Sluggish profitability pulls down banking - CBI/PwC
Slow profit growth, threats from start-ups and a widening skills gap sees optimism within the banking sector drop for the second quarter in a row.
Confidence within the investment industry is also at a low in the face of increasing competition for regulatory staff.
The findings are part of the quarterly CBI/PwC Financial Services Survey, which details trends within the financial services industry.
Banking has seen the largest fall in optimism for the second quarter running. The survey states that this is a result of continuing pressures on business volumes, with little to no positive increase in profitability.
Although employment levels experienced a small rise across the finance sector as a whole, movement has been stagnant in banking as many institutions are making cuts in certain areas. In contrast, firms reported a major recruitment drive for risk and compliance specialists as the regulatory workload ‘continues unabated’, according to the report.
There has also been a large increase in the amount banks are spending on IT, with an outlook of employing as much talent as possible in order to keep up with the increasing popularity of FinTech start-ups.
Andrew Kail, UK financial services leader at PwC, said: “Technological advances are proving to be game changers, and increasing competition is causing industry heavyweights to overhaul how they respond to changing customer needs."
Asset and wealth management
Unrelenting competition for talented compliance staff within the investment industry is a cause for concern among many asset and wealth managers.
“The shortage of compliance staff reflects the acute focus on regulation in the investment industry,” said Mark Pugh, UK asset and wealth management leader at PwC.
“As competition to attract the best compliance professionals hots up, organisations are beginning to ask themselves how else they can creatively address their regulatory responsibilities. They are looking for innovative ways to adapt, including automation and offshoring as alternatives to competing to hire ever higher numbers of regulatory staff.”
Despite an improvement in profitability last quarter, there is a vein of caution running through the industry. Uncertainty over the economic and political landscape of the UK in the near future are two of the reasons behind the wariness.
Rain Newton-Smith, CBI Chief Economist, said: “There’s a mood of caution amongst financial services firms with the vote on our EU membership rapidly approaching and global economic waters still choppy.”
The report states that there has been a rise in the number of asset and wealth management start-ups in the market, which provides “both competition and a useful resource”.
Looking forward, the report states that industry leaders will “combine focus on regulation and an understanding of the innovation their customers expect as the two become increasingly linked.”