Majority of financial bosses bracing for Budget impact, KPMG says
The latest poll found that almost a third of leaders (31%) are expecting the biggest impact to be in the form of sector-specific tax increases such as bank surcharges
Three quarters of financial services leaders are preparing for the Chancellor’s upcoming Budget to have at least a moderate impact on their business, KPMG revealed.
According to the firm’s latest UK Financial Services Sentiment Survey, over a quarter (28%), expect the impact will be significant.
The quarterly poll, which tracks business sentiment among over 150 leaders working mostly in banking but also insurance, asset and wealth management and private equity, found that almost a third of leaders (31%) are expecting the biggest impact to be in the form of sector-specific tax increases such as bank surcharges.
More than a quarter (26%) are expecting an impact on payroll costs, while 19% say the impact on talent from tax changes to non-doms will affect their business.
Currently, almost three quarters (74%) of financial services chiefs feel that the UK’s tax regime for the sector is competitive compared to other major countries. But 40% of leaders feel that stability is the most important aspect of the tax system to stimulate sector growth.
Karim Haji, global and UK head of financial services for KPMG, said: “Leaders in the sector are gearing up for this Budget to have a considerable impact on their business. While there are notable expectations about sectoral tax rises, leaders will hope for a period of stability thereafter to ensure the current tax regime for financial services remains competitive.”
The survey also found that leaders’ confidence in the sector’s future under the new government has dipped over the last two months. In the days after the election outcome, seven in ten leaders felt more positive about the sector’s future under the new government; this has since dropped to 59%.
Haji added: “It’s not completely unexpected to see a dip in confidence after a post-election high, but the speculation surrounding the Budget could be compounding this. This will drive greater need for clarity and certainty when it comes to financial services policy and plans to maintain the UK’s standing as a global financial centre.”
When it comes to business activity in Q4, sector leaders are forecasting a strong quarter, with the majority feeling confident about profitability (89%) and overall business growth (85%). This confidence is driven by increased demand for products and services (52%), a more positive economic outlook (45%) and plans to enter new /launch new products (40%).
Inflation pressures are forecast by 42% of leaders as the biggest business challenge over the coming quarter, followed by 39% expecting interest rates to present the biggest hurdle. A third are forecasting cost pressures as the biggest challenge in the next three months.
Haji concluded: “It’s encouraging to see the sector forecasting a positive end to the year. While leaders are also optimistic about the economic outlook, the knock-on effects of a turbulent economy continue to weigh on their businesses.
“Leaders are dealing with a myriad of challenges and it’s easy to see how the more immediate, closer-to-home issues could detract from challenges that pose a greater threat to business longer term, such as ESG and technology advancements. It’s imperative that leaders don’t take their eye off these areas, given their significance to future business performance.”
