Confidence in future profitability among UK financial services leaders has dipped as geopolitical uncertainties continue to weigh on revenues, according to KPMG’s latest UK Financial Services Sentiment survey.
The quarterly poll, which surveyed more than 150 industry leaders, revealed a five-percentage-point decline in profitability confidence from 94% in Q1 2025 to 89% for Q2 2025. However, optimism about overall business growth remained stable, with nine in 10 respondents maintaining a positive outlook for the coming quarter.
With geopolitical risks escalating, financial services firms are increasing their investment in risk-proofing strategies. The survey found that over 60% of leaders are allocating a greater share of their total revenues to counter geopolitical disruptions. On average, firms plan to spend 8% of their revenues this financial year on risk mitigation, with projections indicating a rise to 10% by 2030. Additionally, more than a quarter of respondents expect to allocate over 15% of their revenues to resilience measures by the decade’s end.
“We are in the most volatile geopolitical and economic environment since 2008, and the stability that the sector thrives on is in short supply,” said Karim Haji, global and UK head of financial services at KPMG. “Despite the dip in confidence about future profitability, it’s encouraging to see most leaders maintain a positive short-term outlook, supported by the uptick in services sector growth reported in March. But volatility is putting pressure on revenues, and we can expect this to be a long-term trend.”
Haji highlighted that geopolitical instability, cybersecurity threats, and China’s sluggish economic growth are among the key factors prompting firms to prioritise resilience over efficiency. He noted that while increased investment in risk-proofing could strain revenues in the short term, it would ultimately enhance firms’ ability to navigate uncertainty and seize growth opportunities.
Despite economic challenges, financial services leaders are increasingly optimistic about the Government’s efforts to enhance the sector’s global competitiveness. Confidence in the Chancellor’s plans to “regulate for growth” and introduce a Financial Services Competitiveness Strategy has risen by 15% since the previous quarter. Currently, 85% of industry leaders believe these measures will boost sector growth, up from 70% in Q1.
Leaders also expressed increased confidence in the Government’s ability to attract foreign investment and strengthen the UK’s position in sustainable finance and fintech. However, some concerns persist regarding tax increases and broader economic headwinds that could hinder growth.
Looking ahead, nearly eight in 10 leaders remain confident in the UK’s ability to retain its status as a global financial hub over the next three years, with six in 10 asserting that the UK is a more attractive investment destination today than it was five years ago.
“Leaders want certainty and clarity, so reduced regulatory complexity is welcome. However, reversing regulation doesn’t come without risk and must be proportionate to preserve a safe and stable financial system, particularly in such a volatile world,” noted Haji.
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