Financial services optimistic about business outlook amid GE year

Business leaders in the financial services sector are feeling confident about business growth for the second quarter of 2024, according to new research from KPMG UK. The quarterly survey of senior executives working in the sector found that business confidence remains high, building on an optimistic outlook for the first quarter of 2024. A total of 88% are confident when it comes to overall business growth in Q2, with 45% of executives feeling “quite confident”, followed by 43% who are casting a “very confident” outlook. 87% have a confident outlook on profitability for the quarter. Optimism marginally grew among those working in banking, with 94% casting a confident outlook on Q2 compared to 89% for the first quarter of 2024. Optimism among those working in asset and wealth management marginally fell to 83% (versus 89% for Q1). Followed by 79% of insurance executives citing confidence about the coming quarter. The prospect of a general election later this year isn't deterring sector optimism, with over two-thirds of leaders feeling positive about a general election for the sector’s future. Despite a positive outlook, the impact of inflation and interest rates on financial services businesses continues to be reflected in cost challenges. Almost 40% cite cost pressures as the biggest challenge facing their business in the coming quarter (behind inflation pressures and interest rates). Over a third of leaders plan to make cost savings by reviewing suppliers (37%) and increasing productivity through technology like Generative AI (35%). Almost a quarter (23%) plan to reduce headcount and hiring, change or downside their real estate footprints and review staff pay and benefits to make savings in Q2. Karim Haji, global and UK head of financial services at KPMG, said: “The start of the year saw renewed growth for the economy and forward-looking indicators point to further signs of recovery, which may well be the reason for continued optimism among leaders in the sector. “However, while financial services leaders are keeping an optimistic outlook, they do so with caution as costs are still a concern, and the sector continues to eye up savings in response to economic pressures.” Haji added: “The prospect of a general election isn’t shaking the financial services sector. In fact, most leaders are surprisingly upbeat about it. “Regardless of the political environment and while the economy is showing some signs of recovery, the coming months will continue to be challenging. Not only does the sector need to remain resilient now, but it also needs to look longer-term and invest in ways to boost productivity through technology, effectively respond to regulatory demands and build sustainable business models. This will all be an essential driver of growth and will lay solid foundations for competitiveness as the economy rebounds.”