Financial services leaders optimistic for business growth in 2024

Business leaders in the financial services sector are feeling optimistic moving into 2024, according to new research from KPMG UK. A survey of senior executives working in the sector found that 87% are “confident” when it comes to overall business growth in the first quarter of 2024, supported by a buoyant outlook on profitability for the quarter (83%). Those working in banking, asset and wealth management are the most optimistic about business growth in Q1 of next year (89%), followed by insurance executives (79%), who continue to face challenges with reinsurance capacity and supply chain inflation. While a majority (61%) have a broadly positive outlook for the UK economy going into 2024, more than half (56%) believe inflationary pressures will still pose the biggest challenge for their business in the first quarter. While more than a third (37%) believe cost pressures will be their biggest issue, 85% are confident they can manage business costs, such as rising energy bills, throughout the quarter. Karim Haji, global and UK head of financial services at KPMG, said: “It’s great to see financial services leaders go into the New Year feeling confident despite ongoing economic turbulence, which is set to continue to challenge the sector in the first quarter. While on the surface, leaders seem less concerned about the specific impact of geopolitical uncertainty, there’s no denying that it is in part adding to inflationary and interest rate pressures. “With interest rates set to stay high in a bid to tackle persistent inflation, combined with the added uncertainty of looming elections in the UK and USA, it will be interesting to see what impact this has on sector confidence beyond the first quarter.” While a majority of leaders (73%) across financial services are confident when it comes to the view that the UK can maintain its position as a global financial centre over the next three years, perspectives vary between different parts of the sector. Executives point to reducing regulatory pressures, tackling inflation and interest rates, and overhauling the tax system as key areas to address to help the country maintain its position as a leading financial centre. Haji said: “As we go into 2024, we are seeing a promising direction of travel from the Edinburgh Reforms package in the bid to boost competitiveness. While the Treasury Committee has highlighted that change is not happening quickly enough, part of the attractiveness of the UK is that our regulatory system is relatively stable. This, together with a plan for enhanced competitiveness will safeguard the UK’s future position on the global stage and boost long-term growth.” In advance of the publication of the FCA’s diversity and inclusion (D&I) policy for financial services expected in early 2024, the sector shows signs of potential over-confidence when it comes to the progress of its D&I strategies. Over half (55%) feel they are ahead of other companies in the sector and more than a third (38%) feel they are on par with their counterparts. The majority (38%) feel that ethnic diversity is the area of D&I that the sector needs to focus on most in 2024, followed by gender and socio-economic diversity (33% respectively). Haji concluded: “Understandably the sector is most focused on investing in workforce areas that have a more direct impact on near-term profitability and growth. But this can’t come at the expense of initiatives that support broader employee and societal needs such as mental health and D&I, which are integral to the long-term success of the sector.”

Financial services leaders optimistic for business growth in 2024

While a majority (61%) have a broadly positive outlook for the UK economy going into 2024, more than half (56%) believe inflationary pressures will still pose the biggest challenge for their business in the first quarter

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