’With interest rates set to stay high in a bid to tackle persistent inflation, it will be interesting to see what impact this has on sector confidence,’ says UK head
The majority of insurance executives are feeling optimistic about business growth in the first quarter of 2024 despite facing challenges with economic headwinds.
That was according to KPMG UK, which today (3 January 2024) published figures revealing that eight in 10 leaders across the financial services sector were confident about short-term growth prospects.
Within insurance, some 79% of bosses felt this way despite having to battle headwinds such as supply chain inflation.
And across the financial services sector, more than half (56%) of executives believe inflationary pressures will pose the “biggest challenge” for their business in the first quarter, while 46% cited interest rates as the “most pressing challenge”.
Karim Haji, global and UK head of financial services at KPMG, said: “It’s great to see financial services leaders go into the New Year feeling confident despite ongoing economic turbulence, which is set to continue to challenge the sector in the first quarter.
“With interest rates set to stay high in a bid to tackle persistent inflation, combined with the added uncertainty of looming elections in the UK and USA, it will be interesting to see what impact this has on sector confidence beyond the first quarter.”
Geopolitical risks
A total of 160 UK executives were polled by Opinium for the research on behalf of KPMG.
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The data also revealed that despite ongoing political uncertainty and global conflicts, geopolitical risks were ranked lower than economic concerns, with just 21% believing this will pose the greatest challenge to their business in the first quarter.
However, Haji warned that such uncertianity was contributing to inflationary pressures.
”While on the surface, leaders seem less concerned about the specific impact of geopolitical uncertainty, there’s no denying that it is in part adding to inflationary and interest rate pressures,” he added.
Financial centre
Meanwhile, executives were also asked about whether the UK can maintain its position as a global financial centre over the next three years.
While 84% of banking executives were confident this could be achieved, more than half (53%) of insurance executives were not.
They highlighted reducing regulatory pressures, tackling inflation and interest rates and overhauling the tax system as key areas to address to help the country maintain its position as a leading financial centre.
”Despite changes to listings rules, fewer international firms are choosing to list in London and some UK domiciled brands are looking to list elsewhere,” Haji said.
”This is creating some uncertainty over the city’s future position as a global financial centre.”
He explained that going into 2024, KPMG was seeing a “promising direction” of travel from the Edinburgh Reforms package in the bid to boost competitiveness.
“While the treasury committee has highlighted that change is not happening quickly enough, part of the attractiveness of the UK is that our regulatory system is relatively stable,” Haji said.
”This, together with a plan for enhanced competitiveness, will safeguard the UK’s future position on the global stage and boost long-term growth.”
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