Htet Tayza examines the implications of a new report which illustrates that global financial services firms experienced robust growth in business volumes during the final quarter of 2015.
Financial Services Report
The Confederation of British Industry (CBI) and PricewaterhouseCoopers (PwC) recently released their latest Financial Services report. This study, which is conducted every three months, examines how financial services businesses across the world view their sector.
Online industry publication Financier Worldwide reported that the overall ‘level of business’ for the financial services sector remained “above normal” in the final quarter of last year. However the sector’s ‘business with overseas customers’ dropped to its lowest point in three years in the quarter.
Examining the findings, we see that 45% of financial services firms reported higher business volumes in the final quarter of 2015, in contrast with 22% who said they were down. Meanwhile, 30% of those surveyed expect business volumes to rise in 2016, while 20% expressed the opposite opinion. Overall, 29% of financial services companies questioned believed that their business was “above normal,” in terms of volume, during 2015.
The survey predicted that financial firms will see weaker growth in business volumes in 2016, as well as flat incomes and rising costs. PwC and CBI said that employment prospects would remain uneven and suggested that banks in particular could see a drop in employment throughout the next 12 months.
Commenting on the current direction of the global economy Rain Newton-Smith, CBI Director for Economics said: “The global economic outlook remains uncertain while China rebalances, which is having knock-on effects on emerging markets, amidst continued unrest in the Middle East. While investment intentions remain robust in IT, and marketing spend is set to expand as firms seek new customers, elsewhere companies are curtailing their capital spending due to poor returns.”
Explaining the significance of this for financial services companies, Kevin Burrowes, UK financial services leader at PwC said “it’s clear that optimism is muted across the whole [financial services] sector and each sub-sector has its own challenges.” Burrowes noted that cyber-crime will be a particular issue for financial services firms: “Against this backdrop, the growing spectre of cyber-crime looms large and the threat of major attacks continues to stalk the entire financial services industry.”
Htet Tayza’s analysis
As CBI explains: “A healthy economy needs a healthy financial system – it helps businesses to invest and grow, undertake day-to-day transactions and manage their risks, underpinning activity in every part of society.” Therefore, the fact that financial services reported robust growth in the final quarter of 2015 suggests these companies could spur the global economy to greater heights this year.
But the industry faces a number of challenges, such as cyber-crime. A PwC study from 2014 found that 39% of these businesses say they’ve been the victims of cyber-crime, compared with only 17% of firms in other industries. Figures quoted by the Telegraph suggest that cyber-crime costs the global economy US$445 billion annually. In other words, financial services firms need to safeguard their operations from issues such as cyber-crime in 2016, to ensure they bolster a relatively unstable global economy and allow it to expand this year.