Three quarters or the majority of UK financial services professionals are preparing for the Chancellor’s upcoming Budget to have at least a moderate impact on their business, according to KPMG’s UK Financial Services Sentiment Survey.
More than a quarter (28%) anticipate the impact will be considerable.
The quarterly poll, which tracks business sentiment among more than 150 professionals working mainly in banking as well as insurance, asset and wealth management and private equity, revealed that nearly a third of leaders (31%) are anticipating the largest impact to be in the form of sector-specific tax increases like bank surcharges.
Over a quarter (26%) are anticipating an impact on payroll costs, and 19% stated that the impact on talent from tax changes to non-doms could impact their business.
At present, nearly three quarters (74%) of financial services execs think that the UK’s tax regime for the sector is competitive compared to other nations.
However, 40% of professionals think that stability is the most vital aspect of the tax system to stimulate sector growth.
Karim Haji, Global and UK head of financial services for KPMG said that industry professionals in the sector are preparing for this Budget to have a significant impact on their business.
Haji added that although there are certain expectations regarding sectoral tax rises, industry participants will hope for a period of stability thereafter to ensure the present tax regime for financial services stays competitive.
The survey further revealed that professionals’ confidence in the sector’s future under the new government has declined during the past two months.
In the days following the election outcome, seven in ten professionals thought more positively about the sector’s future under the new government; this has since fallen to 59%.
Karim Hai said that it is actually not completely unexpected to see a decline in overall confidence following a post-election high, however, the speculation surrounding the Budget might just be compounding this.
He added that this should drive greater need for clarity and certainty when it comes to financial services policy and plans to maintain the United Kingdom’s current standing as an international financial centre.
When it comes to business activity in Q4, sector leaders are expecting a fairly strong quarter, with the majority being confident regarding profitability (89%) and overall business growth (85%).
This confidence is said to be mainly driven by greater demand for products and services (52%), a more positive economic outlook (45%) as well as plans to enter new /launch new products (40%).
Inflation pressures are forecasted by 42% of leaders as the greatest business obstacle over the coming quarter, followed by 39% expecting interest rates to present the biggest hurdle.
A third are expecting cost pressures as the greatest challenge in the next three months. Geopolitical risks, pressure to improve ESG performance and keeping up with advances in tech were ranked by the least (25%) as the most critical challenges.
Survey / Research Methodology
Online quantitative research conducted by Opinium on behalf of KPMG between 17th – 23rd September 2024 of 150 UK adults who are director level and above in financial services companies.