Reducing the cost of regulatory compliance should be the new Conservative government’s priority for the UK financial services sector, according to the latest CBI/PwC Financial Services Survey (covering the three months to June).

Business volumes and optimism in the sector continued to grow at an above average pace but more slowly than in the previous quarter. Weaker overall growth mainly reflected a fall in volumes among building societies and stable volumes in the banking sector. As a result, capital spending plans have been scaled back, with expected growth in IT investment the weakest in a year and a half and firms reporting falling capital budgets in other areas. Intensifying competition is the most significant factor likely to constrain business activity in the next 12 months. Competition is increasingly seen as coming from outside firms’ own sectors. Dealing with statutory legislation and regulation is another important factor likely to constrain business activity.

Kevin Burrowes, UK financial services leader at PwC, comments: “Levels of optimism amongst banks remains broadly unchanged this quarter which is a little surprising as we had expected to see a bounce from the election result and the greater encouragement for financial services from the new government. However, ongoing regulatory uncertainty, the EU referendum and other macro-economic factors have dampened the outlook at least in the short-term. In recent years, banks have enhanced many of their customer-facing operations with digital solutions, most notably through the introduction of mobile apps. The next wave of innovation lies in the digitalisation of the back-end processes, many of which still rely on a high degree of manual processing. Ensuring a continued spend on core IT is critical to the success of banks.”

Share Story: