Investing.com - Worry over Brexit and its impact on the economy have taken a strain on the UK’s financial sector, as demand for financial services declined for the first time in five years, according to a joint survey from research firms CBI and PwC.
Financial services companies, especially banks, building companies and insurers, are concerned about the broader economy over the next year, as the country still remains uncertain over the impact of Brexit.
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The survey of 84 companies showed that demand is expected to continue to decline during the first quarter, while profitability is also expected to fall for the first time in three years.
Wider subdued prospects for the UK economy, weak GDP growth and household growth are also likely to keep the financial sector in check, the report said.
“A combination of macroeconomic and Brexit uncertainty, regulatory compliance and global market volatility are taking a toll on the UK’s financial services sector,” Rain Newton-Smith, chief economist at CBI said.
A parliamentary vote vote on Prime Minister Theresa May’s draft Brexit bill is not expected to pass, as party members are concerned over provisions of the outline for the UK’s divorce from the bloc.
With the UK expected to leave on March 29, the chance of a no-deal is growing stronger, which would increase uncertainty for the financial sector. Many banks have already set up offices in European cities in preparation for a no-deal Brexit.
Despite the gloomy outlook, headcount for the first quarter is expected to grow and investments for the year ahead remain stable.
“UK financial services firms looking to prosper in 2019 should concentrate on issues they can control,” said Andrew Kail, head of financial services at PwC.
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