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Financial services optimism rebounds and job vacancies rise

  • Financial services optimism surges to its highest level in nearly a decade
  • Job vacancies rise with the finance industry optimistic about the future
  • UK banks leaving the City of London due to post-Brexit headwinds
  • UK Chancellor Rishi Sunak promises to provide a solution for mortgage prisoners

According to the Confederation of British Industry (CBI) and PwC’s latest survey, financial services optimism jumped to its highest level in nearly a decade last month as Brexit fears faded and the UK economy began reopening after months of COVID-19 lockdown restrictions.

Data showed that financial institutions’ sentiment surged to 52% in March – its fastest month-on-month rise since December 2013.

It comes despite the finance sector recording a 3% slump in business volumes for Q1 2021, following the spike witnessed in the last three months of 2020.

Although sub-sectors such as building societies, life insurance and insurance broking reported growth, overall output was offset by declines in banking volumes.

Volumes in finance houses and general insurance were also unchanged, albeit the industry predicts a rapid return to growth in the next quarter, as economic activity resumes in tandem with UK Prime Minister Boris Johnson’s lockdown exit roadmap.

CBI Chief Economist Rain Newton-Smith commented, “it’s encouraging to see that the industry is optimistic about its post-lockdown prospects.”

She added: “The pandemic has forced businesses to innovate operation, and with the role of the office space evolving to facilitate greater flexibility, businesses will continue to transform in 2021 and beyond.”

The shift to remote working has caused many finance firms to reappraise office space. According to the survey, nearly 60% of financial services companies said they had considered reducing office space moving forward. In contrast, two-thirds said they would reconfigure space and use the area for collaborative work between employees.

The majority also said that they are considering hiring new staff this year and upskill existing employees.

UK Financial Services Optimism

Financial services job vacancies rise by 70%

Although employment within the financial services industry continued to slump in the first three months of the year, the pace of decline is much slower than in previous quarters.

According to official statistics, financial services employment decreased by 12% in Q1 2021, compared to a 20% decline recorded between October and December 2020.

Declines in the banking and general insurance sectors offset growth in other subdivisions. The CBI found that changes in customer behaviour and new regulations due to Brexit remain a significant risk to the industry’s growth.

Nonetheless, growing optimism has seen job openings rise by 70% quarter-on-quarter, and this is expected to continue growing as the unlocking of the UK economy continues.

Growth in job vacancies also reflects changing attitudes towards Brexit concerns as uncertainty over businesses post-Brexit futures begins to fade.

Morgan McKinley’s UK managing director, Hakan Enver, said: “Banks are back in expansion mode with a strong uplift in appetite for hiring experienced professionals. With Britain’s vaccine programme hitting targets set by the UK government and lockdown easing well underway, we see the sector recovering at a faster rate than anticipated.”

With more financial services companies in the UK becoming increasingly optimistic and the phased unlocking of the economy driving expectations of a solid recovery in business volumes and profits, hiring growth should remain strong in 2021.

Renewed business confidence has also helped push the FTSE 100 Index higher this week as London’s blue-chip Index jumped above 7,000 points for the first time since early 2020 on Friday.

FTSE 100 Index

FTSE 100 hits 7,000 points for the first time since early 2020

The FTSE 100 Index rallied to pre-pandemic highs on Friday after hitting a new 2021 high on Thursday.

Earlier today, London celebrated a massive milestone after its blue-chip FTSE 100 broke the landmark 7,000 points barrier and recorded a high of 7,037.65.

London’s blue-chip index tumbled to 5,000 points at the peak of the coronavirus pandemic, and with new COVID-19 variants threatening the global economy, recovery has been slow.

However, after hitting a high of 9,994.9 points on Thursday, the FTSE 100 rose by an additional 40.67 points earlier today, buoyed by growing confidence over the global recovery outlook.

The gains are a marked contrast from the performance seen during Q1 2020 when funds plunged by approximately 11.6% as the coronavirus pandemic saw investors flee to safety as countries imposed national lockdowns and economies shutdown across the globe.

While the FTSE 100 has slipped slightly during midday trade, it continues to trade above 7,000. At the time of writing, the FTSE 100 is up by 32.60 points or 0.47% at 7,016.10.

Friday’s biggest blue-chip risers include the BT Group (LON: BT.A), which is up by 2.23% or 3.35 points at 153.90. Evraz plc (LON: EVR), Barclays (LON: BARC) and Polymetal International plc (LON: POLY) are also among the biggest risers.

It comes amid news that hedge funds are to reassess how they monitor risk following frenetic growth in GameStop stocks and the collapse of the investment firm Archegos Capital Management which sparked a fire sale of more than USD 20BN assets.

Despite the positive news, new research shows that UK firms are considering relocating to the EU amid concerns that Brexit will significantly impact the City of London.

Financial market regulations

Banks and other finance firms keen to relocate due to Brexit

According to research conducted by a leading think tank, New Financial, nearly 450 banking and financial services companies have either moved some part of their business, relocated staff or set up new establishments in the European Union due to Brexit.

New Financial revealed that banks have moved or plan to relocate more than GBP 900BN in assets to the EU – equivalent to 10% of the UK’s banking system, with Ireland proving to be a popular destination for firms.

The sobering figures also showed that 19% of financial companies, including giants such as HSBC and Goldman Sachs, had their sights set on Paris, France.

Meanwhile, just last week, the global leader in financial services, JP Morgan, said that it was considering relocating its UK operations to the EU due to post-Brexit disruption.

Data compiled by New Financial revealed that 7,400 UK employees had been transferred to other countries following the Brexit referendum, and this figure is expected to increase over the coming years.

The managing director of New Financial, William Wright, said: “Given the limited equivalence deals in place, we expect the drip-feed of business and activity from the UK to the EU to continue.”

offices in Britain as the post-Brexit skirmish fades.

In separate news, the House of Lords has backed a change to the Financial Services Bill regarding a mortgage SVR cap by a 273 to 235 vote.

Holiday let mortgages are being reintroduced in the UK amid easing of lockdown restrictions

Chancellor Rishi Sunak promises to provide solutions for mortgage prisoners

The House of Lords has voted in favour – by a majority of 38 – of changes to Britain’s Financial Services Bill, which would require regulators to place an interest rate cap on mortgages.

Changes to the Financial Services Bill had been proposed by the All-Party Parliamentary Group on Mortgage Prisoners.

While the House of Lords favours the changes, the House of Commons would need to approve the proposal before implementing the new amendment.

The issue of mortgage prisoners has been an issue of debate for years now, with Martin Lewis also arguing for changes to the amendment to support mortgage prisoners.

Most borrowers got trapped in high-interest home loans after taking out mortgages with lenders that went under during the 2008 financial crash.

Sky-high rates and the inability to change lenders due to strict borrowing criteria has caused significant emotional distress and financial hardship for many borrowers. Despite attempts to renegotiate their mortgages with lenders, many have done so to no avail.

MoneySavingExpert.com and founder Martin Lewis, who has campaigned against injustice that has been heaped upon thousands of borrowers, is delighted by the news that interest rates could be capped for borrowers.

Martin Lewis told reporters, “while the government chose to bail out the banks in the financial crisis, it has never bailed out the banks’ customers who were victims of that collapse.”

Strict borrowing criteria means that many people paying high rates have been unable to escape.

Mr Lewis, who interviewed Chancellor Rishi Sunak about mortgage prisoners, said that “an interest rate cap will make a tangible change to the lives of thousands of Britons.” He hopes that Mr Sunak will commit to his promise and provide practical solutions to the issue.

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