UK financial institutions are increasing investment and accelerating expansion plans, according to Lloyds Bank’s ninth Financial Institutions Sentiment Survey, which has found that economic conditions have improved compared to 12 months ago.
The annual survey, which interviewed over 100 senior decision-makers at banks, wealth and asset managers, insurers, and financial sponsors, opened on 18 April and ran until 11 June 2024.
The survey revealed a significant increase in positive sentiment compared to 12 months ago. Almost half (48 per cent) of respondents believe economic growth will improve, an increase from 21 per cent in 2023 and 7 per cent in 2022, marking a two-year high. Similarly, 43 per cent expect growth in the financial sector, up from 27 per cent in 2023 and 12 per cent in 2022.
Confidence is strong when looking longer-term, too. Over two-thirds of financial institutions (68 per cent) are optimistic about the UK economy beyond 2025, and nearly two-thirds (62 per cent) share a similar optimism for growth in the financial services sector specifically.
This improving confidence in the macroeconomic environment is helping to bolster financial institutions’ own growth prospects, the bank says. The survey indicates that over half (59 per cent) of institutions are more optimistic about their growth over the next 12 months. To support these ambitions, respondents are looking to expand in existing markets (63 per cent) and enter new markets (50 per cent), while half (50 per cent) are planning to launch new products and services.
Some key factors that are driving this wave of optimism, include easing inflation and an expectation of rate reductions in the latter half of the year (62 per cent).
Lisa Francis, Head of Institutional Coverage, Lloyds Bank Corporate & Institutional Banking, says: “This year’s survey has revealed a significant shift towards optimism in both the UK economy and the financial services sector. This is in line with what we are hearing and seeing directly from our clients. Deal activity is ahead of last year and there’s positive momentum as this renewed optimism is fuelling our clients growth ambitions, whether by expanding into new and existing markets or launching new products and services.
“Overall, this paints an exciting picture for the UK’s financial services industry, which is crucial to the UK’s economy and our position on the global stage.”
The survey also revealed growing confidence in London’s status as a leading global financial hub. Most respondents (63 per cent) believe the capital will retain its position on the global stage, up from 50 per cent in 2023. 43 per cent of UK financial institutions believe that initiatives to encourage foreign direct investment into the UK would help further enhance London’s status.”
However, financial institutions remain cautious about the number of barriers to expansion, three-fifths (62 per cent) of respondents were apprehensive about geopolitical uncertainty, a significant increase from 22 per cent in 2023. A third (34 per cent) of financial institutions saw global trade barriers as a key obstacle to economic performance over the next year, while 41 per cent acknowledged the productivity challenges facing the UK.
