost of regulatory compliance.
- Ensuring tax stability for the financial system.
- Promoting financial literacy among households and businesses.
- 33% of financial services firms said they were more optimistic about their overall business situation than three months ago, while 1% said they were less optimistic giving a balance of +32%. That compared with +50% in March.
- 35% said business volumes increased in the three months to June, while 17% said they decreased, giving a balance of +18%
- Next quarter 41% of firms expect business volumes to increase, while 2% expect them to decrease, giving a balance of +39%.
- Income from fees, commissions and premiums decreased (-20%), after a solid rise (+46%) in the previous quarter. Growth is expected to return next quarter (+28%)
- Income from net interest, investment or trading income increased (+34%), at a similar pace to the previous quarter. It is expected to grow at much slower rate next quarter (+6%)
- Total operating costs increased (+47%), but the value non-performing loans decreased (-42%) and average costs decreased slightly (-7%)
- As a result, profits grew at their strongest rate (+61%) since March 2011 (+62%).
- 24% of financial services firms said they had increased employment, while 11% said headcount had fallen, giving a balance of +13%. Employment is expected to increase at a similar rate next quarter (+12%).
- In the year ahead financial services firms expect to ramp up spending on marketing (+58%) – the highest balance since March 2011 (+67%)
- Investment in IT is expected to increase (+38%), but at the slowest pace since December 2013 (also +38%)
- Meanwhile, investment in land and buildings and in vehicles, plant & machinery are both expected to decrease (-42% and -3%, respectively)
- Increasing competition, and statutory legislation and regulation, were the factors cited as most likely to limit business expansion over the next twelve months (75% and 67%)
- Firms reported various drivers of capital expenditure over the next 12 months, but the share of firms citing the desire to reach new customers (68%) was particularly high compared with its long-run average.