CBI PwC Financial Services Survey

Q2 2017

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Executive summary

Despite growing volumes of business, increased profits and a step up in the pace of hiring, sentiment among financial services firms has deteriorated over the last quarter. Optimism within the industry has been flat or falling for the last 18 months, largely driven by external factors such as the macroeconomic environment, turbulent political landscape and continued uncertainty around Brexit.  

Importantly, with business volumes expanding and average costs under control, firms are continuing to focus their investments and authorise capital expenditure on technologies to improve their business. Unpacking firms’ use of technology reveals a focus on robotics and artificial intelligence (AI), in particular around operational data analysis, risk profiling, customer engagement and process automation. Interestingly, when taken together with the reported increase in hiring, suggests that firms are currently preparing for long term change and exploring pilots and prototypes, rather than implementing new processes to help cut costs and remove jobs in the short term.

This increasingly technology driven strategy coupled with a renewed focus on hiring, reinforces the transformational journey that many firms have embarked on. This complements a recent report we have published with TheCityUK, which sets out a strategic vision for financial services in 2025 and supporting recommendations for firms.

As we look ahead in 2017, firms expect business volumes, profitability and employment to continue to rise over the next quarter to September, albeit at a slower pace and limited by their ability to find the right talent to support their growth.


Banking

Banking
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What are we seeing in the market?

Optimism within Banks continues to fluctuate, this time reflecting a fall in sentiment when compared with the last quarter. Despite this, banks continue to report increasing volumes of business and profitability with the latter expected to continue over the next 3 months in spite of the tough market conditions and uncertain geopolitical landscape.

Increasing regulation remains a key limiting growth factor over the next year, with respondents citing requirements such as the PRA’s letter on Brexit contingency planning resulting in almost a third having to make changes to their plans. Perhaps unsurprisingly, banks expect to increase spending on regulatory compliance, however this is complimented by increasing investment in IT and in particular new technologies supporting operational data analysis and robotic process automation.

 

Looking forward

Competition from other companies and sectors of the industry are expected to increase over the coming year, with IT systems and applications playing a key role in banks’ growth strategies.


Insurance

What are we seeing in the market?

General insurers, life insurers and brokers in the UK foresee opportunities for growth. However, despite positive volumes of business and reported profitability, optimism is balanced, driven by uncertainty in the market and the changing political landscape.

Insurance technology or InsurTech continues to be an area of focus across insurance, with respondents currently investing in solutions that help drive better risk insights, improve efficiencies, cut costs and improve customer engagement. This complements the findings of our latest global InsurTech report, which found that 52% of insurers have put InsurTech at the heart of their strategies to help drive innovation and respond to challenges.

Looking forward

Embracing the opportunity in technology, insurers are preparing themselves for significant change projects to overhaul ageing legacy systems, respond to regulatory requirements such as IFRS 17 and adapt their business models for the future. Across the board, insurers are looking to recruit more staff to help drive change and acknowledge the availability of skills and strong competition as barriers to growth over the coming year.

General Insurance
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Investment Management

Investment Management
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What are we seeing in the market?

Sentiment among investment managers increased over the last quarter, underpinned by a stronger than expected business volumes and profitability. This is contrast to the other industry segments and the difficult macroeconomic environment that is propagating a sense of cautious optimism within the sector. Despite this, investment managers forecast a muted business performance in terms of average commissions and profitability over the next quarter. 

 

Investment managers continue to invest in recruiting new people and in technologies to support business growth, which are both now at their highest in over a year. Interestingly despite this, investment management firms are behind when it comes to the adoption of new technologies when compared to their industry counterparts. However, this continued focus indicates that work is being carried out to re-platform and become more streamlined as investment managers work towards integrating new technologies over the next couple of years. 

Looking forward

Investment managers continue to develop their systems and processes to support the challenges of today, whilst keeping an eye to the future to be ready to seize the opportunity afforded by emerging technologies such as artificial intelligence (AI) and Robotic process automation (RPA).

Contact us

Andrew Kail
UK Financial Services Leader
Tel: +44 (0)20 7212 5193
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