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Q3 2019
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Employment continues to grow across the board after the slight dip in headcounts we saw back in Q1. The boost in numbers is likely to be in response to an increase in regulatory requirements.
The global economic slowdown is having an impact on demand. Profitability has dipped again and is now at its weakest performance since June 2009. But although expectations of growth in the next quarter are cautious they’re less negative than we saw in last quarter’s results.
As well as Brexit, financial services is also making sure there are plans in place to manage the risks posed to business by climate change and the related changes to compliance obligations. Preparations are also underway for operational resilience and Libor transition.
Download the full survey results
Headcount numbers in banking are up this quarter. In contrast, training spend is declining.
Profitability has declined sharply but stabilised operating costs are cushioning the impact. Although investment plans look weaker, banks are still tentatively ambitious and are focusing IT spending on new customers and services.
As well as Brexit planning, there are also a range of preparations underway for managing climate change risk and related compliance obligations. Banking is also starting to get ready for the Libor transition. A third of firms now say they’re confident they have appropriate plans in place.
The sector continues to try and find the right balance between investment in technology and training the workforce of the future. Employment numbers and spending on training in general insurance are rising. But headcounts in broking continue to fall as acquisition activity consolidates back office operations.
General insurance is continuing to spot opportunities in pricing and technology investment, and broking’s revenue and profits remain healthy. But there are some concerns that technology is enabling customer switching and that fickle purchasing behaviour is starting to happen further up the value chain.
Surprisingly few organisations are thinking about the impact of climate change on their business. Things like weather events may have a short term effect on business in the shape of claims losses, but there are second-order impacts that need to be considered too; compliance obligations could affect firms and their third party suppliers. And business reputations based on environmental awareness could become a competitive factor.The survey results show that broking is more prepared for the Libor transition than the rest of the sector.
With the leaders of £367bn of UK pension funds...signing a Climate Charter this week demanding that asset managers take immediate, meaningful action to combat climate change, the pressure is on for the investment management industry to up its game.
Firms are reporting concerns about access talent; either due to Brexit or the wider need more for technology and AI skills. Employment numbers and training spend are increasing in order to skill up workforces in preparation.
Investment in IT, land and buildings, and vehicles has increased at the same rate. The key drivers for the capital expenditure primarily relate to increasing efficiency and speed, providing new services and accessing new clients which is consistent with the key themes for success that we identified in our Asset & Wealth Management Revolution: Empacing Exponential Change report.
The Libor transition could have a bigger than expected impact on products and services in the sector. New climate change legislation is on the way and will impose updated reporting requirements. And Brexit continues to cause economic uncertainty.
Investment managers are primarily focusing on growth through winning new clients, cross selling and developing new products. LIBOR transition may present opportunities in winning the battle for organic growth.
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Leader of Industry for Financial Services, PwC United Kingdom
Tel: +44 (0) 7703 459 443