High business confidence builds on optimistic outlook for Q2 2024: KPMG UK

Business leaders in the financial services sector feel optimistic about business growth for the second quarter of 2024 (April-June), with 79% of insurance executives citing confidence about the coming quarter.

Research from KPMG UK revealed that 88% of senior executives are confident when it comes to overall business growth in Q2, with 45% of executives feeling ‘quite confident’, followed by 43% who are predicting a ‘very confident’ outlook.

Additionally, 87% of them have a confident outlook on profitability for the quarter.

With 94%, banking leaders share an optimistic outlook for Q2 with insurers compared to 89% for the first quarter of 2024. On the other hand, optimism among those working in asset and wealth management marginally fell to 83%, versus 89% for Q1.

Research also revealed that the prospect of a general election in the UK later this year is not deterring sector optimism. According to the report, over two-thirds (67%) of leaders feel positive about a general election for the sector’s future.

Boosting sector competitiveness, improving its regional footprint to drive growth and balancing the benefits and risks of artificial intelligence for the sector were ranked as the most important for leaders when it comes to government policy.

Despite positive outlook cost pressures remain, mainly due to the impact inflation and interest rates have had on financial services businesses.

Almost 40% of those surveyed cite cost pressures as the biggest challenge facing their business in the coming quarter (behind inflation pressures and interest rates).

Over a third of leaders plan to make cost savings by reviewing suppliers (37%) and increasing productivity through technology like Generative AI (35%).

Additionally, almost a quarter (23%) plan to reduce headcount and hiring, change or downside their real estate footprints and review staff pay and benefits to make savings in Q2.

Karim Haji, global and UK head of financial services at KPMG, commented: “The start of the year saw renewed growth for the economy and forward-looking indicators point to further signs of recovery, which may well be the reason for continued optimism among leaders in the sector.

“However, while financial services leaders are keeping an optimistic outlook, they do so with caution as costs are still a concern, and the sector continues to eye up savings in response to economic pressures.

“The prospect of a general election isn’t shaking the financial services sector. In fact, most leaders are surprisingly upbeat about it.”

He continued: “Regardless of the political environment and while the economy is showing some signs of recovery, the coming months will continue to be challenging. Not only does the sector need to remain resilient now, but it also needs to look longer-term and invest in ways to boost productivity through technology, effectively respond to regulatory demands and build sustainable business models.

“This will all be an essential driver of growth and will lay solid foundations for competitiveness as the economy rebounds.”

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