Financial services suffer ‘rapid’ fall in business
Financial services are suffering from a “rapid” fall in business activity, new survey data has shown, pointing to investors’ struggles to revive a spluttering UK economy.
The Confederation of British Industry (CBI)‘s figures suggested financial services companies experienced a decline in business volumes and profitability at the end of last year, hitting confidence across the City.
Its weighted balance for business volumes dropped from -36 per cent in the third quarter of 2025 to -38 per cent in the subsequent three months.
Business sentiment also dropped sharply in the last three months of the year amid speculation about the Budget, continued questions over regulation and an absence of tangible pro-growth measures in Rachel Reeves’ statement.
Firms were also expected to cut staff while spreads would also decline in the coming month in a bleak start to the year.
CBI chief economist Louise Hellem said the results showed the sector had suffered a “gloomy end to 2025” as profits continued to shrink.
There was some cause for optimism in the new year, Hellem said, with firms expecting a recovery in volume growth over the first three months of 2026.
“Recent Budget decisions, including changes to stamp duty for newly listed companies and avoiding a new banking levy, were welcome steps,” she said.
“To turn cautious optimism into sustained growth, the government must now focus on delivery and double down on the financial services growth and competitiveness strategy to unlock investment, drive innovation, and reinforce the UK’s global edge.”
Financial services double down on tech
The main area of investment would be in technology, adding to hopes that low productivity trends could be reversed as firms reap the benefits of AI over the coming months.
UK companies are still waiting for the verdict of a working group between the Labour government and the US on improving financing and boosting markets in each of the two countries.
It is understood industry groups are providing government officials with advice and a list of demands during negotiations, which are due to end in around three months.
Industry executives also hope the UK could see a rise in the number of IPOs on the London Stock Exchange, with Zilch among a number of fintechs eyeing a listing this year.
But there are still questions over how asset managers can support growth priorities, with a key defence investment strategy being delayed over internal disagreements.
Those working in the banking and insurance also hope the upcoming year could see a rise in dealmaking after the sectors escaped a levy at the Budget.