United Kingdom Banking & Financial Services Q4 2019
Despite the building uncertainty surrounding the United Kingdom'simpending exit from the European Union and thepotential detrimental impact on the country's banking and financial services industry, we remain broadly positive in our view of thesector.The UK has one of the oldest, largest and most well-developedfinancial services sectors in the world that will not bedissolved overnight byBrexit. It is a regional leader in terms of the total economic contribution of financial services, and only inLuxembourg and Switzerland does the industry form a larger proportion of the country's total economy within Western Europe.Taking a more critical view, this well-developed status means the industry is saturated, and opportunities will lie in innovation andthrough mergers and acquisitions (M&A)rather than organic growth in all four markets that we track. This trend is already playingout across the financial services sub-sectors. The UK economy's reliance on financial services will not wane over the next ten years,though the relationship between the UK and EU post-Brexit, and in particular the fate of thepassporting system that allows EU-based companies to operate in the UK, will be a major factor in determining the industry's growth trajectory. In the near-term, thismeans that companies arelikely to defer or scaleback their investment andspending decisions, weighing on demand for credit.Inthe meantime, we highlight that the industry is focused onfurther tightening regulation and increasing transparencyin order tosupport ongoing growth, and specifically to the banking market, maintaining adequate capital buffers.
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