The UK economy will lag the rest of the G7 this year, leaders of the world’s biggest financial firms fear.
The third annual Financial Institutions Sentiment Survey by Lloyds Bank has revealed that Brexit is the biggest risk to the UK economy for the coming year.
The survey is based on the views of more than 100 boardroom and senior executives of global banks, asset managers, insurers and private equity firms. It asks their opinions on the economy, risks regulation and technological change.
While the UK is still expected to be the most prominent financial services hub in Europe, some 70 per cent of firms think economic growth for the year is likely to be weaker than in the other G7 countries.
It shows a sharp fall of optimism from a year ago when just 23 per cent of respondents thought the UK would underperform its peers.
Just 4 per cent thought UK economic growth would be stronger than other G7 countries, down from 33 per cent last year.
Robina Barker Bennett, head of financial institutions at Lloyds Bank Commercial Banking, said: “The financial services sector is a crucial bellwether for the nation’s economic prospects. Fears about Brexit are looming larger as the final countdown begins to March 2019.”
But experts added that the economy would prove resilient and would get through the challenges of the next few months relatively unscathed. Some 48 per cent thought UK growth would stay at 2017 levels while 23 per cent believe it will improve.
Some 28 per cent of those surveyed thought Brexit was the most significant risk over the coming year, with more than half (55 per cent) worried about the effects of leaving the EU. Cross border access, regulation and a UK-EU trade deal are among experts’ greatest concerns.
Meanwhile 35 per cent were concerned about economic uncertainty, 24 per cent about market volatility, 18 per cent about geopolitical uncertainty and 17 per cent about cyber threats.
Yet businesses remain upbeat about their own prospects, with two thirds expecting revenues to increase this year and the majority expecting costs, headcount and business investment in the UK to remain stable.
Priorities for the year ahead include organic growth, new client acquisition, expansion and introducing new products and services.
Some 88 per cent of those surveyed said the UK would remain the most prominent hub for financial services once the UK leaves the EU. Despite that, a quarter are considering moving their operations.
Ms Bennet added: “With one year to go until the UK leaves the EU, it is no surprise that Brexit is seen as the biggest risk on the horizon.
"But despite the worries, the sector is upbeat about its growth prospects and long-term future. There is an unmistakeable confidence that the UK will hold on to its position as the single most important hub for financial services in Europe.”
