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Firms warn of Brexit threat to UK’s status as financial centre

Optimism in the financial services sector fell for the third consecutive quarter in 2017 despite moderate improvement in business conditions.

Most firms see Brexit as the most serious threat to the UK’s status as a financial centre amid a continued fall in optimism, a new study shows.

A survey by the CBI found that optimism in the financial services sector dipped in the final quarter of 2017, rounding off two years of continuous flat or worsening sentiment.

Banks, building societies and insurers were “decidedly less positive” than three months earlier, while providers of specialist finance and investment management reported robust growth.

Business volumes are expected to pick up in the next few months, although with a mixed picture across sectors, said the CBI.

Chief economist Rain Newton-Smith said: “With overall business levels seen as broadly typical, and demand and profitability continuing to expand, the financial services sector ended last year on a stable footing.

“Scratch the surface, however, and a different story is revealed.

“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 and the need for the UK to remain a vibrant centre of FinTech and innovation.

“To restore some confidence, financial services firms absolutely must get as much certainty as possible on what the UK is aiming for in the Brexit negotiations, the opportunities of success and the consequences of failure.”

Andrew Kail, of PwC, which helped with the research among 92 firms, said: “The UK is set to leave the EU exactly 14 months from today.

“A transition period is likely, but ultimately the financial services sector – a critical part of the economy – must prepare itself to operate without membership of this key trading market.”

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