London’s Bankers Haven’t Been This Gloomy Since 2008

Updated on
  • Poll shows finance workers gloomiest since 2008 last quarter
  • Nine out of 10 firms see Brexit as risk to London’s dominance
Barclays CEO Staley Sees New U.S. Business Dynamic

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Sentiment among London’s Brexit-hit bankers sank to its gloomiest depths since the 2008 financial crisis, a survey showed -- a stark contrast to the bullish tone of finance executives gathered last week in Davos, Switzerland.

The Confederation of British Industry and PricewaterhouseCoopers LLP poll -- based on responses from 92 financial-services firms in the three months through December, before a new year that has seen worries of a hard Brexit recede and the pound appreciate -- showed sentiment at banks has deteriorated for seven of the last eight quarters. Almost a third of the firms saw a high likelihood of financial-market conditions worsening in the next six months.

"Optimism in parts of the sector has been falling for the last two years, whilst firms are nearly unanimous in voicing their concern about the damaging impact of Brexit uncertainty," CBI Chief Economist Rain Newton-Smith said in a statement Monday.

That wasn’t the tone among bank bosses attending the World Economic Forum, who were brimming with confidence about the global economy, forecasting a boom in dealmaking as companies use cheap funds to invest. Citigroup Inc. Chief Executive Officer Michael Corbat said he was ready to deploy resources to grow “even faster.” Meanwhile, Italy’s prime minister signaled that the European Union supports a good Brexit deal that includes financial services.

Negativity Rules

The view from London in the final quarter of last year was markedly different. Only 13 percent of financial firms said they were more optimistic about the overall business situation than in the previous quarter, while 35 percent were less optimistic. Nine out of 10 firms in the survey said Brexit was the biggest threat to London’s dominance as a global financial center, the poll found.

"To restore some confidence, financial-services firms absolutely must -– no ifs, no buts -– get as much certainty as possible on what the U.K. is aiming for in the Brexit negotiations," Newton-Smith said.

While banks, building societies and general insurers were gloomy about the outlook for their businesses, other sub-sectors including life insurers, investment managers and specialist lenders such as car-finance providers were more optimistic.

No-deal Warning

Separately, an influential House of Lords committee warned over the weekend that the U.K. and EU risk market fragmentation and financial instability if they can’t agree to a deal on market access once Britain has left the bloc.

The government must urgently clarify what outcome it wants from the next phase of the EU negotiations and on transitional arrangements or firms will be forced to activate costly and potentially irreversible contingency plans, lawmakers said in a report published Saturday.

"We need a transition deal as early as possible -- ideally within this quarter," said Miles Celic, CEO of industry lobby group TheCityUK. "The sooner the clarity, and the greater the sense of the direction we’re going in, the better it is for customers, clients, shareholders and employees."

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