Except for insurance brokers and life insurers, optimism among companies in the financial services sector further declined in the previous quarter, according to a new survey by the Confederation of British Industry (CBI) and PricewaterhouseCoopers (PwC).
The latest research polled 103 firms and found that optimism about the overall business situation fell for the fourth consecutive quarter. A more pessimistic mood was particularly prevalent among banks, while general insurers and finance houses also expressed less optimism.
However, insurance brokers, life insurers and investment managers were more optimistic than they had been three months earlier, the CBI-PwC report noted.
Overall business volumes are expected to pick up in the first quarter of 2017, with stronger demand in the life insurance and investment management sectors. Profitability is also expected to improve across financial services in the next quarter as cost pressures continue to ease.
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The new study also discovered that when it comes to the main challenges in 2017, the insurance sector was most worried about the level of competition. According to the survey, competition was the “overwhelming concern” of 82% of life insurers, 71% of general insurers, and 63% of insurance brokers.
Based on the research findings, insurers, brokers and firms in all other sectors saw the need to intensify their dialogue with regulators in response to the uncertainty around Brexit.
“Financial services companies face many challenges to their business models from competition, regulation, technology and Brexit and, as a consequence, [they have] to take some big decisions about their future strategy,” said Andrew Kail, head of financial services at PwC.
“The first quarter of 2017 and beyond will see many start to fine tune and activate their Brexit contingency plans as the reality of life outside the single market and the EU begins to dawn,” Kail added.
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